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Lenders Raising FICO Score Minimums

Mortgage lenders including Wells Fargo & Co. and Bank of America have raised the minimum credit score on FHA-insured loans that they will buy to 640 from 620. About 6.3 million people are estimated to fall within the 620-640 range, comprising roughly 3.7 percent of US consumers.
Requiring a 640 credit score excludes about 15 percent of FHA borrowers, per FHA estimates. These high hurdles for FHA loans, used in about a fifth of U.S. home purchases, add to the challenges in the struggling housing market, especially for minorities and borrowers in communities hit hardest by the economic downturn

FICO scores range from 300 to 850 and are based on factors such as whether borrowers have missed debt payments, balances on credit cards relative to borrowing limits, and the length of a person’s credit history. The FHA requires minimum FICO scores of at least 500, and more than 580 for loans with down payments of as little as 3.5 percent. Borrowers with scores between 500 and 580 must put 10 percent down. Several lenders, however, have been exceeding FHA standards and requiring minimum FICO scores of 620 and now will be looking for FICO scores of 640.

Copyright 1998 – 2009 Wisconsin REALTORS® Association

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