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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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February 24, 2020
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FHA.com is a privately owned website, is not a government agency, and does not make loans.

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.

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FHA Loan Articles and Mortgage News

FHA Loans: Second Homes and Investment Properties

February 7, 2020 - FHA home loan rules for second homes and investment properties are fairly straightforward; it’s the exceptions that can be confusing. Basically, if you want an FHA mortgage, you must be prepared to occupy the property you buy with one.

FHA Home Loan Interest Rates In 2020

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FHA Loans: It May Be Better to Buy Instead of Rent

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FHA Home Loan Refi Tips

January 29, 2020 - Those refinancing this year will need to review their credit reports, make sure they have no late or missed payments in the year leading up to the loan application, and work hard to reduce debt and credit card use. Take some of the same steps you took when you originally applied.

FHA Home Loan Down Payments: How Much?

January 25, 2020 - The FHA down payment can be as low as 3.5% of the adjusted value of the home. Compare that to the conventional loan 20% down requirement and it’s easy to see why FHA loans might be more appealing. Smaller down payments make sense if you don’t plan to keep the home long-term.