FHA Credit Score Guidelines Will Change This Summer

   

Posted: Feb 5, 2010

credit score 580 is required to participate in FHA program

People who are looking for a home loan from the Federal Housing Administration (FHA) will find that the agency has changed its credit score requirements.

Starting this summer, prospective homeowners who want to take advantage of the FHA's 3.5-percent down-payment program are going to have to have a FICO credit score of at least 580. Those whose credit scores are below 580 will have to provide a 10-percent down payment for their mortgage.

The purpose of the change is to help the agency solidify its capital reserves while also reducing its risks. The FHA is also changing guidelines for up-front mortgage insurance premiums.

"Importantly, FHA will remain the largest source of home purchase financing for underserved communities," said David Stevens, commissioner of the agency.

While your credit score affects your ability to get a loan, it can also dictate how much you pay for things like auto and home insurance. However, a number of state legislatures, including Washington and Michigan, have contemplated banning the practice of allowing credit information to affect insurance premiums.