May 1, 2014
A reader asks, “I have an average FICO OF #709. My EQUIFAX is #686, TRANSUNION is #695, and my EXPERIAN IS #748. What lenders will use my average FICO to determine my FHA LOAN eligibility?”
FHA loan rules about credit scores are found in HUD 4155.1. While we cannot speak for individual financial institutions, in general, lenders seem willing to work with borrowers with an average FICO score of between 620-640 or better.
How does the FHA determine what the average FICO score is when the borrower has different scores from each of the three major credit reporting agencies? HUD 4155.1 Chapter Four Section A addresses this under the section titled, “Definition of Minimum Decision Credit Score”.
According to Chapter Four, “If a credit score is available, it must be used to determine the decision credit score for the application and for eligibility for FHA-insured mortgage financing.”
Chapter Four adds, “A ‘decision credit score’ is determined for each applicant according to the following rule: when three scores are available (one from each repository), the median (middle) value is used; when only two are available, the lesser of the two is chosen; when only one is available that score is used.”
As you can see the FHA covers all bases–when only one FICO score is available, it’s logically the determining score. When there are three, the middle score is used.
It’s important to point out that FICO scores are not the only qualifying factor for an FHA mortgage loan, but it’s definitely one of the more important factors in the loan application package. Discuss your circumstances with a loan officer if you aren’t sure about what might qualify in terms of FICO, debt to income ratios, or loan repayment history.
https://www.fhanewsblog.com/2014/05/fha-energy-efficient-mortgage-loans-a-reader-question/
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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