September 9, 2013
A reader asks, “My wife and I are trying to get a FHA loan. Me as the primary borrower and her as co-applicant. She has lates on her student loans, which have been consolidated and are current for the last 8 months. we provided the lender a letter of explanation, detailing the reason she was late…underwriter has made a decision to deny, stating the reason was/is not good enough. Is there anything we can do?”
There are two important things a borrower should consider when applying for an FHA mortgage in circumstances like these.
The first is that not all lenders have the same standards. The financial institution that turns you down today may have more strict requirements than the one that offers you an FHA mortgage tomorrow. It’s very important to shop around for a lender, so the answer to that part of the reader’s question, “Is there anything we can do?” is basically to keep looking.
The second part has to do with your acceptability to the lender–any lender–as a good credit risk. If you come to the home loan process with a late payment in the last 12 months of your credit history, you seriously jeopardize your ability to get a home loan.
Borrowers should wait to apply for a a home loan until they have at least a full year–12 months–of reliable, on-time payments on their credit record. Anything less may be considered a waste of time depending on the circumstances. Remember that your loan officer will review your credit record with an eye on your repayment patterns as well as your credit scores. Repayment history is one of the strongest indicators that a borrower may or may not be a good credit risk.
In short, respect the “12 month rule” and your chances of getting an FHA loan will increase. Borrowers who need help understanding this portion of the FHA loan process should contact the FHA directly to request a referral to an FHA/HUD approved housing counselor who can further explain the hows and whys of credit reports, credit ratings, and what the lender is looking for when reviewing an FHA mortgage application.
Do you have questions about FHA loans? Ask us in the comments section.
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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