Articles Tagged With: FHA FICO Requirements

July 29, 2015

FHA Loans And Your Credit

A reader got in touch with us this week to ask if it is possible to get an FHA mortgage loan even if the borrower doesn’t have “perfect credit”. While it’s not clear what the reader means by that phrase, we can answer the question in a general way. The simple answer is yes, borrowers can apply for and get approved for FHA home loans with less than perfect credit, but much depends on the nature of the credit issues on your report and whether there’s an overall pattern of responsible credit use the lender can use to justify approving your home loan. FHA loan rules are clear that individual mistakes in a borrower’s past should not be the sole determining factor when it comes to approving or denying an | more...

July 7, 2015

FHA Loans, FICO Scores and Disputed Credit Reports

By Joe Wallace

A reader question came in recently about FICO scores, medical bills and credit reports; can a borrower’s application be affected by FICO scores that have been lowered due to disputed medical bills and missed payments that may have resulted as part of the dispute? Should a borrower expect difficulty with an FHA loan application if his or her spouse is in such a situation? The answer may depend on a variety of issues and there are several questions that would need to be answered. Are the spouses applying for the FHA loan together? Do they live in a community property state where state law may dictate how credit issues of both spouses are handled in a legal marriage? That is a very important question–not all states have community property laws | more...

Can I buy a manufactured home with an FHA loan?

June 4, 2015

FHA Loan Credit Score Requirements: A Commonly Asked Question

By Joe Wallace

One common theme we find when fielding some questions about FHA home loans involves FICO score requirements. It’s true that FHA mortgage loan FICO score minimums are often lower than the requirements of some participating FHA lenders, but some borrowers get confused about FHA loan FICO score requirements in general–never mind what minimum number the FHA might accept versus what the lender might accept. One variation on a commonly asked FHA loan question goes something like this: “Does your actual FICO score matter as much as the details of your credit report? It sounds like the number on your FICO score isn’t that crucial compared to your credit history in the last 12 months leading up to the loan.” The idea that your FICO score itself “doesn’t count” as much | more...

May 28, 2015

FHA Loan Pre-Approval and Credit Scores

By Joe Wallace

One question that comes up frequently when talking FHA loans involves whether or not a borrower’s credit scores are affected by applying for pre-approval for an FHA mortgage loan. While we aren’t experts in credit reporting, and the FHA loan rules found in HUD 4155.1 do not address this issue, a bit of research into this issue turns up some interesting facts. According to the Kiplinger Magazine’s, “Could Mortgage Preapproval Hurt Our Credit?”, any kind of loan application has the potential to “ding” your credit rating. That, Kiplinger reports, is according to Barry Paperno, consumer operations manager for Fair Isaac (the company that created the FICO score system). “Typically, you would see a drop of five points or less,” says Paperno in the Kiplinger piece, which adds, “…when lenders request | more...

May 9, 2015

FHA Loans, Your Credit Report and the Debt-To-Income Ratio

By Joe Wallace

A reader asks, “My question is about what debt matters and witch debt doesnt.I have 4 debts that have been removed from my credit report according to credit karma and 1 credit card that is closed but I owe 1100 dollars on.” Any current debt (outside of student loans under qualifying deferment plans and qualifying medical debt which may be viewed by the lender in a different way depending on circumstances) may affect a borrower’s debt to income ratio calculation for an FHA loan. Anything that has dropped off your credit report won’t be an issue–if it isn’t on your credit record chances are it’s not a factor in the loan approval process unless there’s some record of missed or late payments associated with the accounts that does exist. When | 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...

April 20, 2015

FHA Home Loans and Your Credit Report: Disputing Errors

By Joe Wallace

Some borrowers who want to apply for an FHA loan find their applications held up by problems with what is on their credit report. Are you finding outdated or even erroneous information on your report? There is some good advice for those who find themselves in this predicament, thanks to a government website called ConsumerFinance.gov. A page there titled, “How do I dispute an error on my credit report?” has some very good advice about corrected errors on your credit report, starting with: “Contact both the credit reporting company and the company that provided the information. You should explain what you think is wrong, why, and include copies of documents that support your dispute.” When you deal directly with a creditor, there are certain types of disputes the credit will | more...

April 2, 2015

Commission Income And FHA Loans: A Reader Question

By Joe Wallace

A reader asks, “I made 41000 in 2013 and 65000 in 2014 I am on pace to making over 100000 this year. How will they calculate my income for an FHA loan. I am a saleried and I get commission.” The participating FHA lender is required to calculate the applicant’s income and verify that it is likely to continue–not all income can qualify to be used in figuring out the borrower’s debt-to-income ratio, only “verifiable income”. Commissions can and often are counted as verifiable income for the purpose of FHA loan approval, but that income must meet specific criteria. Borrowers who earn commission must have, in general, been earning the commission for a year or more. The FHA loan rules listed in HUD 4155.1 explain such requirements for verifiable commission | 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 25, 2015

Significant Changes In Borrower Financial Status: An FHA Loan Question

By Joe Wallace

A reader asks, “I am in the process of buying a new home which is scheduled to be closing is by April 30th.My loan processor had just asked me last week to write a letter explaining why there is a significant overdraft fees on my checking account?. i am worried. please advise.” In the same way that borrowers are advised not to apply for new lines of credit leading up to a home loan application, they are also urged to maintain a record of steady, on-time payments until loan approval. The reason for this is simple–the lender is required to document and make loan approval decisions based on any “significant changes” to a borrower’s financial position. A home loan is a major financial commitment and a borrower who has significant | more...