Even though it seems as though everyone’s credit has been hammered by short sales, foreclosures, late payments and credit card debt, the FHA will soon require borrowers to hit a magic 580 FICO score in order to purchase a home with the minimum 3.5 percent down payment. New borrowers with credit scores between 500 and 580 will be required to provide a 10% down payment and even less appealing will be that these same borrowers will not even qualify for the program at all if they have a score below 500.
But there’s more. FHA officials may also soon implement other policy changes announced in January that will also reduce the maximum allowable seller credits on FHA-backed loans from 6 percent to 3 percent.
We get it that the FHA wants to lessen its risk exposure to shaky loans. The FHA loans give people the chance to get into a home with little down payment but some of these buyers might be questionable at best. Even for those buyers who do qualify for an FHA they still need some luck and a tight relationship with a listing agent to get into a home against all cash investors.