June 12, 2014
A reader asks, “I was told that i could qualify for a FHA loan with a credit score of 608. I am a first time home buyer. Is the information I was given true?”
It may sound glib to say that the answer depends on who told you, but in this case that is true. Technically speaking FHA loans are available, according to FHA loan standards in HUD 4155.1, to those in the FICO score range the reader is asking about. However, the FHA loan rules are not the only ones at work in these case.
Lender FICO standards can be, and ofter are, higher than the FHA rulebook minimums. This is allowed and there’s nothing wrong with a lender who requires a higher FICO score as long as those high score requirements are enforced in compliance with the Fair Housing Act.
So the reader question remains–is what he or she was told the truth? If a lender speaking on behalf of his/her financial institution said that, then yes, it’s true–that particular lender is theoretically willing to work with an FHA loan applicant with a FICO score of 608 as the “decision credit score”.
But the same may not be true with all lenders–borrowers are encouraged to shop around for an FHA home loan to find the most competitive rates, the best terms, and in some cases, a company willing to work in the borrower’s circumstances.
It’s easy to misunderstand the FHA loan rules for single-family home loans. Some assume that because the FHA loan rulebook says one thing, that it can’t be overruled or set aside because of other factors including state or federal law, lender standards, etc. FHA loan rules never take precedence over state or federal law, and FHA lenders are considered “participating lenders” and can offer loans with higher standards (which must be applied for all in accordance with the Fair Housing Act).
Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get pre-approved for an FHA loan at FHA.com, a private company and not a government website.
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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