September 20, 2018

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Am I Eligible For An FHA Loan Even Though I Have Had Credit Problems?

Am I Eligible For An FHA Loan Even Though I Have Had Credit Problems?

Am I eligible for an FHA loan even though I have had credit problems? Borrowers often worry their credit scores or credit history aren’t good enough to qualify for an FHA mortgage loan, but what is the reality? What do FHA loan rules say about credit and your ability to borrow?

FHA Loans For Borrowers After Bankruptcy

FHA home loans are possible for those who have a bankruptcy on their credit history, but there is a mandatory waiting period and the duration of that wait depends on the nature of your filing. The mandatory waiting period begins when the bankruptcy is discharged, NOT when it is initially filed.

FHA Loans For Borrowers After Foreclosure, Deed-In-Lieu Of Foreclosre, Or Short Sale

Borrowers with foreclosure or short sale activity on their credit history may be eligible for an FHA mortgage, but like those who have experienced a bankruptcy, the waiting period issue applies.

Certain exceptions may be possible depending on circumstances, but additional lender standards will apply and you’ll need to discuss your situation with a loan officer to determine what may be possible at that financial institution.

FHA Loans For Borrowers With Credit Score Issues

FHA loan program minimums for maximum financing are listed in the FHA loan rule book HUD 4000.1. Your credit scores must be 580 or better for maximum financing according to the FHA loan rules.

But lender standards will apply and you may find participating lenders requiring FICO scores in the 600 range, depending on the lender. It’s best to discuss your needs with a loan officer if you aren’t sure whether your FICO scores qualify at that financial institution.

FHA Loans For Borrowers In Credit Counseling Programs

HUD 4000.1 states that borrowers in credit counseling programs may be eligible for an FHA mortgage depending on circumstances:

“Participating in a consumer credit counseling program does not disqualify a Borrower from obtaining an FHA-insured Mortgage, provided the Mortgagee documents that:

-one year of the pay-out period has elapsed under the plan;
-the Borrower’s payment performance has been satisfactory and all required payments have been made on time; and
-the Borrower has received written permission from the counseling agency to enter into the mortgage transaction.”

Speak to a participating FHA lender to see how these rules may apply to your transaction.

Bruce Reichstein - Staff Writer

By Bruce Reichstein

October 12, 2017

Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.

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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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