Does FHA require a minimum credit score and how is it determined?
- The FHA mortgage applicants is not eligible for FHA-insured financing if the Minimum Decision Credit Score (middle credit score ) is less than 500.
- If the middle credit score is between 500 and 579 the FHA mortgage applicants is limited to a maximum loan-to-value (LTV) of 90%.
- If the middle credit score is at or above 580 the FHA mortgage applicants is eligible for 3.5% downpayment maximum financing. The FHA mortgage lender must downgrade and manually underwrite a mortgage that received an Accept recommendation if only the non-occupying co-FHA mortgage applicants has a credit score. FHA mortgage applicants with non-traditional or insufficient credit histories are eligible for maximum financing but must be manually underwritten using the FHA manual underwriting procedures.The middle credit score refers to
• the credit score reported on the FHA mortgage applicants’ credit report when all reported scores are the same.
• the lowest score where two differing scores are reported
• the middle score where three differing scores are reported
A middle credit score is determined for each FHA mortgage applicants. Where the mortgage involves multiple FHA mortgage applicants, the lender must determine the middle credit score for each FHA mortgage applicants and then select the lowest middle credit score for all FHA mortgage applicants. Where the mortgage involves multiple FHA mortgage applicants and one or more of the FHA mortgage applicants do not have a credit score (non-traditional or insufficient credit), the lender must select the lowest middle credit score of the FHA mortgage applicants(s) with credit score(s). The FHA mortgage lender must review the credit report to determine the FHA mortgage applicants’ middle credit score,