Articles Tagged With: Credit Issues

October 12, 2017

Can I Get An FHA Mortgage After A Short Sale?

Can I get an FHA loan after a short sale? Many have asked this question, unsure of the FHA loan rules for transactions in the wake of a negative credit event such as a foreclosure, bankruptcy, or short sale. To begin, we should address the basic definition of a short sale and what that means for a potential FHA borrower. What Is A Short Sale? A short sale involves a transaction where a property is sold to avoid foreclosure, often at a loss. It is referred to professionally as a “pre-foreclosure sale”. FHA loan rules in HUD 4000.1 specifically define the short sale transaction as follows: “Pre-Foreclosure Sales, also known as Short Sales, refer to the sales of real estate that generate proceeds that are less than the amount owed | more...

FHA Mortgage Loans: Do Interest Rates Matter?

October 4, 2017

Do I Have To Pay Off Collection Accounts To Qualify For An FHA Home Loan?

By Joe Wallace

Do I have to pay off collection accounts to qualify for an FHA home loan? That’s a question on the mind of anyone who has a collection agency action in their credit history. What does the FHA have to say about this issue? On the FHA official site, there is a Frequently Asked Questions section that directly addresses this potential problem for loan applicants nervous about issues in their credit report. It begins with a definition of the phrase “collection account”: “A Collection Account refers to a Borrower’s loan or debt that has been submitted to a collection agency by a creditor.” FHA loan rules address collection accounts in the amount of $2000 or more: “If the credit reports used in the analysis show cumulative outstanding collection account balances of | more...

October 2, 2017

What Are The FHA Loan Credit Score Rules?

By Joe Wallace

What are the FHA loan credit score rules? Do you know the difference between FHA loan standards and lender standards? First time home buyers should know what the rules are long before starting the search for a new home. FHA Loan Credit Score Standards FHA home loans require a FICO score minimum of 580 or better to qualify for the lowest down payment of 3.5%. FICO scores are not the only criteria for approving or denying the home loan, so if you know your FICO score but aren’t sure about the rest of the financial qualifications for FHA loan approval, you’ll definitely want to keep reading. Lender Credit Score Standards Lender FICO score standards can be (and often are) higher than FHA loan minimum requirements. That means that even though | more...

September 26, 2017

How Does My Credit Score Affect My FHA Mortgage Loan?

By Joe Wallace

How does my credit score affect my FHA mortgage loan? There are several areas where FICO scores may affect how much a borrower pays including interest rates, down payment issues, and more. FHA Loan Credit Score Rules: Two Standards There are two basic sets of rules and requirements governing borrower credit scores. One set of rules is found in HUD 4000.1, and gives the FHA Single Family Home Loan program minimum requirements for credit scores and how they affect a borrower’s down payment requirements. The other set of rules and regulations are those of the individual participating lender. Your chosen lender may have higher standards than FHA minimums, and this is permitted by law as long as those higher standards conform to Fair Housing Act policies and other federal regulations. | more...

September 12, 2017

FHA Loan General Credit Requirements

By Bruce Reichstein

Do you know what the general credit requirements are for FHA mortgage loans? Outside of FHA loan FICO minimums (580 or above for maximum financing according to HUD 4000.1, though lender standards may apply beyond this) and employment history, there are a set of standards listed in the FHA loan handbook. Those standards include instructions to the lender on how credit is to be analyzed and how credit data may be collected. Those standards include the requirement that a participating FHA lender must “analyze the Borrower’s credit history, liabilities, and debts to determine creditworthiness.” In the pursuit of this, the lender must get credit reports from “an independent consumer reporting agency”. The lender “must obtain a credit report for each Borrower who will be obligated on the mortgage Note. The | more...

August 31, 2017

Can I Get An FHA Home Loan If I Owe Back Taxes?

By Bruce Reichstein

Can I get an FHA home loan if I owe back taxes? The answer to this question depends on more than one factor, the most important being whether or not the borrower is delinquent on the taxes owed. In general, borrowers who come to the home loan process with delinquent accounts will find it difficult to get loan approval. Borrowers should expect to come to the FHA home loan process with a minimum of 12 months of on-time payments for all financial obligations. That said, disputed accounts and/or issues connected to identity theft may have different requirements (police reports, documentation of the issues, etc.) When it comes to taxes, FHA loan rules emphasize the requirement to be in a satisfactory payment arrangement with the creditor and a minimum period of | more...

August 24, 2017

Can I Get An FHA Loan After A Short Sale?

By Joe Wallace

Can I get an FHA loan after a short sale? This is a question we handle frequently, and the answer depends on circumstances as well as guidelines found in HUD 4000.1, the FHA loan handbook. HUD 4000.1 starts off by defining what it considers to be a “short sale”, also known as pre-foreclosure sales. According to the handbook, these terms refer to “the sales of real estate that generate proceeds that are less than the amount owed on the Property and the lien holders agree to release their liens and forgive the deficiency balance on the real estate.” So we see that a short sale is something that can affect your credit, and as we’ll see, the ability to purchase a home in the near future after the sale. FHA | more...

Getting An FHA Mortgage After Bankruptcy

August 16, 2017

Is My Credit Good Enough For An FHA Home Loan?

By Bruce Reichstein

Is my credit good enough for an FHA home loan? Borrowers need to know what FHA loan minimum credit standards are, but they will also need to find out what their participating lender’s credit requirements are above and beyond FHA loan minimums. FHA Minimum Standards For FICO Scores The FHA loan handbook, HUD 4000.1, lists the criteria the FHA requires to qualify for a home loan. For most FHA mortgage loans, borrowers who have FICO scores of 580 or higher qualify for maximum financing with the lowest down payment possible (3.5% of the adjusted value of the home or the purchase price, whichever is lower). Borrowers with FICO scores between 500 and 579 may technically qualify for an FHA mortgage, but with a minimum 10% down. Borrowers with FICO scores | more...

August 11, 2017

FHA Mortgage Questions: What Is Undisclosed Debt?

By Joe Wallace

What is undisclosed debt and how can it affect your FHA home loan application? Undisclosed debt is basically credit information that is either not listed by the borrower on the credit application, or debt that does not show up yet on a credit report. There are several reasons why a lender would be concerned by undisclosed debt and FHA loan rules anticipate situations where such problems occur. Undisclosed Non-Mortgage Debt FHA loan rules for this type of debt which is not volunteered by the borrower on a mortgage application (or does not show up on the borrower’s credit report) are found on page 187 of the FHA loan handbook, HUD 4000.1. There we find these instructions to the lender: “When a debt or obligation (other than a Mortgage) not listed | more...

May 15, 2017

FHA Loan Rules For Bankruptcy: Chapter 7 and Chapter 13

By Joe Wallace

We’ve had a number of reader questions in our comments section recently asking about scenarios for loan approval that involve bankruptcy and related issues. Can a borrower get a new FHA loan following a bankruptcy? Under what conditions? FHA loan rules in HUD 4000.1 address this issue with separate entries for Chapter 7 and Chapter 13. According to the FHA loan rule book, Chapter 7 requires the lender to observe the following: “A Chapter 7 bankruptcy (liquidation) does not disqualify a Borrower from obtaining an FHA-insured Mortgage if, at the time of case number assignment, at least two years have elapsed since the date of the bankruptcy discharge. During this time, the Borrower must have: – re-established good credit; or – chosen not to incur new credit obligations.” HUD 4000.1 | more...