Articles Tagged With: Credit Scores

July 22, 2015

FHA Loans and Co-Borrowers

We often get reader questions about co-borrowing, FICO scores and other factors. One recent question asked of us involves a couple who have a single income, student loan debt, and some FICO score issues. The reader wanted to know if being a co-borrower with a higher FICO score could help with loan approval in spite of the co-borrower having no income and student loans. The FHA loan rules found at the FHA official site (www.fha.gov) state the following about co-borrower income: “The lender must analyze the income of each borrower who will be obligated for the mortgage debt to determine whether the borrowers income level can be reasonably expected to continue through at least the first three years of the mortgage loan.” That alone implies that all borrowers to be | more...

June 30, 2015

Planning For An FHA Home Loan? Pull Your Credit Reports For Free

By Joe Wallace

If you are in the planning stages before purchasing a new home with an FHA mortgage loan, it’s a very good idea–strongly recommended, in fact–to pull your credit reports from the three major credit reporting agencies. It’s best to request copies of your credit reports as early as possible in the process so that you have abundant time to dispute any outdated information, investigate evidence of identity theft, etc. Many people in this stage go to the official sites for the three major agencies–Equifax, Experian, and TransUnion. But did you know that federal law permits borrowers to get a free credit report from these three agencies once every 12 months? According to the Federal Trade Commission official site (https://www.ftc.gov/), anyone who wants the free reports can order them from annualcreditreport.com, | more...

May 7, 2015

FHA Loans And The Credit Review

By Joe Wallace

We get many questions about FHA loan applications–questions that involve credit, FICO scores, FHA loan standards, and more. Many borrowers aren’t sure about whether they have FICO scores high enough to qualify for an FHA mortgage, and others may wonder if having a history of late or missed payments could hurt their chances at an FHA home loan. In general, borrowers are encouraged to wait to apply for an FHA mortgage until they have 12 full months of on-time payments on all financial obligations. This brings a potential home loan borrower closer to FHA loan approval; anything less can put your loan application in danger. Why? It’s good to know the FHA stance on these issues, and the FHA loan rulebook does spell out the reason why such a premium | more...

March 18, 2015

FHA Mortgage Rate Trends: Large One-Day Drop In Best Execution Rates

By Joe Wallace

On Wednesday mortgage loan rates in general saw a significant drop in the wake of a highly anticipated Fed announcement, which included words some have taken to mean there will be no interest rate increase in the month of April. Some sources are labeling today’s downward move as “the best day of 2015” based on that drop; 30-year fixed rate conventional loan best execution rates are for some extremely well-qualified borrowers coming in at 3.75%, best execution. Borrowers who “floated” into the Fed announcement today were, by all accounts, given a good payoff. That said, those who floated are now being encouraged by many industry professionals to lock, as there is no guarantee that today’s sharp improvement in best execution rates will continue tomorrow or the next day. The lenders | more...

March 2, 2015

FHA Loan Credit Issues

By Joe Wallace

A reader asks, “My partner had a 642 and i have a 517. I have messed up in the past with my credit,but i am now paying off what i have on my credit report. Would we be able to get a home loan with these scores?” That would depend on the standards of the individual lender. FHA loan rules state that borrowers below a certain FICO score are not eligible for maximum FHA loan financing (which requires the borrower to put down a minimum cash investment of 3.5%). Here’s what the FHA official site says about circumstances like the one in the reader question: “When a credit score is available, it must be used to determine eligibility for FHA insured financing. The score that is used to determine eligibility | more...

August 16, 2013

FHA Updates Loan Rules On Credit, Collections, and Judgments

By Joe Wallace

A recent reader question asked, “I have an outstanding judgment in the amount of $8000. Can I still get a loan?” FHA loan rules are clear on the issue of credit, stating that past credit performance and patterns are considered one of the best indicators of whether an FHA loan application should be approved. But recently, the FHA has issued clarifications and updates to lenders on the subject of judgments, collections and other activities that could be considered negative credit data. According to FHA Mortgagee Letter 2013-24, Handling of Collections and Disputed Accounts, the FHA has amended its guidelines and policies for collections, disputed accounts, and judgments for most credit-qualifying FHA loan transactions. It applies to all affected FHA loans with case numbers assigned on or after October 15, | more...

May 30, 2013

FHA Loan Credit Standards

By Joe Wallace

When applying for an FHA home loan, many borrowers are in the dark about credit score requirements and other issues related to FICO scores in general. We recently answered a reader question about FHA loan credit requirements and now is a good time to review FHA policy on FICO scores. The FHA requires the lender to use an available credit score to determine whether or not the borrower is eligible for an FHA home loan. The FHA has rules for interpreting or using FICO scores from credit reports. According to the FHA Frequently Asked Questions list on the official site: “When the credit report reflects: • 3 credit scores (one from each repository) – the middle score is used • 2 credit scores – the lower of the two scores | more...

September 14, 2011

FHA Loans and Credit Score Data–What You Need To Know

By Joe Wallace

There are plenty of FHA rules governing how a loan applicant’s credit data must be reviewed and processed to determine if he or she is a good risk for an FHA loan. One of the first things covered by the rules is how credit scores are to be used in the process. “When a credit score is available, it must be used to determine eligibility for FHA insured financing,” according to the FHA official site. But how does the FHA view the actual score numbers? The answer to that question is a bit tricky because of changes to the FHA loan rules. Let’s examine FHA insured loans for new purchase transactions with case numbers assigned on or after October 4, 2010. A “new purchase” FHA loan is typical for situations | more...

September 13, 2011

FHA Loans and Credit Scores

By Joe Wallace

FHA home loans take into account a variety of factors when a lender is trying to determine a borrower’s potential as a credit risk. While the FHA does look for a record of on-time payments and other factors that make a borrower a good risk, the rules for FHA loans also require the borrower to use credit score information to help make the determination to approve or deny an FHA mortgage. FHA rules state, “When a credit score is available, it must be used to determine eligibility for FHA insured financing.”