November 19, 2013
It’s good to understand the process of FHA loan approval. Knowing what your lender is looking for on your credit application is an important part of being ready for an FHA mortgage application. When you fill out your credit forms, what does your lender do with all that data?
When it comes to your credit information, the lender doesn’t just rely on what’s provided on your paperwork; FHA loan rules listed in HUD 4155.1 say the lender must request a credit report that consists of information from the three major credit reporting agencies in something called a Three Repository Merged Credit Report or TMCR. That data must include:
–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
Additionally, HUD 4155.1 says for each borrower debt listed, the following data is also required:
- date the account was opened
- high credit amount
- required payment amount
- unpaid balance
- payment history
FHA loan rules require the lender to have a “corrected credit report” on file which, “must supplement the TRMCR if the report does not verify legal actions such as bankruptcies, judgments, lawsuits, foreclosures, and tax liens.” Furthermore, any data listed on the loan application that isn’t found in the credit reports must be verified regardless.
Borrowers who don’t have a traditional credit history may wonder if all this leaves them out in the cold, so to speak, when it comes to getting an FHA home loan. But provisions have been made FHA loan rules for just this circumstance. According to HUD 4155.1:
“A Non-Traditional Mortgage Credit Report (NTMCR) is designed to access the credit history of a borrower who do not have the types of trade references that appear on a traditional credit report, and used either as a
− substitute for a TRMCR or an RMCR, or
− supplement to a traditional credit report that has an insufficient number of trade items reported.”
For more information on these credit report issues, contact the FHA directly or speak to a loan officer.
Do you have questions about FHA home loans? 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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