Wednesday, March 30, 2011

Kentucky FHA Minimum Credit Score 2011

Does FHA require a minimum credit score and how is it determined?


When a credit score is available, it must be used to determine eligibility for FHA insured financing. The score that is used to determine eligibility is called the "decision credit score".
When the credit report reflects:
credit scores (one from each repository) - the middle score is used
credit scores - the lower of the two scores is used
credit score - that score is used

If there is more than one borrower, the lender must:
1. Determine the decision credit score for each borrower
2. Select the lower score (or lowest score if more than two borrowers).

Borrowers with non-traditional credit (or insufficient credit) must qualify based on the guidance in Handbook 4155.1 4.C.3
If TOTAL renders an "accept/approve" risk classification, it can be relied on (subject to correct data) EXCEPT when none of the owner-occupants has a credit score. In such cases, the loan must be underwritten using the insufficient credit underwriting guidance.

Case Numbers Assigned on or after 10/04/10
When the decision credit score is:
580 and above: Maximum financing
500-579: Maximum LTV 90.00%
499 and below: Not eligible for FHA insured financing
A transaction where one borrower has only "nontraditional credit" and the other has a decision credit score of less than 500 would also be ineligible.

203(h) Mortgage Insurance for Disaster Victims
When the decision credit score is:
500 and above: Maximum LTV 100.00%
499 and below: Not eligible

These new requirements do not apply to Hope for Homeowners, HECM, Title I, and Sections 247, 248, 223(e), 238.

Case Numbers Assigned through 10/03/10
When the decision credit score is:
500 and above: Maximum financing
499 and below: Maximum LTV 89.99%
When one borrower has only nontraditional credit and the other has a decisioncredit score of less than 500, the maximum LTV is 89.99%

Handbook 4155.1: 4.A.1.c; ML 10-29


Handbook 41255.1: 4.A.1.c; ML 10-29


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