Connecticut Real Estate Attorney Law Blog

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FHA Minimum Credit Scores

This is a very interesting and informative post about the new FHA minimum credit scores going into effect very shortly.  It also discusses the special effect that this will have here in Connecticut, with our own CHFA loan programs.  The FICO scores seem to always be getting more important.  I hope that congress requires that they be made more easily available, like the annual free credit report.

Via George Souto NMLS# 65149 FHA, CHFA, VA Mortgages Connecticut:

Yes you read the title correctly we now have FHA Minimum Credit Scores.  For as long as I have been a Loan Officer, FHA has not had minimum credit score requirements, but as of October 4, 2010 that will change, FHA will implement minimum credit scores for all case numbers assigned on or after October 4, 2010. 

 

 

 

For most Lenders this change will not change anything, because many Lenders and Investors have implemented their own credit score limits on FHA Loans already.  Most Lenders in Connecticut are requiring a minimum credit score of 620 on FHA Loans.  So this change will not have much of an impact on regular FHA Loans here in Connecticut.  However, it will have a HUGE impact on Loan Programs like our Connecticut Housing Finance Authority (CHFA) Loan Program.

CHFA is a quasi government agency that subsidizes Loans/Mortgages for First Time Homebuyers.  CHFA Loans are backed by FHA, but CHFA is the Investor and they follow FHA Guidelines when it comes to minimum credit scores.  Since FHA up until now did not have a minimum credit score, CHFA would do the loan as long as the Borrower met all other CHFA Loan Program Guidelines.  It was not unusual to see CHFA Loans approved with credit scores around 550.  With this new change all CHFA Loans/Mortgages insured by FHA will now have to meet the new FHA Minimum Credit Scores.

Fannie Mae, also has some new changes, and I will post them in my next blog, so stay tune.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308, [email protected], or visit my McCue Mortgage Homepage.

 

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About the author:  Attorney Begemann is a member of the Connecticut Bar and practices real estate and business law in Connecticut.  As an experienced real estate attorney he represents individuals and lenders in residential and commercial loan closings across Connecticut, including the purchase, sale and refinance of real estate.

Attorney Paul H. Begemann, 2764 Whitney Avenue, Hamden, CT  06518

Phone 203-230-8739                                       Fax 800-483-1904

email

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6 commentsPaul Begemann • September 25 2010 05:09PM

Comments

Great post and to have this information handy with the renewed buyer surge. Thanks!

Posted by Carol West, Hillsboro Realtor, Hillsboro homes, Beaverton, Portland, (503-730-4113 - ReMax Equity Group) over 1 year ago

Its important that everyone understand that this will really have no impact.  For the most part, the industry standard for a minimum credit score for FHA is 620+ and that is what it will remain for quite some time.  I wrote post about it earlier in the week. 

Posted by Rodney Mason - FHA 203K/ USDA /VA / HomePath Renovation Specialist - GA / AL (Prospect Mortgage, Atlanta, GA) over 1 year ago

Paul, thank you for re-blogging my post.  While this will not have much of an impact on FHA Loans as Rodney in the comment above stated, it will have a significant impact on our CHFA Mortgages here in Connecticut. 

Posted by George Souto NMLS# 65149 FHA, CHFA, VA Mortgages Connecticut over 1 year ago

Thanks for the comments, and especially thanks to George for writing the original post and highlighting the CHFA issue - I learn alot from his blog!  I think CHFA also provides borrowers downpayment assistance, to make up the amount FHA will not lend, and I assume this will negatively impact that program too, since they will no longer be able to make the first mortgage loan to lower credit score borrowers (George, correct me if I am wrong).  It concerns me that the credit score is becoming ever more important, removing any flexibility from underwriting.  There are situations where a lower score is not really reflective of the whole picture, and it can arbitrarily eliminate deserving people from homeownership.  Plus it concentrates too much power in a credit bureau assigning a number to someone based on a proprietary (secret) formula.

Posted by Paul Begemann (Attorney Paul H. Begemann) over 1 year ago

Paul, the ist Loan is done through CHFA, but since it is insured by FHA, CHFA has to follow the guideline.

On your second point, you are right, credit scores are playing a much bigger role in the approval of loans.  Even though credit scores are now impacting FHA Loans, they are playing an even bigger role with Conventional Mortgages, and as you stated, less flexibility for underwriters.

Posted by George Souto NMLS# 65149 FHA, CHFA, VA Mortgages Connecticut over 1 year ago
I'll try to put this to good use immdeitaely.
Posted by Trish 5 months ago

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