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What is the minimum FICO for a home loan?

What is Your FICO Score? 

You might think you know what your FICO score is 

A FICO Score is a number that helps lenders make a determination about how likely it is that you will repay a loan. The FICO can actually determine how much money you can borrow, the interest rate that you will be offered and how many months you will have to repay. Not all FICO Scores are the same.  Each credit bureau, Experian, Equifax and Transunion all utilize different calculations to come up with their FICO score, which is the middle score and based on what type of credit that you are applying for.

For example there is a FICO score for Auto, for A mortgage, credit cards, etc.  As time goes on these scores/calculations change and each bureau does not update them equally. What does this mean?  Most scores are consumer scores which also vary based on what you are applying for.  Car, Credit card, etc. The score that we are most concerned with here is the Mortgage or risk score. The risk based score is the one that determines your interest rate if you are applying for a home mortgage. One of the best places to look up your “risk based” score is This is a good guideline to help you see where your current risk based or mortgage FICO is.  

What credit score is needed to buy a house
bad credit mortgage

What is A FICO Score is a three-digit number based on the information in your credit reports. It helps lenders determine how likely you are to repay a loan. This, in turn, affects how much you can borrow, how many months you have to repay, and how much it will cost (the interest rate).

What Are Credit Requirements for FHA Loans

The Federal Housing Administration or FHA makes it easier for First Time Home Buyers to purchase a home. 

The Federal Housing Administration or “FHA” makes it easier for First Time Home Buyers to purchase a home.  A first time home buyer is anyone that has not purchased a primary home in 3 years. The FHA does not provide the loan directly but insures the bank against a loan made by utilizing the FHA guidelines. These loans have lower down payments and require a lower FICO score than conventional loans. 

Many banks today during Covid 19 and the uncertainty in the market will only provide loans for those with credit scores over 620. CambridgeHomeLoan is still providing loans with a starting FICO of 580 to qualify for the First time home buyer program that allows for a 3.5% down payment.

Benefits of an FHA Loan

One of the main reasons why FHA loans are one of the most popular loan types is that borrowers that utilize them can take advantage of both the benefits and the protections that are unavailable with most traditional mortgage loans. Loans that are insured through the FHA allow lenders to be more lenient with their underwriting guidelines. Some of the benefits that you can enjoy with the (Federal Housing Administration) FHA loan:

  • Qualifying is Easier
    Because the FHA insures the lender in the event of a potential loss they can offer loans with lower credit scores and requirements so that they are easier to qualify for. 

  • Competitive Rates
    FHA loans have very competitive rates. Today during Covid-19 we have seen refinance rates in the low to mid 2s and purchase rates in the 3s.  Many factors contribute to your rate but these are certainly the lowest rates I have ever seen in my career.

  • Lower Closing Costs
    With FHA loans you can also benefit from lower fees like closing costs, mortgage insurance and others.

  • Bankruptcy and Foreclosures
    Even if you have had a foreclosure of filed for a bankruptcy in the past does not mean that you will not qualify for a loan. There are a number of requirements that you would have to meet like re-establishment of good credit, no late payments and solid payment history but you can still qualify. 

  • If You Have No Credit
    There are typically 2 or three forms of established credit paid on time to qualify for a loan. 

The FHA home loan makes home ownership possible for many home buyers. 

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