March 14, 2015
A reader asks, “I have a transunion score of 600 an Equafax score of 591 and a Experian score of 591. Am I eligible to apply for a FHA loan through the website? (Lender name deleted) here in Peoria,IL told me that I would need a score of 620 before I can qualify for an FHA loan. Is this true?”
The “is this true?” part of the reader question is a common one. Yes, it is true that a given lender may require a score of 620 in order for the applicant to be approved for an FHA home loan. No, it is not true that 620 is the FHA limit–FHA loan rules say a borrower can have a credit score as low as 580 and still be eligible for maximum financing.
But that does not mean the lender must require the same, lower score.
The lender is free to have higher standards as long as those standards are applied to borrowers in accordance with federal law. We can’t say for sure what the borrower was actually told in this particular case, but borrowers should know that FHA loan rules do permit maximum financing for credit scores of 580 or above. A lender who “blames the FHA” for a FICO score requirement higher than 580 is not being honest with the borrower, or doesn’t know what FHA loan rules say about FICO scores.
Again, we aren’t saying that’s the case here, just making a general observation.
Borrowers with FICO score issues in cases like these should shop around for another lender and call the FHA directly at their toll-free number (1-800 CALL FHA) and request a referral to a pre-purchase housing counselor in the borrower’s local area. The FHA will refer you to a HUD-approved counselor who can assist with credit issue questions, offer advice and help potential borrowers prepare to become homeowners.
Do you have questions about FHA home loans? Ask us in the comments section. All questions and comments are held for review before they appear on the site.
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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