November 14, 2018

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FHA Loans and Credit Reports

One frequently asked question about FHA home loans involves the credit check. Many borrowers want to know what credit score the lender is looking for, (many lenders require a minimum score of 620) but many more also want to know what kind of credit reporting data the loan officer needs to approve or deny an FHA home loan application.

There are many areas the lender must review as part of the FHA loan application. A typical credit check includes a review of all credit inquiries over the last three months–one reason why many lending experts recommend not applying for new credit cards or other lines of credit before or during a home loan application.

The lender must also review credit information from the last seven years of the applicant’s credit history. That would include bankruptcy filings, any judgments or lawsuit cases, or tax liens. In the case of bankruptcy or foreclosure the lender must check to insure the minimum waiting period (two to three years in most cases) has passed and that the lender is eligible to apply for new credit once more.

For each line of credit or borrower debt listed on the credit report, the lender must check the date the account was started, the credit limit, required payment amounts, payment history and any remaining unpaid balance.

The lender is required to get all this information directly from the credit reporting agency. It cannot come from outside sources including the borrower. The credit report itself must be an original and cannot have hand-corrections, erasures, or other alterations.

In cases where a borrower has non-traditional credit information that might not show up on a credit report, the lender is required to pull information from other sources to supplement the data. These sources can include references from utility companies, landlords, and insurance providers.

 

Joe Wallace - Staff Writer

By Joe Wallace

March 30, 2012

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 www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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FHANewsBlog.com 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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