August 16, 2017
What does my FHA lender look for in my credit report? That is a very good question to ask, and the earlier in the home loan planning stages you ask, the better off you’ll be. It’s highly recommended that home loan borrowers get copies of their credit reports in the year leading up to a home loan application. You want to know what your credit history says about you before you submit that information to your loan officer.
FHA Loan Rules For Credit Reports
Your lender is required by the FHA loan program to pull your credit reports, and to use “traditional” credit reporting wherever available. Some borrowers do not have credit, or have non-traditional credit histories. According to the FHA loan handbook, HUD 4000.1, the lender is required to do the following:
“The Mortgagee must use a traditional credit report. If a traditional credit report is not available or the traditional credit report is insufficient, the Feedback Certificate will show a Refer recommendation, and the Mortgagee must manually underwrite the Mortgage. The Mortgagee must obtain a Tri-Merged Credit Report (TRMCR) from an independent consumer reporting agency.”
Having a mortgage “manually underwritten” does not automatically equal getting turned down for the loan, but you may be required to submit additional documentation depending on circumstances.
FHA Loan Requirements For The Actual Credit Report
FHA loan rules do not permit the borrower or other third parties to provide credit reports, even if they are sealed and come from the credit reporting agency itself. According to HUD 4000.1:
“Credit reports must contain all information from at least two credit repositories pertaining to credit, residence history, and public records information; be in an easy to read and understandable format; and not require code translations. The credit report may not contain whiteouts, erasures, or alterations. The Mortgagee must retain copies of all credit reports.
The credit report must include:
-the name of the Mortgagee ordering the report;
-the name, address, and telephone number of the consumer-reporting agency;
-the name and SSN of each Borrower; and
-the primary repository from which any particular information was pulled, for each account listed.”
The participating FHA lender must look for any bankruptcies, judgments, foreclosure activity, lawsuits, tax liens, etc. For each account listed in your credit report the lender will require information about your balance, credit limit, payment history, and how long you have had the account.
Your lender will examine your credit report over a period as long as seven years. Certain types of credit information such as medical debt or accounts with evidence of identity theft problems may be subject to different standards or review depending on circumstances.
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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