For the longest time, the investors seemed to keep moving up the minimum credit score for an FHA mortgage. We started at a 580, then 600, then 620 and most lenders now have a minimum requirement of 640. For the quite some time, it looked like we were headed to a minimum middle credit score of 660. But that seems to be on the back burner now. It should be noted, that a borrower with at least a 661 middle credit score will receive the best interest rate as they are not subject to the risk-based pricing.
There are however, some investors that have relaxed some of the credit score requirements and will now accept a lower credit score. Now, I am not going to imply that these are going to be "easy" to get approved, and most likely the borrower will have to have more than one compensating factors in order to get approved. But for a borrower that has good work and rental history and has been able to save part if not all of their down payment, this is a terrific option. A consumer with a lower score can take advantage of still relatively low interest rates, lower purchase prices in most areas and with a good payment history moving forward can rebuild their financial life.
When possible, I recommend to my customers that they do everything possible to get their score as high as possible before they make the purchase, but sometimes, the amount of time it will take works against their time line.
For more information on FHA requirements please contact me or check out www.hud.gov.