FHA requirements are structured so that loan applicants who have a good credit history will likely be eligible for the mortgage. Late payments, bankruptcies, no credit history, and foreclosures will adversely affect your chances.

FHA Loan Rates

July 4, 2015
FHA Rates for July 4, 2015
30 Year Fixed
3.5% Rate
3.74% APR
15 Year Fixed
2.75% Rate
3.0% APR
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FHA Requirements

Credit Guidelines That FHA Lenders Follow

Before approving a loan, the lender analyzes the integrity of the borrower's past credit performance. Based on FHA requirements, those who have a good credit history demonstrated by a solid track record of timely payments will likely be eligible for a loan. Potential borrowers whose credit history is marred by slow payments, poor financial judgment and delinquent accounts is not a good candidate for loan approval.

The following is a list of items concerning the borrower's credit:

No Credit History

Two lines of credit are necessary to apply for an FHA loan. However, in the event a borrower does not have sufficient credit on their credit report the FHA will allow substitute forms.

Chapter 13 Bankruptcy

FHA will consider approving a borrower who is still paying on a Chapter 13 Bankruptcy if those payments have been satisfactorily made and verified for a period of one year. The court trustee's written approval will also be needed in order to proceed with the loan. The borrower will have to give a full explanation of the bankruptcy with the loan application and must also have re-established good credit, qualify financially and have good job stability.

Chapter 7 Bankruptcy

At least two years must have elapsed since the discharge date of the borrower and / or spouse's Chapter 7 Bankruptcy, according to FHA guidelines. This is not to be confused with the bankruptcy filing date. A full explanation will be required with the loan application. In order to qualify for an FHA loan, the borrower must qualify financially, have re-established good credit, and have a stable job.

Late Payments

During an underwriter analysis of borrower credit, the overall pattern of credit behavior is being reviewed rather than isolated cases of slow payments. If a good payment pattern has been maintained, regardless of a specific period of financial difficulty preceded it, the borrower may escape disqualification.

Foreclosure

FHA insured mortgages are generally not available to borrowers whose property was foreclosed on or given a deed-in-lieu of foreclosure within the previous three years. However, if the foreclosure of the borrower's main residence was the result of extenuating circumstances, an exception may be granted if they have since established good credit. This does not include the inability to sell a home when transferring from one area to another.

Collections, Judgments, and Federal Debts

A collection is minor in nature usually does not need to be paid off as a condition for loan approval. It is stated as such in FHA guidelines. Any judgments will have to be paid in full prior to closing. Borrowers who are delinquent on any federal debt, such as tax liens, student loans, etc., are not eligible.

FHA Loan Articles

Read About Mortgage News, FHA Updates, and Guidelines
FICO Scores and FHA Lender Requirements

The FHA has a section in its rulebook that lists a minimum FICO score for borrowers. In general, if your FICO score is below 580, you won't qualify for the lowest down payment amount of 3.5%. This minimum may be lower than the standards set by lenders.

FHA Mortgage Insurance Premiums Requirements

There are many types of questions about FHA mortgage insurance premium requirements, but since the FHA changed its MIP policies to extend MIP for the maximum duration permitted by law, we've seen more questions about those changes.

Minimum Property Requirements for Septic Systems

Lenders are responsible for making sure a property lives up to local requirements, community sewage systems are properly licensed, and these systems are adequate enough to service the property.

FHA FICO Score Facts

The FHA Bad Credit Loan myth is a common one, but the truth of the matter is that FHA loan rules, as printed in HUD 4155.1, do list minimum credit scores.

FHA Loan Rules on Student Loan Debt

The borrower who has a parent paying student loan debt every month may be able to show the cash income from that payment is stable and reliable. Debt listed in their own name can and probably will be included in debt-to-income ratio calculations.