The “New” Credit Score

In 2005 when the real estate market was on fire, lenders were handing out sub-prime loans left and right to those who had a credit score in the mid-to-high 500’s.  Everyone was doing it, but little did they know we would all pay for it later.

Most lenders now require a minimum 640 credit score to qualify for an FHA loan. Those whose score is lower than 600 will have to come up with more money up front.  A credit score below 580 has more strict requirements in order to qualify. The borrower will now have to come up with 10% of their own money to put down. Gifts and seller’s concessions are no longer allowed.

Lending to those who have had a bankruptcy is not out of the question. FHA will go as low as 530 if there are compensating circumstances that offset the credit risk.

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