Articles Tagged With: Credit Requirements

September 12, 2017

FHA Loan General Credit Requirements

Do you know what the general credit requirements are for FHA mortgage loans? Outside of FHA loan FICO minimums (580 or above for maximum financing according to HUD 4000.1, though lender standards may apply beyond this) and employment history, there are a set of standards listed in the FHA loan handbook. Those standards include instructions to the lender on how credit is to be analyzed and how credit data may be collected. Those standards include the requirement that a participating FHA lender must “analyze the Borrower’s credit history, liabilities, and debts to determine creditworthiness.” In the pursuit of this, the lender must get credit reports from “an independent consumer reporting agency”. The lender “must obtain a credit report for each Borrower who will be obligated on the mortgage Note. The | more...

July 28, 2017

Who Can Qualify For An FHA Loan?

By Joe Wallace

Who can qualify for an FHA loan? The answer surprises some people, thanks to some misunderstandings about who the FHA single family home loan program is for, and who can use it. FHA home loans are for any financially qualified borrower. You don’t have to earn a minimum amount of money, and there is no maximum income limit for FHA mortgages. While it’s true that FHA loans can be less expensive than their conventional mortgage counterparts (in terms of interest rates, no penalties for early payoff, etc.) these loans are not specifically targeted at people who “can’t afford conventional mortgages” or to those with an economic disadvantage. Hence, there’s no maximum income limit. There’s also no preference given by the FHA for first time home buyers, though a particular lender | more...

Credit Scores For An FHA Home Loan: When Low Credit Is Not Bad Credit

July 5, 2017

Who Are FHA Loans Good For? Part Two

By Joe Wallace

Who are FHA loans good for? We’re examining this issue to help clear up some myths and misconceptions about the FHA loan program including the notion that FHA loans are only intended for first-time home buyers (FHA loans are available to all financially qualified borrowers) and the idea that FHA mortgages have an income limit that prevents those with greater incomes from applying (not true). Who Are FHA Loans Good For? FHA loans are good for both first time buyers and those who have returned to house-hunting after owning property. For second-time house hunters (and beyond) the most important thing to remember is that FHA loans have an occupancy requirement and you can only purchase a primary residence with an FHA loan. No timeshares, vacation homes, or other “occasional occupancy” | more...

June 22, 2017

Who Qualifies For An FHA Loan? Part Two

By Joe Wallace

Who qualifies for an FHA home loan? Many borrowers want to know if they can get approved for an FHA mortgage even with low FICO scores, past mistakes on their credit history, or other issues. What does your lender have to see in your financial details in order to approve your home loan? FHA Borrower Credit Scores The main confusion over FHA home loan FICO score requirements comes when a potential borrower reads FHA loan program standards but doesn’t understand that lender standards may also apply. FHA home loan rules state that a borrower with a FICO score between 500 and 579 is technically eligible for an FHA home loan provided a larger down payment of 10% is made. But a borrower with a 500 FICO score may discover that | more...

June 14, 2017

How Is An FHA Loan Better Than A Conventional Loan?

By Bruce Reichstein

What are the major differences between FHA loans and conventional loans? Do you know why people choose FHA over conventional mortgages? There are many reasons, depending on the borrower, but let’s examine how FHA loans differ to see what advantages you may find with a participating FHA lender. FHA Loans Versus Conventional Loans: Interest Rates Depending on your FICO scores and other financial qualifications, you may be required to put as much as 20% down on a conventional mortgage loan. Compare that to the FHA-required minimum down payment of 3.5% of the adjusted value of the property. Down payment requirements can and often do depend on your credit score, and for FHA mortgages, HUD 4000.1 (the FHA Single Family Loan Handbook) states that borrowers with FICO scores 580 or higher technically | more...

June 9, 2017

FHA Loan Credit Score

By Bruce Reichstein

Do you know what your credit score is? Do you know what lenders require in terms of an FHA loan credit score? The answer might surprise you. The short answer is that there’s a minimum FHA loan credit score requirement to qualify for the program, but lender FICO score requirements will also apply. FHA loan rules in the FHA Single Family Loan Handbook (HUD 4000.1) state that FICO scores of 580 or higher are required for “maximum financing”, which is the cost of the loan minus the borrower’s required 3.5% down payment. Borrowers with FICO scores lower than 580, but not lower than 500 still may qualify for the FHA loan program but with a higher down payment (ten percent). Remember, these are the FHA minimum standards, NOT individual lender | more...

May 26, 2017

Qualifying For An FHA Cash-Out Refinance Loan

By Bruce Reichstein

Qualifying for an FHA cash-out refinance loan is much the same as qualifying for an FHA “forward mortgage” or typical new purchase loan. Since this type of refinancing involves money back to the borrower, the lender is required to run a new credit check and the usual credit requirements will apply even for those who are repeat customers for a particular lender. Credit Activity When you are preparing for your FHA cash out refinance loan, you’ll need to observe the same rules about credit that you did when you applied for your original mortgage. That means avoiding new credit card applications and other types of credit leading up to your refi loan paperwork. Why? Every time you apply for new credit, a “hard inquiry” is listed on your credit report. | more...

How much can I borrow with an FHA refinance loan?

May 23, 2017

Basics Of An FHA Home Loan

By Bruce Reichstein

Are you interested in an FHA mortgage? If you’ve never applied for an FHA home loan before, there are some basics you should know that will help you make the right choices for the property you wish to purchase. Who Is An FHA Home Loan For? The FHA single-family home loan program is available to all financially qualified borrowers looking to buy property that meets FHA standards. FHA loans are for owner-occupiers looking to purchase a home to live in as their primary residence. There is a residency requirement for FHA mortgages, and FHA single family home loans are not intended for investment properties. You can purchase a home with as many as four units, and the borrower is free to rent out the unused units of the property as | more...

May 1, 2017

FHA Loan Questions: Verifying Alimony and Child Support

By Joe Wallace

FHA loan questions often come in our comments section after we’ve posted on a certain topic. Recently we wrote about how a lender is supposed to verify child support and alimony payments to a borrower who wants to use them as income: “I applied for a loan and my loan officer said I need proof of continuing payment for the next 3 yrs because my oldest son is 16 but will not graduate high school until after he turns 19. Would my court ordered support papers, my sons school records showing graduation year, and a copy of the law stating that he has to pay until he graduates be good enough proof?” FHA loan questions like these are proof that there’s still much work to do on explaining how FHA | more...

April 6, 2017

Credit Report Data, Disputed Accounts, and FHA Loans

By Joe Wallace

Borrowers are often advised to give themselves plenty of time in the pre-purchase planning stages to review credit report details to make sure there are no errors or outdated information. What happens if a borrower does see something on a credit report and chooses to dispute it? Ideally, issues like these should be caught very early in the planning stages. You should check your credit report as early as one year prior to the home loan application in order to give yourself enough time to dispute items if required. But not all borrowers have that much time to deal with such issues, and FHA loan rules address disputed accounts in detail. HUD 4000.1, the FHA single family home loan rule book, has two sections on disputed accounts-one for derogatory credit | more...