In some unexpected good news, Wells Fargo (ranked #1 in the number of mortgage loans originated) & Quicken Loans (ranked #3) have revised their FICO score requirements making it possible for more borrowers to obtain new FHA mortgages. Although FHA’s standard requirement is a minimum credit score of 580 for a loan with 3.5% down, most mortgage lenders have for some time imposed their own higher minimum of 620 restricting the ability of many borrowers to get financing. This has hit first time home buyers particularly hard because during the recession as many household’s credit scores were significantly negatively impacted. In fact, one consumer group estimates that nearly one third (29.6% to be exact) of all Americans currently have credit scores of less than 620. While I’m not sure what percentage of Americans currently have credit scores below 580 and therefore won’t be helped, this will allow those with credit scores between the two values to now have a chance of getting a FHA backed loan.
Although most homes here in the Smokies are not financed with FHA loans (second homes are generally not eligible for these low down payment loans), reasonably sized primary residences can be financed with FHA loans and therefore will be helped by this change. To remain competitive, I expect most competitors to make the same change soon and more potential buyers will therefore be able to qualify.