The Federal Housing Administration has offered home loan insurance so that a wide variety of individuals who may have had low credit scores and were in need of or looking for a home might be able to obtain a home loan despite their low credit score. However, a recent CNN report regarding the Department of Housing and Urban Development mentioned that HUD requires borrowers to have a credit score of at least 500 before a homeowner can qualify for this type of home loan.
While HUD has has this requirement in place for a while, it’s been said that this change is the first time that HUD has required that a potential homeowner have a certain credit score. There are those who say that this change will not be detrimental to many homeowners as no FHA insured loans were given to borrowers with a score below 500 during the second quarter of 2010. While many believe that this will cause an easier transition into these new rules, there is concern that many homeowners who may have a score under 500 may still be able to afford a home loan payment but are now in a position where an FHA-insured loan will be unavailable.
The mortgage industry has been concerned over the potential of homeowners defaulting or becoming delinquent on their home loans and it’s been reported that the FHA is changing in this manner so that they can avoid these types of mortgage troubles. Many homeowners have been seeking a home loan modification in order to make the home loan more affordable, seeing as how cutbacks at homeowners’s place of employment or the loss of their job had been wreaking havoc.
While there are some who feel a cap on the credit score required for an FHA home loans is a mistake, there are those who feel that if the Federal Housing Administration wishes to cut down on the potential of delinquency and default, they will need to be more strict with qualifications homeowners must meet. Currently, borrowers must have a FICO score of 582 meet the FHA’s qualifications for obtaining an FHA home loan.