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FHA FICO Score Minimums
It's true that the FHA does list a minimum FICO score of 500, but very few lenders offer this financing option.  Many lenders have "Overlay's", or "Additional Required Guidelines" to qualify for a home mortgage.  Why is this? The lower the fico score, the higher the likelihood of the borrower defaulting. The risk of a borrower defaulting can count negatively against the lender and the loan officer.
 
HUD tracks borrowers defaults and tracks which lenders and loan officers were involved in the transaction and wrote the loans, it si called "Lenders Compare Ratio". The FHA's Lender Compare Ratio is calculated for all lenders. This ratio is geographically based, comparing the rate of early defaults and claims for single family loans in a geographic area to other mortgagees in the same area.
 
Both the mortgage lender and the loan officer have Compare Ratios that follow them throughout their careers.  The more defaults that their borrowers have, HUD can essentially not allow that entity or person to issue FHA loans in the future. So the risk factor is not just there for FHA but also for the lending entity and the loan officer.
 
Many lenders have had a minimum FICO ... more

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