Borrowers with credit scores less than 500 are not eligible for Federal Housing Administration-insured mortgage financing, according to the new credit score and loan-to-value (LTV) requirements released today by the U.S. Department of Housing and Urban Development.
This is the first time the FHA has had a minimum score to determine borrower eligibility.
Borrowers with a credit score between 500 and 579 can receive up to 90% LTV from FHA for a single-family mortgage while any borrower with a score 580 or above is eligible for maximum funding. Non-traditional and insufficient credit is accepted provided that borrowers meet the underwriting guidelines.
100% financing is available to borrowers using Mortgage Insurance for Disaster Victims with no downpayment, as long as their credit score is above 500.
The FHA said it is providing a special, temporary allowance to permit higher LTV mortgage loans for borrowers with lower decision credit scores, so long as they involve a reduction of existing mortgage indebtedness pursuant to FHA program adjustments.
The credit standards will take effect on Oct. 4.