HUD Credit Score Mortgage Guidelines On FHA Home Loans

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This ARTICLE On HUD Credit Score Mortgage Guidelines On FHA Home Loans Was PUBLISHED On November 11th, 2019

HUD Credit Score Mortgage Guidelines
Gustan Cho Associates

Not all FHA Lenders have the same credit score requirements on FHA loans.

  • All mortgage lenders need to meet the minimum HUD Agency Mortgage Guidelines on FHA mortgages
  • However, every lender can have their own lending requirements that are above and beyond the minimum HUD Agency Mortgage Requirements
  • This higher credit score requirement by mortgage companies is called lender overlays
  • For example, to qualify for a 3.5% down payment FHA loan, HUD requires a minimum of 580 credit scores
  • However, lenders can require 620 to 640 credit scores as part of their lender overlays
  • Most lenders do have lender overlays on credit scores and other factors like debt to income ratios
  • Just because you do not qualify for an FHA loan with one lender does not mean you cannot qualify with another lender that has no lender overlays on FHA loans
  • Gustan Cho Associates is a direct national lender with no lender overlays on FHA loans

In this article, we will cover and discuss HUD Credit Score Mortgage Guidelines On FHA Home Loans.

HUD Credit Score Mortgage Guidelines On Lowest Credit Score Required

What are Mortgage Guidelines On Lowest Credit Score Required

HUD Credit Score Mortgage Guidelines are the following:

  • The minimum credit score required to qualify for a 3.5% down payment FHA loan is 580 FICO
  • Borrowers can qualify for an FHA loan with under 580 FICO down to 500 FICO but need 10% down payment
  • Under HUD Guidelines, 10% down payment is required on home purchases

The above is the HUD Credit Score Mortgage Guidelines.

HUD Guidelines Versus Lender Overlays

What are HUD Guidelines Versus Lender Overlays

As mentioned above, not all lenders have the same lending requirements on FHA loans. Over 75% of our borrowers at Gustan Cho Associates are folks who cannot qualify at other lenders due to their overlays. It is not illegal for mortgage companies to impose overlays. Below are typical overlays imposed by lenders:

  • Credit Scores where the lender may require a higher credit score requirement
  • The maximum front end debt to income ratio required on FHA loans is 46.9% front end and 56.9% back end to get an approve/eligible per automated underwriting system
  • Typical lender overlays are when a lender can cap debt to income ratios at 45% to 50%
  • Manual versus automated underwriting system: Although HUD does allow for manual underwriting, many lenders will have overlays and not accept manual underwrites
  • Late payments in the past 12 months is not always a deal killer
  • It is possible to get an approve/eligible per AUS with late payments in the past 12 months
  • HUD allows borrowers in a current Chapter 13 Bankruptcy repayment plan to qualify for FHA loans without being discharged
  • However, most lenders will have overlays where they will not accept borrowers in a current Chapter 13 bankruptcy repayment plan
  • There is no waiting period after Chapter 13 bankruptcy discharged date
  • Gustan Cho Associates has no overlays and will accept borrowers with a recent discharge of Chapter 13 bankruptcy discharge
  • Most lenders will have a two-year waiting period after Chapter 13 bankruptcy discharged date

Qualifying For A Mortgage With A Direct Lender With No Overlays

How Qualifying For A Mortgage With A Direct Lender With No Overlays

Not all lenders will honor the minimum credit score guidelines by HUD on FHA loans. Most lenders will require higher credit score requirements than the HUD minimum credit score requirements. Most lenders will not accept borrowers with under 580 down to 500 credit scores even though HUD allows it with 10% down. As long as borrowers meet the minimum HUD Credit Score Mortgage Guidelines, they can rest assured they can qualify for an FHA loan with a direct lender with no overlays. Gustan Cho Associates are direct lenders with ZERO lender overlays on government and conventional loans. We approve borrowers who only meet the minimum HUD credit score mortgage guidelines. To qualify for FHA loans with a direct lender with no overlays, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com.

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