Home Ownership Gets Tougher as Lenders Restrict FHA Mortgages

Home ownership may be falling out of reach for more Americans as lenders toughen their standards for Federal Housing Administration-insured loans beyond what the agency itself requires, Bloomberg News reported today. Mortgage lenders including Wells Fargo & Co. and Bank of America Corp., the two largest, have raised the minimum credit score on FHA-insured loans that they will buy to 640 from 620. About 6.3 million people fall within that range, according to FICO, which created the formula for the ratings. The higher hurdles for FHA loans, used in about a fifth of U.S. home purchases, add to challenges for a housing market already struggling with record-low sales and surging foreclosures. The FHA, which previously didn’t have minimums for FICO scores, began in October to require grades of at least 500, and more than 580 for loans with down payments of as little as 3.5 percent. Borrowers with scores between those levels must put 10 percent down. Several lenders moved minimums to about 620 at the start of 2009, the companies said then.

http://www.bloomberg.com/news/print/2010-11-17/home-ownership-gets-harder-for-americans-as-lenders-restrict-fha-mortgages.html