June 25, 2012
One frequently asked question about FHA home loans goes something like this: “Why do different banks seem to have different standards for FHA home loans?” It’s a legitimate question–some lenders require different credit scores than others, some are stricter about certain types of credit issues or require longer wait times after bankruptcy or foreclosure. Why?
The FHA loan rulebook for lenders, HUD 4155.1, has a section in Chapter Four called “Qualifying Ratios” which can help borrowers understand why some of these variances may occur. Every bank has its own set of standards, based on the need to effectively manage risks in lending while allowing credit access to the largest number of qualified borrowers the company can support. What do the FHA rules require a lender to take into consideration when reviewing an FHA mortgage loan application?
According to HUD 4155.1 Chapter Four, Section F:
“Each loan is a separate and unique transaction, and there may be multiple factors that demonstrate a borrower
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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