May 2, 2013
A reader asks, “I was in the Independent Foreclosure Review. I was put in a modification for a year made all my payments and they sold my mortgage and then sent me a letter saying I was denied. I ended up short saleing on 7/5/11. My credit score is 561, what are my chances of getting an FHA loan?”
Short sales in and of themselves may not be an automatic barrier to an new FHA home loan if the borrower was current on the mortgage at the time of the sale. You may find that in cases where there was a delinquency or late payments at the time of the short sale, a borrower may be required to wait at least 12 months from the time of the last late payment before applying for a new loan.
These standards may vary from lender to lender.
When it comes to credit scores, the issue gets a bit more complex. The FHA minimum scores are not necessarily those of the financial institution you’re applying at. In general borrowers may find lenders willing to work with them with credit scores starting at between 620 and 640 at a minimum–again, depending on the lender.
While the FHA minimum FICO score requirement does address borrowers with scores in the 500s, many lenders won’t approve an FHA mortgage unless the FICO scores are in the 600 range as mentioned above.
The lender is free to require a higher FICO score; the FHA loan program is supported by participating lenders, the word “participating” being the key factor–the FHA cannot force a lender to lower FICO score standards to the FHA minimums.
Borrowers who need help with pre-purchase issues such as credit ratings should contact the FHA and request a HUD-approved housing counselor referral. Contact the FHA directly at 1-800 CALL FHA.
Do you have questions about FHA home loans or refinance 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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