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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.

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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.

Credit Guidelines That FHA Lenders Follow

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 Requirements

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FHA Loan Articles and Mortgage News

Who Can Apply for an FHA Mortgage?

November 21, 2021 - Can anyone apply for an FHA home loan? It’s true there are few limitations in terms of who may apply without being rejected out of hand. One scenario that disqualifies applicants for purchase or refinance loan approval are those where hopeful borrowers have FICO scores below 500.

First-Time Home Buyer Advice

November 18, 2021 - FHA home loans aren’t restricted to first-time homebuyers, but the FHA mortgage program is a good option for those who have never owned a home before--there is a low down payment requirement and more flexible FICO score guidelines for FHA mortgages.

How to Prepare Your Credit for an FHA Home Loan

November 16, 2021 - How much time do you need to start working on your credit to become ready to apply for an FHA mortgage? Focusing on your credit habits, credit card account balances, and more in the year or more leading up to your home loan is an important part of the process.

Facts About Your Credit Scores

November 11, 2021 - If you are preparing for a large investment like a home loan, you’ll want to start looking at your credit reports early and pay attention to them over the long term. That is why it’s recommended to start working on your credit a full year or more in advance. You will definitely want the time.

Home Loans After Bankruptcy: What You Need to Know

November 8, 2021 - If you are considering a new home after a Chapter 7 or Chapter 13 bankruptcy has been discharged, you should know the rules that apply in such cases. Knowing them ahead of time will definitely help when you are ready to explore your options again.