Articles Published in: 2013

June 7, 2013

FHA Loan Questions: Applying for an FHA Loan With No Credit Card History

A reader asks, “I have a credit score of 662, but I have no outstanding credit. I do not have any credit cards open, nor a car loan (loan was open in 2003)I have 0 installment loans, 0 credit cards, 0 retail cards. How can I get approved for a home loan? I have had credit in the past, but closed my accounts when I moved out of the country in 2001 and never got any credit cards again.” FHA loan rules address this in HUD 4155.1 Chapter Four, Section C. That section says in part, “Past credit performance is the most useful guide to • determining a borrower’s attitude toward credit obligations, and • predicting a borrower’s future actions. Borrowers who have made payments on previous and current obligations | more...

June 6, 2013

FHA Loan Rules: Contingent Liability

By Joe Wallace

FHA loan rules cover a wide range of circumstances and situations. Many of these rules were written in anticipation of needs that, while not as common as some, still might be in demand many times over the course of a single fiscal year based on the sheer volume of FHA mortgage loan applications. One set of rules governs something known as “contingent liability”, which the FHA loan rulebook describes in HHUD 4155.1 Chapter Four, Section C. “A contingent liability exists when an individual is held responsible for payment of a debt if another party, jointly or severally obligated, defaults on the payment.” This sort of obligation may be known as a co-sign agreement, a co-borrower or co-obligor arrangement. FHA loans require any borrower who has a contingent liability to list | more...

June 5, 2013

FHA Loan Answers: First Time Homebuyers

By Joe Wallace

A reader asks, “I have a Chapter 7 bankruptcy a yr ago w/a score 589 and as a veteran honorable recieving SS benefit income of $735.00/month, and together with my wife, employed 5/yrs with an income is $1,920.00 a month, with a score 580. We have been renting for 5yrs without missing or late payments with the same landlord in Fla. Can we qualify as a first time home buyer?” There are two basic issues related to this reader question. The reader asks if there’s a chance to qualify “as a first time home buyer”. The FHA does not, contrary to popular belief, require applicants to be first time home buyers in order to get an FHA home loan. By the same logic, there is no benefit or preference given | more...

June 4, 2013

FHA Loan Reader Questions: Does Bankruptcy Hurt Your Chances?

By Joe Wallace

A reader asks, “We want to know, if filing bankruptcy 3 years ago will hurt our chances? We had to do that because I lost my job. But now I am on social security disability so I do have income.” “Our credit score is about 650. My husband makes 60K per year and I get 12K per year but little in savings. We have established new revolving credit within the past two years. Is this good enough to apply and get pre-approved for a home loan?” We’ve been getting a number of bankruptcy-related questions lately, and one thing we’d like to remind potential FHA borrowers in this situation is that a call to 1-800 CALL FHA (the official help line of the FHA) can answer many of these bankruptcy questions | more...

June 3, 2013

FHA Credit Score Rules

By Joe Wallace

We’ve gotten a lot of reader questions lately about FHA loan standards for credit, FICO scores and more. Many readers want to know what the FHA FICO score requirements are and whether their credit reports are good enough to qualify for an FHA mortgage. There are two important things to understand about FHA loan credit requirements. The FHA loan rules spell out the minimum FICO scores required by the FHA; those minimums are found in HUD 4155.1 Chapter Four, Section A. According to the FHA, “The table below describes the relationship between the borrower’s minimum credit score and the maximum loan-to-value (LTV) ratio for which he/she is eligible.” The FHA minimum for maximum financing is listed in the table above at 580. But many borrowers don’t understand that the FHA | more...

June 3, 2013

FHA Loan Reader Questions: Bankruptcy Issues

By Joe Wallace

A reader asks, “I recently completed a debt reorganization on ch 11 bankruptcy. My plan is 5 years. I will not be discharged until then (5 years).” “However, I would like to refinance my mortgage loan. my credit score is bad because I am in bankruptcy for the next 5 years. Can I refinance ? Can a FHA loan help me and would they refinance my existing loan?” FHA loan rules have plenty to say about bankruptcy issues. For example, in HUD 4155.1 Chapter Four, we find the following: “A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have elapsed since the date of the discharge of the bankruptcy. During this time, the borrower must have • re-established good | more...

May 31, 2013

FHA Loan Application Rules

By Joe Wallace

When some FHA mortgage loan applicants fill out their loan paperwork, it may be tempting to leave recent or new financial obligations out of that paperwork. In some cases it may be a simple oversight, in others it might be a question of an applicant mistakenly thinking that the lender won’t know or can’t find out. What’s the reality? FHA loan rules anticipate situations like these. In HUD 4155.1, Chapter Four, Section C, there’s a heading titled, “Recent and/or Undisclosed Debts or Inquiries”. It states: “Lenders must determine the purpose of any recent debts, as the borrower may have incurred the indebtedness to obtain the required cash investment.” That means that the lender must, among other things, determine whether the borrower has gone into debt in order to make his | more...

May 30, 2013

FHA Loan Credit Standards

By Joe Wallace

When applying for an FHA home loan, many borrowers are in the dark about credit score requirements and other issues related to FICO scores in general. We recently answered a reader question about FHA loan credit requirements and now is a good time to review FHA policy on FICO scores. The FHA requires the lender to use an available credit score to determine whether or not the borrower is eligible for an FHA home loan. The FHA has rules for interpreting or using FICO scores from credit reports. According to the FHA Frequently Asked Questions list on the official site: “When the credit report reflects: • 3 credit scores (one from each repository) – the middle score is used • 2 credit scores – the lower of the two scores | more...

May 30, 2013

FHA Loan Reader Questions: Credit Scores

By Joe Wallace

A reader asks, “My credit score is in the ‘poor’ range (low score 475. Hi score 585) and I will need assistance with down payment. However, I have an excellent income and have been on the job over 15 yrs. I have recently been approved for an auto loan which I am using to I prove my credit scores. Might I qualify for FHA, and what assistance is available for the down?” The FHA has rules about minimum credit scores needed for FHA loan approval. According to the FHA official site: “When a credit score is available, it must be used to determine eligibility for FHA insured financing. The score that is used to determine eligibility is called the ‘decision credit score’. When the credit report reflects: • 3 credit | more...

May 29, 2013

FHA Loan Reader Questions: No Credit History?

By Joe Wallace

A reader asks, “I had a question about buying a home with no credit. My partner has had a very good job for over 2 years now and I am a stay at home mom. Our problem is that she has no credit it’s not bad credit it’s no credit history.” “I, on the other hand have some credit but since I stay home that wouldn’t be sufficient. She has records of paying her bills on time and rent on time. Would we be able to qualify for a home loan with that information and no credit?” The answer to this question is found in the FHA loan rules as published in HUD 4155.1 Chapter Four Section C, which states the following: “The lack of a credit history, or the | more...