January 23, 2013
A reader asks, “My wife’s uncle just passed away not to long ago and I want to keep his property in the family. I make very good money,but i only have a 590 credit score.How can I go about buying his property and keeping everything the way it always has been?”
Without addressing the credit score issue, in general one good way to go about buying a home with an FHA home loan is to get pre-approved for a loan amount–fill out the online application at FHALoan.com (a private company, not a government agency) and work with the loan officer to get the property appraised. This process–pre-approval, appraisal, and etc.–is fairly typical for many borrowers.
Credit scores are a separate issue. The FHA Loan program has minimum credit score requirements which include the following:
At or above 580:
eligible for maximum financing.
Between 500 and 579
limited to a maximum LTV of 90%.
Less than 500
not eligible for FHA-insured financing.
Those numbers are printed directly from the FHA loan rulebook, HUD 4155.1. But it’s important to know that these numbers are only FHA minimums. The lender is free-and usually does–require higher credit scores for FHA home loans. The FHA will not force a lender to issue an FHA mortgage to a borrower with what it views as bare-minimum credit according to its own standards.
Many lenders won’t consider an application if the borrower has a combined FICO score of 620 or less, but the important thing for all potential FHA loan applicants to consider here is actively working on credit scores (without resorting to third party “credit repair” agencies which may not be able to do anything on your behalf you can’t do yourself for free).
If you need help with credit score issues, contact the FHA at 1-800 CALL FHA and ask for a referral to an FHA approved local home buyer counseling agency that can help. These agencies can advise you on working on improving your credit score, preparing for an FHA home loan, and budgeting for the FHA loan expenses you’ll need to pay in order to close the deal.
Do you have questions about FHA home loans? Ask us in the comments section.
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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