January 13, 2015
A reader asks, “I have a credit score of about 590, have some old stuff on my credit, which has been cleared up but still showing. Im looking for a $100,000 loan and have $8k to put down. I just last week got financed for a newer car, what are the chances I qualify for the FHA program since I am a first time home buyer?”
FHA minimum FICO score requirements for maximum financing aren’t necessarily the same as the lender’s minimums–the lender is free to require a FICO score higher than the FHA minimum of 580 for maximum financing on a new purchase FHA mortgage loan.
The credit report issue is also something the lender would have to address on a case-by-case basis. Depending on circumstances and the presence (or absence) of any contributing factors in the applicant’s favor, the lender may be able to make a judgment call on the borrower as a good credit risk even though there are issues that would otherwise complicate the loan approval process.
FHA loan amounts are determined by a variety of factors including the sale price of the home and/or the appraised value (whichever is lower).
The final FHA loan amount may also depend on whether the borrower wants to add an FHA Energy Efficient Mortgage amount to the loan for approved energy-saving upgrades to the home. The borrower cannot request X amount of dollars for the loan–that is something set in part by the factors mentioned above and also affected by FHA loan guaranty limits set by county.
Borrowers should know that the FHA does not give preference to applicants for being “first time home buyers”. There may be state or local programs designed to help first time home buyers, but the FHA doesn’t have such a plan. That’s one long-standing myth about FHA home loans, and one many have worked hard to dispel.
Borrowers who are interested in first time home buyer programs may wish to contact a local housing counseling agency that may be able to provide information on the existence of such programs.
Borrowers who have major lines of credit opened just before an FHA home loan application may find the lender needs additional information or may require compensating factors such as a larger down payment in order to offset the major line of credit timing. This is entirely dependent on the lender and the standards of the financial institution–the borrower would need to discuss the situation with the lender.
Do you have questions about FHA home loans? Ask us in the comments section. You can also follow us on Facebook.
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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