Articles Tagged With: FICO Score

Can I buy a manufactured home with an FHA loan?

July 24, 2015

FHA Loan Questions: Late Payment History

A recent reader question about FHA loans and missed payments reminds us how important it is to examine your credit report and repayment history on all financial obligations long before you apply for a new home loan. The reader wanted to know if late payments on a student loan would affect chances for FHA home loan approval. The question mentioned that the reader’s current mortgage loan is current, but that late payments on the student loan were on her credit record. Does this reader have a chance for a new FHA loan? The answer is complicated because of two things. A borrower with a current mortgage trying to apply for a new purchase FHA home loan would have to declare that the new home is to be the borrower’s primary | more...

July 22, 2015

FHA Loans and Co-Borrowers

By Joe Wallace

We often get reader questions about co-borrowing, FICO scores and other factors. One recent question asked of us involves a couple who have a single income, student loan debt, and some FICO score issues. The reader wanted to know if being a co-borrower with a higher FICO score could help with loan approval in spite of the co-borrower having no income and student loans. The FHA loan rules found at the FHA official site (www.fha.gov) state the following about co-borrower income: “The lender must analyze the income of each borrower who will be obligated for the mortgage debt to determine whether the borrowers income level can be reasonably expected to continue through at least the first three years of the mortgage loan.” That alone implies that all borrowers to be | more...

July 15, 2015

FHA Home Loans And “Zombie Debt”

By Joe Wallace

Some borrowers who are preparing for an FHA loan application get surprises when they pull their credit reports–the existence of outdated debt information, inaccuracies, and mis-reported collection activity can plague credit reports in some cases. It takes time to undo these things and the borrower must work directly with the credit reporting agency to clear up the problem. And according to a recent headline at the Consumer Financial Protection Bureau (CFPB) official site, there may be more of these issues in store for some potential FHA loan applicants. According to Were ordering JP Morgan Chase to refund $50 million and stop collecting on 528,000 accounts, JP Morgan Chase’s sale of credit card accounts to debt buyers resulted in inaccuracies that brought complaints of aggressive, improper, and inaccurate debt collection activity. | more...

June 30, 2015

Planning For An FHA Home Loan? Pull Your Credit Reports For Free

By Joe Wallace

If you are in the planning stages before purchasing a new home with an FHA mortgage loan, it’s a very good idea–strongly recommended, in fact–to pull your credit reports from the three major credit reporting agencies. It’s best to request copies of your credit reports as early as possible in the process so that you have abundant time to dispute any outdated information, investigate evidence of identity theft, etc. Many people in this stage go to the official sites for the three major agencies–Equifax, Experian, and TransUnion. But did you know that federal law permits borrowers to get a free credit report from these three agencies once every 12 months? According to the Federal Trade Commission official site (https://www.ftc.gov/), anyone who wants the free reports can order them from annualcreditreport.com, | more...

May 28, 2015

FHA Loan Pre-Approval and Credit Scores

By Joe Wallace

One question that comes up frequently when talking FHA loans involves whether or not a borrower’s credit scores are affected by applying for pre-approval for an FHA mortgage loan. While we aren’t experts in credit reporting, and the FHA loan rules found in HUD 4155.1 do not address this issue, a bit of research into this issue turns up some interesting facts. According to the Kiplinger Magazine’s, “Could Mortgage Preapproval Hurt Our Credit?”, any kind of loan application has the potential to “ding” your credit rating. That, Kiplinger reports, is according to Barry Paperno, consumer operations manager for Fair Isaac (the company that created the FICO score system). “Typically, you would see a drop of five points or less,” says Paperno in the Kiplinger piece, which adds, “…when lenders request | more...

May 9, 2015

FHA Loans, Your Credit Report and the Debt-To-Income Ratio

By Joe Wallace

A reader asks, “My question is about what debt matters and witch debt doesnt.I have 4 debts that have been removed from my credit report according to credit karma and 1 credit card that is closed but I owe 1100 dollars on.” Any current debt (outside of student loans under qualifying deferment plans and qualifying medical debt which may be viewed by the lender in a different way depending on circumstances) may affect a borrower’s debt to income ratio calculation for an FHA loan. Anything that has dropped off your credit report won’t be an issue–if it isn’t on your credit record chances are it’s not a factor in the loan approval process unless there’s some record of missed or late payments associated with the accounts that does exist. When | more...

May 6, 2015

FHA Mortgage Loans and the Fair Credit Reporting Act (FCRA)

By Joe Wallace

Most FHA loan applicants are well aware when they apply for a new home loan that they are about to give permission to the lender to do an extensive review of FICO scores, loan repayment history, financial responsibility in general, income, and much more. But did you know that there are federal laws that govern how a lender must proceed in order to be fair during the process? These laws also explain in general what to do if negative credit information requires “adverse actions” such as denial of a loan application. The Fair Credit Reporting Act instructs lenders on how to proceed in such cases, and FHA loan rules in HUD 4155.2 Chapter One, Section B include the following: “The Fair Credit Reporting Act (FCRA) is intended to control collection | more...

May 5, 2015

FHA HECM Loans: Basic Details You Should Know

By Joe Wallace

If you are a qualified borrower aged 62 years or older and either own your home or are very close to doing so, you may be eligible for an FHA Home Equity Conversion Mortgage (also known as a HECM loan). HECM loans, also known as reverse mortgages, feature money back to the borrower and no mortgage payments. The HECM loan normally comes due and payable when the borrower dies or sells the home. According to the FHA official site, the type of homes eligible are strictly residential in nature with an occupancy requirement for the borrower: “To be eligible for the FHA HECM, your home must be a single family home or a 2-4 unit home with one unit occupied by the borrower. HUD-approved condominiums and manufactured homes that meet | more...

April 30, 2015

“Second” FHA Appraisals: A Reader Question

By Joe Wallace

A reader asks, “I am in the process of selling my home. There was an appraisal done and it came in low. We negotiated with the buyers on that appraisal. Now I am learning they got another appraisal that was higher so they could get a higher loan amount for closing costs but will not provide the appraisal to us.” “By the way, this is FHA and apparently the lender never filed the first appraisal with the FHA. Additionally, the lender has now changed their story stating they paid for the first appraisal and that the buyer paid for the 2nd appraisal and therefore they dont have to give it to us for re-negotiations. This cant be legal? And surely I have recourse? We are set to close tomorrow, and | more...

April 11, 2015

FHA Appraisals Versus Home Inspections: Part Two

By Joe Wallace

A reader asks, “My follow up question is that I believed that there would be an FHA inspection done and if serious problems or defects are found then the seller would be required to fix the issues. I realize FHA does not “check” for everything so a home inspection is still in order, but has this rule changed?” This is a follow-up to our answer to this reader’s question in our April 3, 2015 post, “Is A Home Ever ‘FHA Approved'” where we answered the original question as follows: “…there is one serious issue raised here that we MUST address–the prevailing misconception some borrowers have that the FHA or HUD would ever ‘approve’ a home. Some borrowers mistakenly assume that because a home passes the appraisal process that it is free | more...