The Federal Housing Authority (FHA) recently proposed a number of tweaks to its flagship home loan program, including some significant credit scoring changes.
In order to better manage risk and continue supporting the fragile U.S. housing market, the FHA will require a minimum Fico score of 500 once the changes are accepted and ultimately implemented.
Prior to the announcement, the FHA didn’t have a minimum credit score requirement, though many individual banks and lenders had their own minimums set.
Additionally, prospective homeowners with credit scores below 580 (bad credit score) will be required to come in with at least a 10 percent down payment.
Borrowers with credit scores of 580 and above will still be able to take advantage of the FHA’s flagship 3.5 percent down payment home loan program.
If you’re in the market for a new home or even a refinance, you should check your credit score long before applying for a mortgage (free credit score).
It’s important to know exactly where you stand long before applying to ensure you have time to make changes if you’re credit score isn’t up to snuff.
Tip: Banks and mortgage lenders often require that you have at least three open lines of credit with a minimum two-year credit history on each.
Read more: How to raise your credit score.
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