Articles Tagged With: Credit Check

November 8, 2011

Credit Report Requirements for FHA Home Loans

To be processed by a lender, FHA home loan applications require detailed credit information from the three major credit reporting agencies. The lender uses these reports to determine that an FHA loan applicant meets the minimum credit requirements for a FHA home loan. Those requirements include the FHA minimum credit score and any additional credit score requirements set by the lender. The FHA minimum credit score must be above 500, but lenders frequently require scores at 620 or better. In order to get this credit score information, the lender can’t simply check–there is a specific set of procedures required for a credit check to “count” as an official representation of an FHA loan applicant’s credit worthiness. For example, the FHA rules say the credit data must come directly from the | more...

October 13, 2011

FHA Title I Home Improvement Loans

By Joe Wallace

If you explore FHA home loan options, you’ll find a variety of them–there are loans for new purchase mortgages, but also options for energy efficient mortgages, home equity conversion loans, rehab loans, and something called the FHA Title I Home Improvement loan. Title I loans are used for repair, alteration, or site improvements and can be used together with a 203k Rehabilitation Mortgage if needed. Title I loans for a single family home can be approved for amounts up to $25,000 for qualified borrowers. Applicants aren’t required to ask for the maximum amount; according to the FHA official site, “Both large and small improvements can be financed.” FHA rules also state, “Any loan over $7,500 must be secured by a mortgage or deed of trust on the property.” As with | more...

October 12, 2011

FHA Loan Applicants With Little Or No Credit History

By Joe Wallace

A reader sent in a question about credit history, asking if a lack of credit was grounds for disqualifying an FHA home loan application. It would be easy to assume the answer to that questions is “Yes”, but a quick check of FHA loan requirements reveals an answer that may surprise you. According to the FHA rules for lenders found in Handbook 4155.1, the lack of credit history cannot be used as the basis for rejecting an FHA loan application. That answer leads many to wonder how the lender can tell whether a borrower is a good credit risk or not. How does the FHA approach situations where the borrower has no previous credit? According to the official site, “FHA permits mortgage lenders to establish a borrower

October 10, 2011

FHA Loans and the Debt-To-Income Ratio

By Joe Wallace

The debt-to-income ratio is an important calculation all home buyers need to understand. To qualify for an FHA home loan, potential borrowers should have a debt-to-income ratio of 43%. But what does that mean? According to the FHA, that means that the total mortgage payment plus all monthly financial obligations cannot exceed 43% of the borrower’s “gross effective income”. It’s important to point out that the debt-to-income ratio does include the mortgage payment–not the amount of the borrower’s current financial obligations alone at the time of the FHA loan application. Knowing the debt-to-income requirements can help a future borrower prepare for the FHA loan application because it’s as simple as doing the math on your income/expenses and set financial goals accordingly. If you know a year in advance that your | more...

August 25, 2011

FHA Loans: What Does It Mean To Be Listed in CAIVRS?

By Joe Wallace

Any type of home loan includes a credit check, including FHA insured mortgages. But FHA loans include an extra requirement when it comes to credit–the borrower is not eligible for an FHA mortgage if he or she is delinquent on any type of federal debt. An FHA approved lender is required to check to insure the borrower is not delinquent on any debt owed to the government; that check is done using a system called CAIVRS, which stands for Credit Alert Interactive Voice Response System. This system provides a list of all people currently in default on an FHA insured mortgage, those who have had a government-backed home loan foreclosed on in the last 36 months, and those who are delinquent on a debt owed to the government. According to | more...