Minimum Credit Score For New FHA Loans
The Federal Housing Administration has now established a minimum credit requirement of 620 for borrowers whose debt-to-income (DTI) exceeds 43 percent. According to the FHA, this will reduce the number of claims by 20 percent or more and the directive will apply to FHA loans of all types, including FHA Streamline Refinance and the FHA 203k home construction program.
Loans with FICO scores under 620 will remain FHA-eligible, but lenders must show evidence of “compensating factors”; reasons why the loan should be approved even though it fails to meet Federal Housing Administration standards. Common compensating factors include large downpayment or equity position, or higher levels of reserves.
View original post 529 more words