July 2, 2020

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FHA Loan Approval: Credit Check Facts

FHA Loan Approval: Credit Check Facts

First-time borrowers and experienced house hunters alike often wonder if their credit is good enough to be approved for a new mortgage loan. Do you know the facts about credit and FHA home loan approval?

FHA Credit Score Standards May Vary From Your Lender’s Requirements

The FHA home loan program’s FICO score standards are the minimum requirement. FHA loan rules say that any borrower with a FICO score of 500 or higher is eligible to apply for an FHA loan.

Lender standards may be higher than this, which is one reason why it’s best to start working on your credit early-long before you apply for a home loan.

FHA Credit Requirements Can Be More Forgiving

FHA loan rules in HUD 4000.1 say that it is not impossible to get a new home loan following a short sale, bankruptcy, or foreclosure. However, mandatory waiting periods will be required-at least a year in most cases, more depending on circumstances and/or lender requirements.

FHA Loan Rules Say “On-Time Payments Count”

Come to the FHA loan application process with a year or more of on-time payments for all financial obligations for best results.

You Cannot Pay To Have Accurate Negative Credit Information Removed From Your Credit Report

You can give your money to a third party promising such results, but in the end, the only thing that will change is your bank balance. Accurate credit data will not be removed from your credit report as long as it has not aged to the point where it “falls off” your credit record. Third parties cannot alter your credit report to remove current, accurate negative credit information.

Be wary of any third party agency that promises to “fix your credit” in this way. A third party might be able to help remove outdated information that should have fallen off your credit report, but this is something you can do without paying a third party to do so.

Credit Scores Are Not The Only Determining Factor In Loan Approval

Your credit score is highly important, but also your payment record (see above), your income, and your overall patterns of credit use. Are your credit cards at their limit? Do you carry half the limit or less as a balance? Work on reducing your debt ratio and carry under 50% of your credit card limit for improved chances at home loan approval.

Lender Credit Standards Will Vary

Shop around for the right participating FHA lender. What is not possible with one financial institution may be available with another lender. Much depends on the condition of the housing market for certain home loan products, the demand for these products may also help determine their availability with a particular lender.

Joe Wallace - Staff Writer

By Joe Wallace

February 7, 2019

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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About FHANewsBlog.com
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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