March 19, 2013
When you apply for an FHA guaranteed home loan, you’re required to list a variety of items on your application form including credit data. Your recent debts and other recurring financial obligations are required because the lender must determine your debt-to-income ratio.
Some borrowers wonder if leaving items off the application means the lender won’t know about them. But it’s very important to know what the FHA requires and what the lender is responsible for checking when it comes to credit. Do you know what goes into your credit report and what the lender has access to when he or she is processing your application data?
Many people don’t.
Here’s what the FHA loan rulebook, HUD 4155.1 has to say about credit reporting data and what the lender is required to access in order to properly review your application for an FHA loan:
• All inquiries made within the last 90 days
• All credit and legal information not considered obsolete under the Fair Credit Reporting Act (FCRA), including information for the last seven years regarding
-bankruptcies
-judgments
-lawsuits
-foreclosures
-tax liens
• For each borrower debt listed:
-the date the account was opened
-the high credit amount
-required payments
-unpaid balance
-payment history
As you can see, the list of items the borrower must review is quite extensive and reveals a lot about the borrower’s previous debts, ability and willingness to pay. Knowing the lender has access and must review these items can help you to be as thorough as possible when completing your application and help you to prioritize your pre-purchase home loan planning.
Borrowers who have missed payments or other issues in their recent credit history should consider getting in touch with the FHA to get a referral to a HUD-approved housing counselor who may be able to help you in the preparation stages for an FHA loan.
To get such a referral, contact the FHA at 1-800 CALL FHA.
Do you have questions about FHA mortgages? 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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