August 21, 2012
A reader asks, “I have good credit but my wife had a delinquent student loan. It is now up to date for the past two months. We only have two car payments, never been late. We also have (a) home in another part of the state since my job transferred me to a different city. What are the chances of us getting a loan?”
Questions like this are hard to answer for several reasons–one of which is the reader doesn’t provide any credit score information. FHA home loans require the borrower to have a minimum credit score.
In general, borrowers should not expect an FHA loan unless their credit score is at least 580 or better, and many lenders won’t approve a loan for borrowers with credit scores lower than 620.
The lender’s minimum credit score requirement may be higher than the FHA’s, which is permitted under FHA loan rules.
For that reason, a borrower who wants to know about his or her chances for an FHA loan should start by requesting copies of credit reports and viewing the credit score currently listed. There’s no way to tell what your chances are for an FHA loan otherwise–without the credit score data, it’s all speculation.
The other circumstances mentioned in this reader question include possible debt-to-income ratio issues. Does the borrower still owe house payments on another home? Those expenses will be factored in when the lender is calculating whether or not the borrower can afford the new loan.
Finally, FHA home loans for single-family new purchase transactions require the borrower to certify that the new home is to be the primary residence–that’s a factor that must be taken into consideration when the borrower already owns property elsewhere. The residency requirement is a condition of loan approval–borrowers can’t opt out of using the home as their main address.
Do you have questions about how the FHA loan process works? 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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