August 6, 2014
A reader asks, “I have a FICO of 610/608/586. Is there a chance of getting approved for a loan? How much if so? And where would I begin?”
FHA loan rules specify that borrowers with FICO scores above 500 are eligible to apply for an FHA mortgage loan. However, lender standards are often higher than FHA minimums so you would need to check with the individual lender to see whether such scores are acceptable. The FHA cannot force a lender to offer FHA mortgage loans or refinance loans to those who don’t meet the financial institutions minimum FICO score guidelines.
Borrowers who ask “how much?” are asking a common question, but the answer depends on the sale price of the home and the appraised value of that property. FHA loans for new purchases are not permitted to offer cash back to the borrower. You can only apply for a new purchase FHA loan for the amount of the mortgage, plus approved add-ons or fees.
Borrowers cannot get money back on a new purchase loan except in the form of a bona fide refund for money paid up front that was later included in the loan amount. These rules are very important to know, as is the minimum 3.5% down payment requirement. Borrowers cannot finance 100% of the FHA loan amount for new purchases.
FHA loans require a much lower down payment than many conventional mortgages, and the credit requirements on FHA mortgages and refinance loans are often more lenient. But borrowers are encouraged to shop around for a lender when seeking an FHA mortgage as there may be more competitive terms and rates offered. Additionally, if you borrow with one participating lender, you aren’t forced to use the same lender to refinance. FHA borrowers are free to shop around for a new lender for the refinance loan.
Discuss your needs with a loan officer and if you aren’t sure your FICO scores will qualify, contact the FHA for a referral to an FHA/HUD approved housing counselor who can help you with pre-purchase issues including what to do about your credit issues without having to pay a third party.
Do you have questions about FHA home loans? Ask us in the comments section. You can get information about applying or getting 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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