Recently the bar was raised to a 620 credit score for what is called manual underwrite. This type of loan is a loan where the underwriter looks at the loan in a type of hard case situation, instead of getting what is called an automated approval. Typically borrowers with decent credit get automated approvals on FHA loans. So if you have credit issues, and your middle FICO credit score is below 620, you will need to work on getting your credit score increased to qualify for a FHA loan in today’s market. If you your credit score is a 600, some lenders will allow you get a loan as long as the underwriter gets a automated approval. This will vary from lender to lender, so double check to see what is required with the lender you choose.
You will have 3 credit scores, one with Equifax, Trans Union, and Experian. Lenders take the middle credit score, and that is the score they use to determine whether you will qualify. For example, if you have a 620, 590, and a 640 your middle credit score is 620. You would have the credit score required to get a loan; of course you need all the other qualifications as well. You will need to check with a mortgage lender to determine if you meet other criteria to get a FHA mortgage loan if your middle credit score is a 620.
The reason the bar has been raised is due to what the current market will allow. Mortgage loans are bought and sold on what is called the secondary market. Investors watch different type’s of criteria to determine what type of paper will be bought and sold. Evidently a buyer who’s credit score was below 620 is not performing well on the secondary market. So the standards get tightened up to lower potential risk for future investors in this particular market.
If you find that your credit score is too low to qualify, use our FREE credit repair guide to help you. We created this guide, and know it works because we are lenders as well. If you have any questions you may e-mail us also. questions@freecreditscorequick.com