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640 is the New FHA Minimum!!!!!

By
Mortgage and Lending with Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 NMLS ID# 158606

Well, it's pretty much official.  Credit score minimums are going up across the board for FHA loans.  FHA has a manual.  But the manual which is known as the 4155 doesn't give a minimum credit score.  The issue really arises from the fact that investors have been analyzing the performance of all sorts of FHA loans.  For example, they analyze the peformances of FHA loans with only 3.5% down with a credit score below 600, and again at 600, at 610, at 620 and son on and so on.  Then they analyze the performance of all FHA loans with 5% down with loans below 600, and so on.  As a result,

IT'S BEEN DETERMINED THAT

FHA LOANS WITH CREDIT SCORES BELOW 640

HAVE A DEFAULT RATE THAT MOST INVESTORS DON'T WANT TO TOUCH!

So, while it's not 100% across the board, the general rule is that with a 640 score, you should be safe, credit wise.  However, if you are below 640, you're likely to have issues, if not, be just plain ineligible for FHA financing. 

Remember, exceptions abound, but let's be real here.  You need to work with a licensed mortgage professional to examine your situation!

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Comments (6)

Deborah Byron Leffler BzyBee Real Estate Lady!
Keller Williams Realty Boise - Nampa, ID

Well it probably is really needed to up the standards....we have to get rid of all of this distressed inventory!  ANd not get more of it!    Yikes!

Oct 25, 2010 07:31 AM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

It's a sad day!

The need to point fingers is over riding what common sense is left!

God help us!

Bill

PS: This will help fill public ghettos housing projects.

Oct 25, 2010 09:22 AM
Fran Gatti
RE/MAX Integrity - Medford, OR
Managing Principal Broker - RE/MAX Integrity

Things are a-changing.

Oct 25, 2010 06:45 PM
Kim Boekholder Utah Real Estate/ PECO
Results Real Estate 801.580.5624 - Draper, UT
Broker Results Real Estate/Leasing Specialist PECO

Larry great point and information.  I hope you don't mind me reblogging your article.  I have a buyers working on improving their credit and they were so excited to finally have a middle score of 620 and now need to work for a 640.    Fran is right things are changing.

Oct 26, 2010 01:54 AM
Dennis Duvernay Broker/Owner
Hillview Realty - Northbridge, MA

I can understand lenders protecting their investments but here goes SOME who will get delayed in purchasing a home...

Oct 26, 2010 02:06 AM
Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

Yes, I agree that this can be both good and bad....that does seem high for some of the buyers out there...

Oct 28, 2010 03:43 AM