FHA Mortgage Refinance Credit Score Qualification Creeping Upward

It appears that banks and lending institutions are becoming even more stingy with their money, not only as it relates to business and short-term lending, but also for mortgage loans. One of the bigger shifts in qualification standards for refinancing homeowners pertains to the FHA loans program.

Throughout the subprime meltdown, FHA loans appeared to be the saving grace for many borrowers, as it allowed people with poor credit to get refinanced at awesome refinance rates, and up to a 97 percent LTV to boot.

Even though FHA loans are not technically credit score driven, the actual lenders underwriting and funding the loans have a minimum credit score limit that they will accept in order to qualify for the mortgage. That low limit was set at a 580 score throughout 2008 and for the beginning months of 2009. Unfortunately, that lower limit threshold has drifted upward for most lenders. As of this moment, most refinancing homeowners will have to have a minimum 600 to 620 mid fico score in order to qualify for an FHA loan.

There are most likely some lenders out there that will accept the older scoring limits, but my best guess is that you will have to pay a premium with a higher qualified mortgage rate, than the current market is bearing for the same loan scenario with a 600 to 620 credit score.

Yes, FHA rates are still great for lower qualified credit scores, but I’m afraid that a rather large percentage of poor credit score homeowners will be left out in the cold when they try to refinance.

If you find yourself with a sub 600 credit score and really need to refinance, especially if your major motivation is for cash-out or to consolidate debts, then you might want to consider the aid of a credit restoration company. Many times, credit reports have false information or negative items that can be removed. A credit repairer can take care of these items rather quickly and possibly have your score raised into refinance qualification range within 90 days or so.

If you do contact a credit repair company, make sure that they go over your credit report with you first, and also let you know if they can raise your score to the appropriate level, along with the timeframe anticipated to do this. There are many credit restoration companies that are long on fees and short on results. A reasonable fee should be no more than $300 to $400 for a year’s service for one individual.

Also consider that an improved credit score not only helps with mortgage qualification, but also for all other financial (credit related) matters, and even job opportunities.

May the Mortgage Refinance Rates be with You!

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