December 15, 2015
A reader got in touch to ask about certain FHA loan standards for loan approval. “…underwriting is telling me that I am approved with conditions. One of which is, no missed or over 30 days late payment. I cannot give that. They say it is a law/rule. Is this true in my case?”
We get many “is this true?” type questions. Unfortunately there’s no quick or easy answer to this because there are several factors at work. A borrower who comes to the FHA loan process with missed or late payments in the 12 months leading up to the application will find it more difficult to get an FHA home loan approved.
We’re not saying that’s the case with this particular reader, but it’s worth pointing out that the lender will be looking carefully at the 12 months of payment activity.
FHA loan rules aren’t the only ones that count when it comes time to approve or deny an FHA home loan application. Lender standards also apply. It may be that in this case the lender was only able to approve the loan as described above because of lender standards. We don’t know the nature of the applicant’s credit or other financial qualifications, so it’s difficult to say.
Regardless, the lender’s job is to review a borrower’s credit history, payment patterns and other financial data to see whether the borrower is a good risk or not. FHA standards AND lender standards are used to make this determination. The FHA has minimum FICO score requirements for FHA home loans, refinance loans, and HECMs. The lender is free to require a higher standard as long as that standard is applied in accordance with federal law.
Borrowers or soon-to-be loan applicants who find themselves in a situation where they are unsure whether they can get loan approval or not should contact the FHA directly to request a referral to a HUD-approved housing counselor in the local area who can help with pre-purchase planning. You can contact the FHA for such a referral by calling 1-800 CALL FHA.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
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.
Browse by Date: