My FHA allows a 580 Credit Score

All the time I am being asked what is the minimum credit score that a borrower can have and I can still help provide FHA financing. That is a loaded question but normally I can entertain FHA financing for borrowers with a middle credit score as low as 580.

Before we all get too excited, I should say there are a lot of caveats here that we as mortgage lenders have to review with you before we can say yes.

The benchmark for most banks and FHA is 640. Many will tell you they cannot help you because they have no leaway below that credit score threshold. I have leaway down to a 580 but other criterea have to be met in order for us to get our Approve/Eligible. Also, I should point out that FHA (A Minus) pricing will be worse than your FHA above 640 middle score pricing by at least .5% to .75%.  I realize that is a big difference but you still get your house or your refinance into a lower rate.

If you have spent anytime over at my Establishing Credit page you will see that most lenders want to see three valid tradelines paid on time for one year or more. These tradelines can be credit cards, car loans, student loans, cell phone bills if it appears on the credit.  In addition to this the underwriter would like to see your housing payment paid on time. This is very important! This can be demonstrated with cancelled checks or if you live within a big community, a verification of rent from a management company.

Other factors that can come into play are previous short sales, foreclosures or bankruptcies. FHA will make you wait 3 years from your short sale date before you are allowed for homeownership again. If you had a foreclosesure you must wait 7 years from the foreclosure date. If you have had a bankruptcy you must wait 4 years from the discharge date and you will need to show re-established credit that is spotless since the BK..

When in doubt we will need to run your file on-line through Automated Underwriting which will give us a feedback of Approve/Eligible , Refer with Caution or Refer. In other words Yes , No or Maybe.

Even if you have a 550 middle score I would love to hear from you. Please keep in mind that the most important thing is your job. If you have the job, the credit and the savings will follow. Sometimes boasting a credit score can be as simple as paying down certain credit cards to 40% of high credit limit.