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.
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FHA Loan Articles and Mortgage News
January 16, 2019 - Are FHA home loans, which are government-backed mortgages offered by participating commercial lenders, still available during a government shutdown or partial shutdown? This is an important question and borrowers or potential borrowers should know the facts.
January 11, 2019 - FHA One-Time Close construction loans are available in 2019 at higher FHA loan limits than in 2018. This is good news for anyone who wants a low-down payment construction loan that features only ONE application and closing date.
January 8, 2019 - The sharing economy has made entrepreneurs out of many who never thought of earning income by being an Uber driver or acting as an Airbnb host. Some are tempted to buy a multi-unit home and begin offering it for rent to Airbnb users. Is this possible with an FHA mortgage?
January 4, 2019 - FHA loan limits are going up for the second year in a row. In 2019 your ability to buy a 1-4 unit home gets a boost thanks to the higher limits. FHA loan FICO score requirements and other credit rules of the program will NOT change in 2019.
January 2, 2019 - If you’re looking at home loan options, especially for the first time, you might wonder why some buyers choose to pay more out of pocket up front on their mortgage loans rather than making the bare minimum down payment and financing closing costs.
FHA.com Reviews
FHA.com is a one-stop resource for homebuyers who want to make the best decisions when it comes to their mortgage. With our detailed, mobile-friendly site, individuals can access information about different FHA products, the latest loan limits, and numerous other resources to make their homebuying experience easier. Take a look at some of the reviews from other FHA.com visitors!
