What Is The Average Credit Rating For FHA Home Loans? – Easy Qualifying Mortgage Loan

Americans the Federal Housing Administration has helped secure best mortgage loan since it was established in 1934. FHA protects lenders by paying back in the event of homeowner default, which makes them more willing to lend to people with less-than-perfect credit. It is an agency of the Ministry of Housing and Urban Development (HUD) that collects data, including average credit scores, for its borrowers. The average FICO score for FHA refinancing and purchases has increased over the years.

The basics

FHA has a two-tier credit score system to secure the loans. Senior loans require a payment of at least 3.5 percent down, while subordinated loans require at least 10 percent. The first level includes those with FICO scores of 580 or above, while the second level includes those between 500 and 579. FHA does not guarantee loans with anything below minimum payment down 500.Procedure is based on the lowest average credit score for all borrowers. For example, a borrower with a tri-merged FICO report with an average score of 753 and a co-borrower with an average score of 570, must make at least 10 percent down payment.

Data

According to a FHA 2011 chart outlook by HUD, the average FICO score on a single family home buying in January is 703, up from 702 in December 2010. The average credit rating on a single home refinancing family through the FHA is 707, versus 705 in December 2010. In October 2010, HUD notes that “for the first time the average FICO score for insured cases has reached the 700 level — in fact 702.” The average score continued to rise slightly in the following months for purchase and refinancing transactions, according to HUD data.

Considerations

Manual underwriting serves as a better deterrent for mortgage fraud than automated underwriting systems do, according to Housing Wire. Also known as digital underwriting, the process of analyzing borrower credit qualification criteria with electronic software programs is used by the FHA and conventional mortgage lenders. The FHA method, technology open to approved lenders (from TOTAL), had a 3.76 percent rate of fraud on a pool of 20,000 FHA loans used for home purchases from 2009 and 2010. The FICO’s average score for fraudulent loans was 711.

Insight expert

FHA has reduced the FICO score gap between its Excellent- and Equitable loans rated in 2010, according to Housing Wire. The quality control mortgage company that provided the data, the quality of best mortgage loan services, reports that in 2006, the FICO average score for FHA insured mortgages rated “excellent” was 665 and 603 for “fair” loans. This 62-point gap fell to a difference of 19 points four years later. Data showing excellent loans from the end of 2010 averaged 707 scores, while fair loans had a score of 688.

“This is good news for investors because of the increased number of loans granted for securitization,” says a quality manager of best mortgage loan services.

Credit requirements

The credit requirements for FHA mortgages greatly benefit people with a history of foreclosure. It can take several years to rebuild a credit score after a foreclosure. Some senior lenders ask for credit ratings of 700 or higher for mortgages. But with FHA mortgages, people who have a history of foreclosure can get approved once their credit score reaches 620. Perfect credit after losing a property contributes to credit enhancement. Several late payments after a foreclosure can stop the mortgage process.

Other requirements

Meeting the credit score requirement is only a factor in qualifying for a home loan with a foreclosure history. Borrowers applying for FHA funding must adhere to the other guidelines for the loan program. This includes 24 consecutive months of employment, verified with W-2 forms or tax returns. In addition, the payment of the house on the mortgage must not exceed 30 percent of gross monthly income, says the FHA Home Loan website.

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