FHA currently does not require credit scores to guarantee a mortgage, but individual lenders originating FHA loans often have minimum score requirements before they will submit a loan for FHA approval. 

FHA is on the verge of moving to a risk-based pricing system that, for the first time, will use credit scores and require higher mortgage premiums from those whom it believes pose a higher risk of default.

The change had been proposed in September 2007, with the intention of starting January 1, 2008, but the proposal stalled after opposition to it stiffened.  Now it looks like the change will finally happen some time after mid-year.

While FHA has not revealed its final risk-based pricing plan (it is likely to do so 30 days before it starts), it will probably closely follow the schedule that was proposed last year.  Under that plan, those with credit scores between 680 and 850 would qualify for the lowest mortgage insurance premiums, as little as 0.75% of the loan amount for those making a downpayment of 10%, 1% for a 5% downpayment and 1.25% for 3% down.  At the other end of the credit spectrum, those with scores of as low as 300 to 499 could still get loans, so long as they put 10% down and pay a 1.75% premium. Even those with no reportable score (because of insufficient credit data) could qualify for 5% and 10% down loans with premiums of 2.25% and 2%. 

FHA has said it would use the middle score from the three credit reporting agencies as the “decision score.”  © 2007, Real Estate Information Services, Capitol Assets, Choice Real Estate, Inc. & Choice Finance®