October 27, 2017
What are the lender requirements for an FHA loan? The answer to that question varies depending on the lender, but in general there are many areas the lender will examine to determine if you are able to afford an FHA home loan.
FHA Lender Requirements For Employment And Income
The FHA loan handbook, HUD 4000.1, requires your chosen participating FHA lender to verify your most recent two years of employment history. Those two years do not have to be with the same employer, but the lender will be looking for patterns of reliability where income and employment are concerned.
The lender wants to know that your current income is stable, reliable, and likely to continue.
FHA loan rules provide for the fact that not all income is employment-based. You cannot be discriminated against just because you draw retirement pay, disability pay, public assistance, or other forms of income.
However, the lender will need to determine that such income is likely to continue and is not temporary in nature. Your debt-to-income ratio will play an important factor in loan approval regardless of the type of income you receive.
FHA Lender Standards For Credit
There are two areas the lender will pay close attention to with regard to credit-credit scores and credit history. These two areas are equally important. Your FICO scores may fall within a lender’s required range, or the FHA minimum standards; if your credit history also shows a history of reliable payments and responsible credit use, your chances at home loan approval are much better.
FICO scores are very important-FHA minimum standards are 580 or higher for the maximum financing allowed (with a 3.5% required down payment).
But lender standards may be higher than this minimum. You will need to check with your lender to see what FICO score is acceptable as a minimum for maximum financing. Lower or even marginal credit scores may be acceptable depending on circumstances, but you may need compensating factors such as a higher down payment or cash in reserve to help out with loan approval.
Lender Standards For Payment History
For best results, do not apply for a home loan until you can come to the application process with 12 full months of on-time payments for all financial obligations.
FHA Lender Standards For Certain Types Of Home Loans
FHA One-Time Close construction loans may have higher FICO score requirements than new purchase loans for existing properties. FHA loans for rehab projects may have different credit requirements depending on circumstances, especially those who are applying for home loans in federally declared disaster areas.
Some lenders won’t offer all FHA loan products. You may find one lender does not offer mobile home loans, while another does. You may have different experiences in different housing markets based on demand, availability, or popularity of a certain type of home loan.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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