FHA, once the bastion of easier home loans for people with lower down payments and/or lower credit scores has announced a proposal to require borrowers to have a credit score of at least 500 to qualify for FHA insured mortgages. FHA has never before had a minimum credit score and has typically left the decision to the individual lenders.
However, the effect of this is expected to be minimal because even though there has not been a minimum credit score very few mortgages have been made to people with lower credit scores. In fact in the second quarter of 2010, no FHA-insured mortgages were issued to borrowers with credit scores below 500 and less than 1% of borrowers had scores below 580. The vast majority of the loans were made to borrowers with credit scores above 620.
