Articles Tagged With: Credit Scores

July 14, 2017

What Is An FHA Loan And How Does It Work?

What is an FHA loan and how does it work? There are many differences between conventional and FHA mortgages, and those differences could mean significant savings depending on your home buying needs and goals. What An FHA Loan Is Not An FHA loan is a mortgage loan, first and foremost. It is intended to buy or refinance a property. An FHA “forward mortgage” or new home loan not intended to act as a personal loan, with cash back to the borrower at closing time. FHA loan rules don’t permit the borrower to apply for a loan greater than the adjusted value of the property plus additional costs that may be rolled into the loan. While your FHA mortgage may be greater than the total adjusted value of the property, you | 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...

June 9, 2017

FHA Loan Credit Score

By Bruce Reichstein

Do you know what your credit score is? Do you know what lenders require in terms of an FHA loan credit score? The answer might surprise you. The short answer is that there’s a minimum FHA loan credit score requirement to qualify for the program, but lender FICO score requirements will also apply. FHA loan rules in the FHA Single Family Loan Handbook (HUD 4000.1) state that FICO scores of 580 or higher are required for “maximum financing”, which is the cost of the loan minus the borrower’s required 3.5% down payment. Borrowers with FICO scores lower than 580, but not lower than 500 still may qualify for the FHA loan program but with a higher down payment (ten percent). Remember, these are the FHA minimum standards, NOT individual lender | 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...

February 16, 2017

Credit Score Rules For FHA Mortgages

By Joe Wallace

There’s a common reader question about credit score rules for FHA mortgage loans that we get from time to time that goes something like this: “Is it possible to have a low credit score (500-600) and still get an FHA mortgage?” FHA loan rules state that borrowers with credit scores at 580 or higher are eligible for maximum financing for FHA home loans, which requires a 3.5% down payment from the borrower. For those with credit scores between 579 and 500, 10% down is required. However, these FICO score numbers are FHA loan minimum standards and lender requirements can be and often are higher. Credit score rules for FHA loans include the following instructions (see below) to the lender found in HUD 4000.1, the FHA single-family mortgage loan rule book. | more...

Can I get an FHA home loan if I owe back taxes?

January 26, 2017

FHA Loans and Credit Report Issues

By Joe Wallace

FHA home loans offer an alternative to the more strict requirements of conventional mortgages. FHA loans typically feature a lower down payment requirement than many conventional loans, and have more forgiving credit standards (though lender standards will still apply). Some apply for an FHA mortgage unsure of how their past credit activity or even their current FICO score might affect their chances at loan approval. If you are one of those people, there are some things you can do for greater peace of mind going into the loan process. The catch is that advance planning is required-it’s best to start preparing for a major financial commitment like a mortgage a full year or more before applying. The planning time is crucial since you will need to save up money for | more...

December 19, 2016

FICO Scores And FHA Loans

By Joe Wallace

Your credit report and FICO scores are very important factors when it comes to getting an FHA loan approved. Do you know what your FICO score is and how it affects your home loan? The U.S. government’s consumer watchdog agency, the Consumer Financial Protection Bureau, has a definition of FICO scores on its’ official site, which includes the following: “A FICO score is a particular brand of credit score. A credit score is a number that is used to predict how likely you are to pay back a loan on time. Credit scores are used by companies to make decisions such as whether to offer you a mortgage or a credit card. They are also used to determine the interest rate you receive on a loan or credit card, and | more...

April 27, 2016

FHA Loan Rules For Credit Qualifying: Credit Reports For Each Applicant

By Joe Wallace

One of the most common questions about FHA home loans involves who gets their credit reports reviewed in the application process. FHA home loans permit co-signers, co-borrowers, and non-occupying co-borrowers, and with so many options open to the applicant(s), it can be confusing when trying to figure out who will need to furnish what information in order to apply. FHA loan rules in HUD 4000.1 instruct the lender on who is to have credit reporting data pulled. On page 171 we learn: “The Mortgagee must obtain a credit report for each Borrower who will be obligated on the mortgage Note. The Mortgagee may obtain a joint report for individuals with joint accounts.” But that’s not the only instruction to the lender. We also learn, “The Mortgagee must obtain a 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...

October 19, 2015

CFPB Updates Home Mortgage Disclosure Act

By Joe Wallace

Friday October 15, 2015, the Consumer Financial Protection Bureau (CFPB) announced it is updating mortgage loan regulations–specifically the Home Mortgage Disclosure Act (HDMA)–to make the home loan process more transparent and easier to understand. According to the to the CFPB official site, HMDA requires, “many financial institutions to collect, report, and disclose information about their mortgage activity. The original law was enacted by Congress 40 years ago to respond to concerns that some banks may be failing to serve their communities.” HMDA, the press release states, is a statute that provides “the public and policymakers with information about the mortgage market and ensures market transparency.” What does the HDMA do? According to the Consumer Financial Protection Bureau, it: –Helps to show whether lenders are serving the housing needs of their | more...