Articles Tagged With: Credit Requirements

What you should know about FHA 203(h) Loans For Disaster Victims

September 5, 2013

FHA Loan Credit Score Issues: A Reader Question

A reader asks, “My husband and I are working on improving our credit, but still have low scores, mine being in the 530s and his in the 640s. Although we’re working on improving it, we aren’t to our ideal score yet…Does anyone have suggestions on lenders that will work with lower credit scores AND a lower down payment? (~5% based on the houses we’ve looked at so far).” Borrowers who find themselves in situations like these should do one very important thing before going any farther–contact the FHA directly by calling 1-800 CALL FHA and ask for a referral to an FHA-approved housing counselor. FHA approved housing counselors can offer advice and suggestions for improving creditworthiness before filling out an FHA loan application, and give advice on how to best | more...

September 3, 2013

Qualifying For an FHA Loan, “Minimum Income”, and Your Monthly Debt

By Joe Wallace

One common misconception about FHA home loans is that there’s a set, minimum income amount a borrower must have in order to qualify for the home loan. This is not true. The FHA does not set minimum income requirements or have rules about how much a borrower can make before he or she is no longer eligible to apply for an FHA mortgage. In short, the actual dollar amount of your income doesn’t matter. What does is whether you can afford the loan based on the amount of debt you have versus the amount of money you bring in every month. Your lender is required to calculate your debt to income ratio to make sure you can afford the FHA loan along with all your other financial obligations. Here’s an | more...

August 29, 2013

HUD Brings Housing Discrimination Charges Against Fifth Third Bank, Fifth Third Mortgage Company and Cranbrook Mortgage Corporation

By Joe Wallace

The FHA/HUD official site has issued a press release announcing charges against Fifth Third Bank, Fifth Third Mortgage Company and Cranbrook Mortgage Corporation. According to HUDNo.13-128, “The U.S. Department of Housing and Urban Development (HUD) announced today that it is charging Fifth Third Bank, Fifth Third Mortgage Company and Cranbrook Mortgage Corporation with discriminating against a couple with disabilities who were attempting to refinance their home mortgage. HUD’s charge alleges that the Cincinnati, Ohio-based mortgage lender and the Clinton Township, Michigan-based mortgage broker required unnecessary medical documentation in order to qualify the couple for a Federal Housing Administration (FHA) loan.” Fair Housing Act laws forbid discrimination in the home loan process or loan modification process, “based on disability, race, color, religion, national origin, sex, or family status, including imposing different application or | more...

August 28, 2013

FHA Loan Reader Questions: The Nature of FHA Loans

By Joe Wallace

A reader asks, “I am currently buying a home on a land contract and was hoping maybe I could get it run through FHA the pay off is I think around 19,000.00 it is a trailer with a garage on it. My credit isn’t good enough to run it through the bank. I’m hoping you can help me. I have been paying on it for about 4 & 1/2 years. Please if you can help me I would appreciate it. I live off SSI because I became disabled in 1995, and have been drawing my SSI since 1996. Thank you for your time and consideration.” This reader question is a good reminder that there are still plenty of myths floating around out there about FHA mortgages and the nature of | more...

August 27, 2013

FHA Loan Reader Questions: Spouse Credit Issues

By Joe Wallace

A reader asks, “My husband and I are looking to apply for an FHA loan. We just recently got married. He is more than qualified to apply on his own, with a good credit score and great income. I, unfortunately, have terrible credit and unresolved debts (prior to marriage). Is it possible for him to apply on his own without factoring in my debt? Our loan agent told us that I had have my credit checked and my debt would also be factored into the debt to income ratio, but not my income. Is this true?” The answer to this question is fairly simple–it depends on the laws of your state. The first thing a borrower in this situation should do is check to see if they are living in | more...

August 26, 2013

Back To Work: The FHA’s New Program Requires Housing Counseling

By Joe Wallace

The FHA has a new program called Back To Work, designed to help borrowers who have experienced what the FHA terms an Economic Event that resulted in negative credit information but may not necessarily be an accurate indicator of a borrower’s creditworthiness or ability to repay the FHA mortgage. Back To Work, according to FHA Mortgagee Letter 2013-26, lets lenders evaluate these Economic Events to see if the borrower may still be a good credit risk for an FHA loan. “FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage. To that end, FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that: certain credit | more...

August 23, 2013

Back to Work: How the new FHA Loan Guidelines Apply to Foreclosures and Short Sales

By Joe Wallace

In recent blog posts we’ve explored a new FHA program called Back To Work, which allows lenders to be more lenient with credit requirements for borrowers who have experienced what the FHA terms an Economic Event. Borrowers who have a qualifying Economic Event under Back To Work may be able to get an FHA mortgage in spite of negative credit data that lender determines does not realistically affect the borrower’s ability to afford mortgage payments on the FHA loan. The FHA’s Back to Work program rules are described in FHA Mortgagee Letter 2013-26, which states, “FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that: certain credit impairments were the result of a Loss of Employment or a significant loss of Household | more...

August 22, 2013

Back to Work: How the new FHA Loan Guidelines Apply to Bankruptcy

By Joe Wallace

In our last several blog posts we’ve been examining an important new development from the FHA, a program known as Back To Work that allows lenders to work with borrowers who may have negative credit information due to the recession that doesn’t necessarily reflect the ability to pay for an FHA mortgage. The FHA describes an applicable financial setback as an “economic event” and allows borrowers to be more lenient with credit requirements for qualified borrowers. Back To Work rules were issued in FHA Mortgagee Letter 2013-26, which says “FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that: certain credit impairments were the result of a Loss of Employment or a significant loss of Household Income beyond the borrower’s control; the | more...

August 21, 2013

New FHA Loan Rules For Borrowers With Financial Difficulties: Evaluating an “Economic Event”

By Joe Wallace

We’ve been taking a look at the new FHA loan guidelines for lenders who are working with borrowers who have had what the FHA terms an “economic event” that affects credit but may not necessarily be a good indication of a borrower’s ability to repay an FHA mortgage loan. FHA Mortgagee Letter 2013-26 describes an FHA program known as Back To Work. The mortgagee letter was issued in order to, in the words of the FHA, “provide minimum underwriting standards and criteria for evaluating borrowers who have experienced an Economic Event, as defined in this ML, that resulted in a severe reduction in income due to a job loss or other circumstances resulting in reduced Household Income; describe the use of housing counseling to qualify under the provisions of this | more...

August 21, 2013

New FHA Rules For Borrowers Who Have Faced an “Economic Event”

By Joe Wallace

In recent blog posts, we’ve examined some of the new guidelines for FHA borrowers who may have negative credit information on their records as a result of financial difficulties the FHA describes as an “economic event”. The FHA/HUD issued Mortgagee Letter 2013-26 outlining new guidelines for lenders who are working with borrowers affected by such circumstances. According to the mortgagee letter, “Because of these recent recession-related periods of financial difficulty, borrowers’ credit has been negatively affected. FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage. To that end, FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that: certain credit impairments were the result | more...