Articles Tagged With: Credit Reports

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?

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...

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 16, 2017

What Does My FHA Lender Look For In My Credit Report?

By Joe Wallace

What does my FHA lender look for in my credit report? That is a very good question to ask, and the earlier in the home loan planning stages you ask, the better off you’ll be. It’s highly recommended that home loan borrowers get copies of their credit reports in the year leading up to a home loan application. You want to know what your credit history says about you before you submit that information to your loan officer. FHA Loan Rules For Credit Reports Your lender is required by the FHA loan program to pull your credit reports, and to use “traditional” credit reporting wherever available. Some borrowers do not have credit, or have non-traditional credit histories. According to the FHA loan handbook, HUD 4000.1, the lender is required to | more...

August 7, 2017

Which Credit Score Will My Lender Use For My Home Loan?

By Bruce Reichstein

Which credit score will my lender use for my home loan? There is understandably some confusion over this issue; there are three major credit reporting agencies, and multiple credit scores possible. How does your lender know which score(s) to use? When it comes to FHA mortgage loans, the FHA loan handbook has instructions for the lender on how to proceed when evaluating a borrower’s credit scores. One page 132 we learn: “The Minimum Decision Credit Score (MDCS) refers to the credit score reported on the Borrower’s credit report when all reported scores are the same. Where three differing scores are reported, the middle score is the MDCS. Where two differing scores are reported, the MDCS is the lowest score. Where only one score is reported, that score is the MDCS.” | more...

July 28, 2017

Who Can Qualify For An FHA Loan?

By Joe Wallace

Who can qualify for an FHA loan? The answer surprises some people, thanks to some misunderstandings about who the FHA single family home loan program is for, and who can use it. FHA home loans are for any financially qualified borrower. You don’t have to earn a minimum amount of money, and there is no maximum income limit for FHA mortgages. While it’s true that FHA loans can be less expensive than their conventional mortgage counterparts (in terms of interest rates, no penalties for early payoff, etc.) these loans are not specifically targeted at people who “can’t afford conventional mortgages” or to those with an economic disadvantage. Hence, there’s no maximum income limit. There’s also no preference given by the FHA for first time home buyers, though a particular lender | 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...

March 27, 2015

FHA Loan Reader Questions: FICO Scores and Down Payment

By Joe Wallace

A reader sent us a question via our comments section recently, asking: “I HAVE A CREDIT SCORE OF 591, I HAVE WORKED FOR MY JOB FOR 18 YEAR. I WOULD LIKE TO PURCHASE A HOME AND AM WORKING ON MY CREDIT WITH MY CREDIT UNION. WHAT MORTGAGE COMPANY WOULD WORK WITH ME TO GET A HOME? I DON’T HAVE MONEY FOR A DOWN PAYMENT”. Unfortunately, FHA home loans do not offer a zero downpayment option. FHA loan rules found in HUD 4155.1 states clearly that a “minimum borrower cash investment” or downpayment is required. The minimum down payment on any new purchase FHA home loan is 3.5% of the sale price or appraised value of the home (whichever is lower). That information is found in HUD 4155.1 Chapter Five Section | more...

March 26, 2015

FHA Loans and Non-Traditional Credit Histories

By Joe Wallace

There are many situations where a new borrower might want to apply for an FHA home loan, but without bringing a “traditional” credit history to the process. Do FHA loan rules permit a loan even when the borrower doesn’t have a typical credit history, has chosen not to use credit cards, etc? HUD 4155.1, the FHA rulebook for lenders, does make provisions for this. There’s a section of the rules governing what the FHA terms a “Non-Traditional Credit Report” or NTMCR for short: “NTMCRs are designed to assess the credit history of borrowers who do not have the types of trade references that normally appear on a traditional credit report. An NTMCR can be used as a • substitute for a TRMCR or an RMCR for a borrower without a | more...

March 11, 2015

Disputing Bad Credit Information Before Applying For An FHA Loan

By Joe Wallace

A recent article published by Marketplace reports that disputing bad credit information on your credit report is going to be easier than in years past. According to the article titled, “Disputing bad credit is about to get a whole lot easier”, “The nation’s three biggest credit reporting companies—Experian, TransUnion, and Equifax—are changing the way they collect and report the credit scores. The changes involves the way bureaus handle credit-rating disputes, as well as how they report unpaid medical bills.” That can be a big help for borrowers who need to deal with credit agencies or manage credit applications while dealing with medical expenses. According to the article, “Under the Fair Credit Reporting Act, all credit error claims are entitled to a ‘reasonable investigation’. In practice however, that wasn’t happening. Chi | more...

May 13, 2014

FHA Loan Credit Report Rules

By Joe Wallace

Going into the FHA loan application process for the first time? It can be helpful to understand what your lender is looking for from your FHA loan application. Do you know the FHA’s rules for credit and how credit reports are handled by your loan officer? FHA loan rules state that all applicants for the loan must be checked–credit reports must be pulled, employment history and other financial qualifying information is required. HUD 4155.1 Chapter One has rules and instructions for the lender in these areas. Under “Required Credit Information” we find the following: “A credit report submitted with a loan application must contain all credit information available in the accessed repositories. Additionally, for each borrower responsible for the debt, the report must contain all of the information available in | more...