mortgage

FHA changes home mortgage rules

Credit score minimums
Credit score minimums

The FHA is setting a minimum credit score for borrowers.

Old rules: There was no minimum score from FHA; lenders set their own standards and were allowed to set score minimums.

New rules: For a regular FHA home loan, you need a FICO score of at least 500. Borrowers with scores from 500 to 579 are required to put 10 percent down, instead of the usual 3.5 percent. On a $177,000 home, that means coming up with $19,470 (down payment plus upfront premium) at closing.

What you need to know: Steve O'Connor, senior vice president for public policy and industry relations for the Mortgage Bankers Association in Washington, D.C., says lenders are likely to "impose higher standards," and that "as a practical matter, the true threshold will be higher than 500."

These rules go into effect with lender applications submitted after Oct. 3.

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