On Sept. 3, the US Department of Housing and Urban Development (HUD) released Mortgagee Letter 2010-29, Minimum Credit Scores and Loan-to-Value Ratios. This is in accordance with Federal Register Notice FR-5404-N-01, which proposes minimum credit scores and loan-to-value (LTV) ratios.
Effective Oct. 4, borrowers with a credit score below 500 are not eligible for FHA-insured mortgage financing. Borrowers with a credit score between 500 and 579 are limited to 90 percent LTV, which requires a 10 percent down-payment. Borrowers with a credit score of 580 or higher are eligible for maximum financing, which requires a minimum 3.5 percent down-payment. Borrowers with nontraditional credit histories may be eligible for maximum financing.