Do the same FHA loan requirements apply to all borrowers? This is a complex question, and the answer depends greatly on whether credit issues are being discussed or whether general requirements for loan approval outside FICO scores are the topic. What’s the difference?
Basically, FHA loan rules apply for all borrowers when it comes to the basic minimum requirements, standards, and verification processes for a certain type of mortgage. If you apply for a new purchase mortgage, those basic requirements will affect your transaction.
But the basic requirements for an FHA reverse mortgage are not the same as those for a new purchase loan and so there are different standards for that type of loan including an age requirement. FHA reverse mortgages are only for qualified borrowers age 62 or older. A new purchase FHA home loan is for any financially qualified borrower who is able to enter into a legally binding agreement.
FHA loan standards may vary depending on circumstance-for example, a housing market with no flood plains or natural disaster zones may not require hazard insurance for the kinds of known issues associated with homes purchased in an area prone to flooding.
An FHA mortgage loan in one housing market may require additional scrutiny for property damage associated with “meth houses”-FHA appraisal rules require abatement of toxic substances in such cases. Not all housing markets deal with such issues, so the requirements in areas where this is a concern are naturally different than those where no such problems exist.
The basic financial qualifications for an FHA mortgage are intended to apply for all borrowers in terms of FICO scores, compensating factors for marginal credit, employment and income verification, etc. But the nature of an applicant’s work may not be “typical” and there are additional requirements for applicants who are seasonal workers, earn commission income, work for themselves, etc.
The most basic standards for FHA loan approval, which include a range of FICO scores, apply to all applicants but it is important to remember that FHA loan rules are not the only requirements. Lender standards will also factor in, and those standards are not identical from lender to lender.
One important area where all FHA borrowers are intended to get identical treatment is in the application of Fair Housing law standards. No discrimination is permitted in the FHA home loan process, and those who do experience some form of it should report the incident immediately to the FHA/HUD.
You cannot be rejected for an FHA home loan on the basis of factors that have nothing to do with your financial qualifications, employment, income, being an owner/occupier, etc. A home may not be suitable for an FHA loan, a borrower may be denied the loan because he or she doesn’t intend to live in the property as the primary residence, or because of factors that affect the economic life of the property.
But an applicant’s race, beliefs, orientation, family status or lack thereof, affiliations, or other non-economic factors are not permitted to be used as a measure of creditworthiness. This Fair Housing standard applies to all applicants.