February 19th, 2011 1:25 PM by Sherry Lee
Here's some unexpected good news for anybody working to get buyers into houses, especially first-timers who don't have much down payment cash on hand: The door to an FHA-insured mortgage just opened a little wider.
With no fanfare or public announcements, two of the largest FHA-approved lenders have backed off their controversial "overlay" requirements on FICO scores (lender overlays are qualification requirements that can be more stringent than FHA's own requirements).
Both Wells Fargo and Quicken Loans confirmed to me last week that they will now lend to applicants with 580 FICOs and 3.5 percent down payments.
Their revised standards conform in most respects to FHA's own minimums, and open the agency's financing to large numbers of buyers whose credit scores have sagged during the recession. Wells Fargo is the largest originator of FHA-insured mortgages; Quicken ranks third, according to industry data.
Along with most other major lenders, both companies previously had insisted on minimum FICOs of 620 for otherwise qualified borrowers seeking 3.5 percent down payment loans. If your score came in even slightly lower, they wouldn't even look at your application.
An estimated one third of Americans now have FICO scores below 620, according to one consumer group's estimate.