October 2, 2017
What are the FHA loan credit score rules? Do you know the difference between FHA loan standards and lender standards? First time home buyers should know what the rules are long before starting the search for a new home.
FHA Loan Credit Score Standards
FHA home loans require a FICO score minimum of 580 or better to qualify for the lowest down payment of 3.5%. FICO scores are not the only criteria for approving or denying the home loan, so if you know your FICO score but aren’t sure about the rest of the financial qualifications for FHA loan approval, you’ll definitely want to keep reading.
Lender Credit Score Standards
Lender FICO score standards can be (and often are) higher than FHA loan minimum requirements. That means that even though you may technically qualify under FHA loan FICO score standards, you will also need to know the lender’s requirements for FICO scores and much more.
FICO Scores Aren’t The Only Criteria
Your FICO scores are only part of the picture. Your lender will need to know that you have a debt-to-income ratio that does not exceed FHA or lender standards, and your income must be verifiable by the lender as stable, reliable, and “likely to continue”. The lender will require tax forms, employer contact information, and other data to insure you are financially qualified.
FHA Loan Standards For Certain Types Of Debt
Your debt-to-income ratio is important, but so is the nature of your debt. Do you have tax debt or federal non-tax debt? The lender will be required to determine that you are not delinquent on this kind of debt and that you are participating in a payment program that is satisfactory to the creditor.
FICO scores can’t offset this type of debt issue, but your credit activity is important regardless of how you need to handle federal debt going forward.
Bankruptcy Issues
FHA loan applicants who have a bankruptcy in their credit history should know there are mandatory waiting periods required after a bankruptcy is discharged. Note that the filing date is NOT the beginning of the waiting period which is normally one year at the very minimum. That period may be longer depending on the type of bankruptcy filed, state law, lender standards, or other factors.
Your FICO scores won’t be a factor in these waiting periods, but your credit activity post-discharge will be key.
Speak to a loan officer to get clarification on these issues or to learn more about how FICO scores and other financial qualifications affect your ability to successfully apply for a home loan.
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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