December 2, 2021

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FHA Loans and Your Credit History

A home loan is a major investment. Many borrowers are nervous about the credit qualifying portion of an FHA home loan application because they’ve made mistakes in the past with credit, have collection judgements in their record or have experienced bankruptcy.

Those who have been through foreclosure sometimes assume they can never get their credit rating repaired enough to qualify for a home loan. But in many cases such fears are not warranted–at least where FHA loans are concerned. Conventional loans are more difficult to get in the wake of housing market woes, a bad economy and other factors, but borrowers trying for an FHA mortgage soon learn there are more options available than one might assume.

According to the FHA rules, getting access to those options means having a recent record of on-time payments, dependable income, and the likelihood of both income and dependability to continue. What does the FHA rulebook say about your credit history?

“Past credit performance” the FHA official site says, “serves as the most useful guide in determining a borrower’s attitude toward credit obligations and predicting a borrower’s future actions. A borrower who has made payments on previous and current obligations in a timely manner represents reduced risk.”

That’s great news for the slice of the American public that has had little trouble paying their bills. But what about those with less-than perfect records?

“…if the credit history, despite adequate income to support obligations, reflects continuous slow payments, judgments, and delinquent accounts, strong compensating factors will be necessary to approve the loan.”

Compensating factors include the length of time your credit record shows dependable payments since any financial trouble, and any explanations the FHA borrower can provide for the period where missed payments, bankruptcy or foreclosure happened. Situational difficulty is not viewed in the same manner as financial irresponsibility. FHA rules allow flexibility for those who had trouble, overcame that trouble, and got back on track.

FHA rules agree. “When delinquent accounts are revealed, the lender must document their analysis as to whether the late payments were based on a disregard for financial obligations, an inability to manage debt, or factors beyond the control of the borrower, including delayed mail delivery or disputes with creditors.”

If you’re considering an FHA insured mortgage, don’t hesitate to apply or prepare your finances to apply at a later date because of worries over your past credit history. Instead, contact a lender and your nearest FHA office and ask for assistance in planning for an upcoming loan application. You may be surprised to learn that a new home is closer than you think.

Joe Wallace - Staff Writer

By Joe Wallace

May 26, 2011

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for for (8) years and is currently the Associate Editor for

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About was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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