Although FHA has no minimum credit score requirement for FHA loans, currently many FHA lenders do impose a minimum score. Most lenders have already moved their minimum credit score requirements to 620 or 640.
While there may be others, at this moment I am only aware of two wholesale lenders accepting between 550 and 580 with compensating factors and recent good credit. After December 12, it looks like all lenders will move to a minimum of 620 unless they have a special investor tucked away somewhere.
Fannie Mae, announced that it "is revising the eligibility, underwriting, and pricing policy to support housing market liquidity and sustainability." In a statement released on Tuesday, September 24, 2009 Fannie said that starting December 12, 2009, the minimum credit score will be increased to 620 for all loans delivered to Fannie, including loans insured or guaranteed by FHA, VA and USDA-RD.
While the increased minimum score is still much lower than what is required by private mortgage for a conventional loan, it's a reminder for everybody, especially first-time-home-buyers, that a good credit score is needed even if they want to buy a home with a FHA loan.
Lenders often run back up credit reports prior to funding which can lower scores. So while the minimum will be 620 if you are currently working with buyers with less than 630 mid scores my best advice is to begin immediately with a legitimate credit repair company. Personally, I would pass on any that require a large upfront fee.
Bill Ladewig, Your FHA Guru.
October 2009, FHA Credit Score going to 620
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