November 2, 2018
There are many reasons why a home loan application might be denied. If you seek an FHA home loan, credit requirements and other rules may be more forgiving of past credit mistakes, but lender standards and other factors do mean the borrower is held to certain minimums for FICO scores, debt ratios, and other financial qualifications.
#5: FHA Loan Rules Require A Minimum FICO Score Requirement
If your FICO scores are below 500, FHA loan rules say you are not eligible for an FHA mortgage loan. But that 500 minimum score is the FHA requirement, NOT the lender’s. Your participating lender’s requirements may be higher than 500 as a minimum, and meeting the bare minimum can result in a higher down payment.
FHA FICO score requirements for the lowest down payment? FICO scores of 580 or above. But again, this is the FHA minimum and not the lender’s standard which may be higher. Ask your loan officer what the FICO score rules are for that financial institution to get a better idea of what may be expected beyond the FHA minimum.
#4: You Can Be Denied A Home Loan For Certain Kinds Of Employment Issues
If you have a minimal job history (less than two years) your FHA lender may not be able to justify approving your mortgage loan unless there is a way to determine that your employment is stable, reliable, and likely to continue. Some jobs require frequent moves or changes; this may be anticipated by the lender.
But other careers may not, and frequent job changes in these positions when the job history is minimal might not work in the borrower’s favor. Lender standards, and circumstances will affect the outcome in this area.
#3: Being Overdrawn, Late/Missed Payments
Borrowers should take great pains to come to the mortgage loan application process with 12 months of on-time payments on every financial obligation and have no bounced checks or overdrawn accounts on the record for the same amount of time. Anything less than this may jeopardize your ability to get an FHA home loan or FHA refinance loan approved.
#2: Changes In Your Credit Or Debt After Applying For The Mortgage
If you apply for new credit after applying for your home loan, your lender is required to run your financial information again to insure you can still afford the loan. Don’t risk getting turned down for your mortgage because of the timing of your other credit applications.
#1: The FHA Appraisal Comes Back With Problems That Cannot Be Corrected
A home loan can be stopped in its’ tracks if the FHA appraisal shows that the home is simply ineligible for a loan due to its’ condition, location, local disaster hazards, etc. If a home does not meet FHA minimum appraisal standards for safety, habitability, and economic viability, it won’t be approved for an FHA mortgage.
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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