The most flexible first-time homebuyer loan just became a bit more stringent. Starting Oct. 4, homebuyers must have a minimum credit score of 500 to be eligible for a Federal Housing Administration-insured mortgage. Borrowers seeking a single-family home mortgage with credit scores ranging from 500 to 579 will be limited to up to 90 percent loan-to-value (LTV) funding, which is a measurement of the final appraised value of the property. This is the first time the FHA has set a minimum credit score to establish eligibility. The good news for younger borrowers is that nontraditional and insufficient credit is not grounds for disqualification, so long as the borrower meets all the underwriting guidelines. In general, a sterling credit score on the FICO scale is 720 or higher; so all things considered, the new restrictions are fairly modest.
To learn more about how to improve your credit score and get the best rates on mortgages, visit our Home Buying Guides section for guides like these: