This is the second part of HUD's Proposed changed to Set a Minimum Credit Score for the 3.5% Down Payment that was included in a press release issued Jan 20, 2010. Full informatin can be found here FHA Announces Policy Changes to Address Risk and Strengthen Finances
Item # 2 says
Update the combination of FICO scores and down payments for new borrowers.
- New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA's 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
- This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
- This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.
I understand and can support this change as a lender who presently has no options for lenders with credit scores below 620. I believe this could offer the opportunity for some buyers with low credit scores to make a purchase with a better collateral position on the part of the lender and HUD. This change could encourage some lenders to accept borrowers with these lower scores. Also, in the case where a parent is willing to act as a coborrower these loans might be made based upon the credit and financial resources of the coborrower. Presently, unless all borrowers have a 620 Plus Credit Score finding a lender is very difficult. When it can be found the additional points are near prohibited. This again may make the loans more affordable to borrowers recovering from credit issues of the past.
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