Articles Tagged With: Credit Check

July 11, 2017

When Is An FHA Loan Better Than A Conventional Loan? Refinancing Issues

When is an FHA loan better than a conventional loan? If you are exploring your refinance options, you may find your FHA loan options provide you with some unexpected flexibility. Refinancing Conventional To FHA Yes, FHA loan rules permit those who have existing conventional, VA, or other non-FHA mortgages to refinance them into an FHA loan using cash-out refinancing or no cash-out FHA refinancing. Borrowers will need to budget for a new appraisal for these FHA refinance loan transactions, and you’ll be required to do the usual credit and employment checks. Refinancing from a conventional loan to an FHA loan also includes flexibility where interest rates are concerned. Have you ever compared FHA fixed-rate mortgage loans with FHA adjustable rate mortgages (ARM loans)? For some borrowers, refinancing out of an | more...

June 22, 2017

What Is An FHA Loan And Who Qualifies?

By Bruce Reichstein

What is an FHA loan and who qualifies? These are common questions, especially for first-time home buyers looking at all their options from conventional mortgages to FHA loans. What Is An FHA Home Loan? Simply put, an FHA mortgage is a home loan that has been guaranteed by the government, making the mortgage safer for the lender and less expensive for the borrower. The FHA single family home loan program is designed for borrowers who are financially qualified with FICO scores at 580 or better for maximum financing. (Lender FICO score requirements may be higher than FHA minimums.) An FHA mortgage as described here is intended for owner-occupiers and is meant for primary residences. That means that time shares, vacation homes, and other occasional-occupancy properties cannot be purchased with an | more...

June 19, 2017

FHA Streamline Refinance Loan Requirements

By Joe Wallace

FHA Streamline Refinance Loan requirements include having a tangible benefit to the borrower in the form of a lower interest rate, a lower monthly payment, shorter mortgage term, and/or refinancing into a fixed rate loan from an FHA adjustable rate mortgage. But there are other requirements for streamline refi loans above and beyond the “tangible benefit” rules. Did you know that FHA streamline loans have “seasoning” rules, too? Seasoning in this case means how long the borrower has been paying on the existing FHA home loan before the assignment of a new FHA loan case number for the refinance transaction. How long do you have to own your home before you can refinance with an FHA Streamline? HUD 4000.1, the FHA single family home loan handbook, states that on the | more...

June 16, 2017

What Is The Average Credit Score Needed To Buy A House?

By Joe Wallace

If you are a first-time home buyer, you’re likely asking a very common (and very important) question. What is the average credit score needed to buy a house? To get the answer, we decided to see what one of the three major credit reporting agencies, Experian, has to say on this subject. On the official Experian website, the answer to this question might surprise you: “There is no set minimum score to buy a house.” That’s right, you just read a direct quote from the official site of the credit reporting agency, Experian. But that statement does NOT mean there are no FICO score or credit score standards. Each lender has a set of credit score ranges it uses to determine creditworthiness. And many federally insured or guaranteed home loan | more...

April 6, 2017

Credit Report Data, Disputed Accounts, and FHA Loans

By Joe Wallace

Borrowers are often advised to give themselves plenty of time in the pre-purchase planning stages to review credit report details to make sure there are no errors or outdated information. What happens if a borrower does see something on a credit report and chooses to dispute it? Ideally, issues like these should be caught very early in the planning stages. You should check your credit report as early as one year prior to the home loan application in order to give yourself enough time to dispute items if required. But not all borrowers have that much time to deal with such issues, and FHA loan rules address disputed accounts in detail. HUD 4000.1, the FHA single family home loan rule book, has two sections on disputed accounts-one for derogatory credit | more...

January 13, 2016

FHA Home Loan Questions: FICO Scores

By Joe Wallace

A reader got in touch recently in the comments section to ask a question about FICO scores and FHA home loan applications. “My new wife’s credit score is 749 and mine is 620 due to an ugly divorce and transfer several years ago. We make over 287K per year with very little debt. Would we qualify for a loan together with a favorable rate? All debt paid except car loans.” This question implies that FICO scores are the deciding factor for an FHA loan approval decision, and while credit scores are very important, they are not the only factor taken into account by the lender. When you apply for an FHA home loan, the lender will examine not just your FICO scores, but your history of payments–especially those made in | more...

December 5, 2014

FHA Loan Requirements For Credit Checks, Documentation

By Joe Wallace

FHA loan rules require your loan officer to perform credit and employment checks, examine the source of down payment funds, and verify your income. In order to accomplish this, the FHA requires the lender to get documentation from the source; the borrower cannot provide the lender with credit reports, for example, and must contact your employer directly for verification of your income and work history. The rules governing these procedures are found in HUD 4155.1 Chapter One, Section B. which includes permission for the lender to ask the borrower for “blanket authorization” as described below: “The lender may ask the borrower to sign a general authorization form that gives the lender blanket authority to verify information needed to process the mortgage loan application, such as •past and present employment records | more...

May 9, 2014

FHA Loan Rules For Loan Approval: Previous Housing Obligations and Your Credit

By Joe Wallace

When you fill out your FHA loan application paperwork online or in person, it’s obvious that part of the qualification process involves having your credit scores examined and your employment verified. What may not be so obvious is that the lender is also looking for patterns of reliability in areas such as the timely payment of your monthly obligations. Some FHA loan applicants might mistakenly assume that while late or missed mortgage payments might be a factor that missed rent payments aren’t held in the same esteem. Is this true? Not according to HUD 4155.1 Chapter Four, Section C, which has instructions for the lender on checking credit report data. A strict interpretation of Chapter Four reveals no difference between how the FHA or the lender should view late or | more...

January 9, 2012

Reader Question: Preparing for an FHA Home Loan

By Joe Wallace

When it’s time to apply for an FHA home loan, your credit score is an important part of the application. Participating FHA lenders examine your credit history and the score you currently have to make a determination about your creditworthiness and what kind of risk you make. Credit experts recommend preparing for any kind of major loan in advance, and when it comes to a home loan, you should take at least a year to get your credit ready–starting with a good look at your credit report. Today’s question comes from a reader concerned about credit, but it’s clear from the question the reader has the right idea–taking at least a year to get ready for the FHA loan application is the best approach possible. This question came to us | more...

January 6, 2012

FHA Loans: What Is The Ideal Credit Score?

By Joe Wallace

Many readers write us asking questions about FHA loans. We field questions about bankruptcy, foreclosure, loan default, and many others. We also get plenty of questions about credit scores, qualifying for FHA home loans in general, and what it takes to qualify. Credit is the topic of many of our most frequently asked questions. Many borrowers want to know what the FHA is looking for in a credit report, what the minimums are, but the FHA’s “ideal credit score” is seldom discussed. Please note: this score is NOT the FHA minimum, it’s what the FHA considers to be an “ideal” score. Something to live up to, rather than basic qualifying criteria. What does the FHA consider to be an optimal credit score? According to the FHA official site at FHA.gov,