May 13, 2014
Going into the FHA loan application process for the first time? It can be helpful to understand what your lender is looking for from your FHA loan application. Do you know the FHA’s rules for credit and how credit reports are handled by your loan officer?
FHA loan rules state that all applicants for the loan must be checked–credit reports must be pulled, employment history and other financial qualifying information is required.
HUD 4155.1 Chapter One has rules and instructions for the lender in these areas. Under “Required Credit Information” we find the following:
“A credit report submitted with a loan application must contain all credit information available in the accessed repositories. Additionally, for each borrower responsible for the debt, the report must contain all of the information available in the credit repositories pertaining to
• credit
• residence history, and
• public records information.
Note: One report is required for each borrower. The lender may obtain a joint report for individuals with joint accounts.”
Notice that it’s not just your credit scores–the lender will examine your residence history, too. You may be asked to furnish addresses, phone numbers, landlord names or other information. This is all used to develop a picture of you the borrower as a credit risk.
If you have information that shows up in your credit report, but not your loan application (or vice versa) your lender is required to learn more about that. According to Chapter One, “A lender must develop credit information separately for any open debt listed on the loan application but not referenced in the credit report. Accounts listed as “rate by mail only” or “need written authorization” require separate written notification for traditional credit reports.”
Any difference between what’s listed on your credit report and your application must be duly noted and explained by the lender as part of the FHA loan application review process. “The lender must
- retain copies of all credit reports
- document in writing an analysis of the reasons for any discrepancies between credit reports, and
- reconcile inconsistencies if it receives any information that is not consistent with information on a credit report.”
Do you have questions about FHA home loans? Ask us in the comments section. You can get information about applying or getting pre-approved for an FHA loan at FHA.com, a private company and not a government website.
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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