Articles Published in: May 2014

May 6, 2014

FHA Loan Reader Questions: Chapter 7 Bankruptcy and Credit Scores

This reader comment raises some very important issues potential FHA borrowers should keep in mind when it’s time to apply for a new home loan, no matter whether applying in the wake of a bankruptcy or not. The reader says: “I was in Chapter 7 on 8/2011 and Discharged 2.5 years ago. I just applied for a loan and when my credit was pulled they found the loan of the home I own as a open account. This loan was closed for several years and it was just put back on in 2/2014 for no reason, which I have proof since I keep all my reports. I disputed it and it was taken off right away.” “Meanwhile it cleared up that problem showing the account closed but it left late | more...

May 5, 2014

FHA Loan Reader Questions: Credit Score Minimums

By Joe Wallace

A reader asks, “If a lender can want a higher credit score then FHA does, how do I find a lender that will work with me having a lower credit score? Mostly because if the lender is approved by FHA but don’t have to go by their guidelines doesn’t that make it that much more difficult for a low credit score individual to get a loan?” This question raises an important issue all FHA loan applicants should be aware of–FHA credit score minimums are just that. They are minimum requirements that lenders use as a benchmark, but the lender is free to require a higher credit score as long as that requirement is applied fairly and in accordance with federal Fair Housing Act laws. Let’s look at the FHA loan | more...

May 2, 2014

FHA Loans, Credit Reports, And Late Payments On Your Record

By Joe Wallace

Some borrowers come to the FHA loan application process worried that late payments on their credit history might jeopardize their chances at FHA loan approval. What do FHA loan rules say about late payments and how does the FHA loan rulebook address this issue? HUD 4155.1 Chapter Four Section C has guidance for participating FHA lenders about late payments. Chapter Four says, “The lender must document the analysis of delinquent accounts, including whether late payments were based on • a disregard for financial obligations • an inability to manage debt, or • factors beyond the borrower’s control, such as delayed mail delivery, or disputes with creditors.” That can be comforting for borrowers who do have some minor credit issues in their past. FHA loan rules actually go a bit further | more...

May 1, 2014

FHA Loan FICO Score Requirements: A Reader Question

By Joe Wallace

A reader asks, “I have an average FICO OF #709. My EQUIFAX is #686, TRANSUNION is #695, and my EXPERIAN IS #748. What lenders will use my average FICO to determine my FHA LOAN eligibility?” FHA loan rules about credit scores are found in HUD 4155.1. While we cannot speak for individual financial institutions, in general, lenders seem willing to work with borrowers with an average FICO score of between 620-640 or better. How does the FHA determine what the average FICO score is when the borrower has different scores from each of the three major credit reporting agencies? HUD 4155.1 Chapter Four Section A addresses this under the section titled, “Definition of Minimum Decision Credit Score”. According to Chapter Four, “If a credit score is available, it must be | more...

May 1, 2014

FHA Energy Efficient Mortgage Loans: A Reader Question

By Joe Wallace

A reader asks, “Can an FHA EEM loan be a stand alone or does it need to be a part of a purchase money loan or a refinance loan?” The FHA Energy Efficient Mortgage program allows a borrower to add money to a new purchase home loan or an FHA refinance loan–money that is intended to be used for approved energy efficient upgrades to the home. The rules governing FHA EEM loans are found in HUD 4155.1 Chapter Six Section D, which states in part: “New and existing one to four unit properties, including one unit condominiums and manufactured housing properties, are eligible for the Energy Efficient Mortgage (EEM) Program. EEMs may be used for both purchases and refinances, including streamline refinances, with • Section 203(b) • Section 203(k) rehabilitation | more...