The Housing of Urban Development (HUD) has made it clear that in the FHA credit standards are changing for 2011.  HUD and the Obama administration have several goals they have outlined to improve the credibility of their flagship FHA home loan programs. The first goal is to bolster the FHA loan reserves and the second goal is to reduce loan defaults and foreclosures. 

 In order to accomplish these goals, HUD must tighten the FHA guidelines and increase the accountability for FHA lenders with more comprehensive FHA loan requirements.  FHA credit score minimums have never been enforced in the past because HUD always prided itself that the FHA loan guidelines enabled underwriters to consider a borrower for government financing based on all of their credentials rather than just a credit score. 

* Higher Down-Payments for Bad Credit  * FHA Credit Score Minimums  * More Equity for Refinancing w/ Bad Credit

Is this End of Bad Credit Home Financing for FHA?

*  Minimum credit score at or above 580 are eligible for maximum 97.5% Loan to Value for FHA financing (3.5% down-payments required with purchases).

*  Minimum credit score between 500 and 579 are restricted to 90% Loan to Value for FHA finance options (10% down-payment required).

*  Minimum credit score of less than 500 are not eligible for FHA- mortgage loans insured by the government.

*  FHA borrowers with a non-traditional credit history or insufficient credit are eligible for maximum financing if they otherwise meet FHA guidelines.

*  Borrowers using 203(h), Mortgage Insurance for Disaster Victims, are eligible for 100% mortgage financing and no down-payment is required.  However, FHA borrowers must have at least a 500 credit score to be eligible.