FHA loan rules do specify a minimum FICO score for borrowers who want to qualify for the lowest down payment of 3.5%. FHA (HUD) has set a minimum score of 500. Though it it is set at 500, there are very few lenders in the country that will go down to a 500 Fico score. Most lenders have "Overlays". Some will have a minimum score of 580. Others are at 600 & some are at 620.
FHA loan rules do not prevent the lender from have more strict standards (overlays) as long as they are applied in compliance with federal law, Fair Housing Act regulations.
Individual borrower circumstances can and often do play a role in the kinds of terms a borrower is offered. FICO scores are only part of the picture.
Historically, the lower the score a borrower has, the more challenges there are with the file.
The best way to increase ones credit score is to pay your bills (accounts) on time for 12 months. By striving to pay down and pay off your debts. Anytime you have a missed payment (30 day late), a drop is approximately 30 to 50 points. Collection accounts will drop a score 30 to 50 points.
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