Articles Tagged With: FHA FICO Requirements

May 1, 2014

FHA Loan FICO Score Requirements: A Reader Question

A reader asks, “I have an average FICO OF #709. My EQUIFAX is #686, TRANSUNION is #695, and my EXPERIAN IS #748. What lenders will use my average FICO to determine my FHA LOAN eligibility?” FHA loan rules about credit scores are found in HUD 4155.1. While we cannot speak for individual financial institutions, in general, lenders seem willing to work with borrowers with an average FICO score of between 620-640 or better. How does the FHA determine what the average FICO score is when the borrower has different scores from each of the three major credit reporting agencies? HUD 4155.1 Chapter Four Section A addresses this under the section titled, “Definition of Minimum Decision Credit Score”. According to Chapter Four, “If a credit score is available, it must be | more...

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

March 28, 2014

FHA Loan Answers: Does Alimony/Child Support Count As Income?

By Joe Wallace

We’ve been discussing topics this week related to FHA loan rules for income and employment. The participating FHA lender is responsible for verifying an FHA loan applicant’s employment and income to make sure it is stable and reliable. Not all forms of income can be used on the FHA loan application. Sporadic income from sales of goods online, for example, may not qualify, and certain types of commissions may not qualify depending on their frequency. GI Bill housing stipends cannot be used because they are not “likely to continue” past a certain number of months. Then there is the common question about child support and/or alimony payments. Can this form of income, if declared on the FHA loan application, be used to qualify for the mortgage? Chapter Four of HUD | more...

March 27, 2014

FHA Loan Rules: Qualifying For A Home Loan As Self-Employed/Family Business Employee

By Joe Wallace

FHA home loan rules include a requirement that the lender verify employment and sources of income. The reasons for this verification include making sure the job and wages are stable and likely to continue to help the borrower pay the monthly mortgage bills. But what are the rules for borrowers who are self employed or who work at a family business? The rules that cover these requirements are found in HUD 4155.1 Chapter Four, Section D. Under the heading, “General Information on Self Employed Borrowers and Income Analysis” we find the following instructions to the lender: “Income from self employment is considered stable and effective, if the borrower has been self employed for two or more years.” However, the FHA loan rules do make a distinction between someone who owns | more...

March 20, 2014

Am I Eligible For A New FHA Loan After A Short Sale?

By Joe Wallace

One of the most commonly asked questions we get in our comments section has to do with whether a borrower can apply for a new FHA loan following a short sale. The loan rules for post-short sale transactions are found in HUD 4155.1, Chapter Four, Section C under the heading, “Short Sales”. It starts off by stating that while it IS possible to get a new FHA loan following a short sale under the right conditions, “A borrower is not eligible for a new FHA-insured mortgage if he/she pursued a short sale agreement on his/her principal residence simply to • take advantage of declining market conditions, and • purchase a similar or superior property within a reasonable commuting distance at a reduced price as compared to current market value.” The rules mention | more...

March 19, 2014

FHA Loans and Borrower Credit

By Joe Wallace

Some borrowers get nervous when applying for an FHA mortgage loan because of the credit check. There can be many reasons for this–some come to the house buying process with some history of credit problems, others may have disputes with creditors or other problems. Having credit issues in the past is not necessarily a barrier to an FHA loan in the present. But there are FHA guidelines for the lender you should be aware of that can help you better prepare for an FHA loan. The rules for FHA home loans found in HUD 4155.1 include instructions to the lender for analyzing borrower credit. Chapter Four of HUD 4155.1 has a section titled, “Past Credit Performance” and includes the following: “Past credit performance is the most useful guide to • | more...

February 24, 2014

FHA Loan Reader Questions: Refinancing Loans and Occupancy

By Joe Wallace

A reader asks, “We have a home for 25 years paid the first mortgage off and the we got a home equality line now ten years are up and the loans and it need to be refinance and the bank said because we done live in the house but my daughter and her husband do that won’t give us the loan again. Can we just get another mortgage on the house I don’t want to lose our house.” FHA loans for single-family residences do have an occupancy requirement–the borrower must live in the home as his or her “principle residence”. This is an important thing for FHA loan applicants to be aware of–FHA loan regulations include the borrower moving into the home and using it for the borrower’s personal use. | more...

February 7, 2014

FHA Loans After Delinquencies On A Previous FHA Mortgage

By Joe Wallace

After the housing market crisis that started in 2007, many home owners found themselves in trouble on mortgages. Some simply walked away from their loans, others tried to avoid default and foreclosure, while still others initiated short sales or sold their property for the market value at the time which was most likely far less than they expected to get for the property. Picking up the pieces after something like that can be difficult, and many borrowers wonder if they could be eligible once more for an FHA home loan now that times have changed, markets have improved, and the financial positions of many have also gotten better. For some, the question is, “Can I get an FHA loan after having a past delinquency or going into loan default on | more...

January 10, 2014

FHA Loans And Outstanding Debt: A Reader Question

By Joe Wallace

A reader asks, “If you have those (FHA) minimum scores do you still have to pay some remaining debt on your credit report? What if most those are doctor bills, and do they have a special buyers program for people on disability?” Though this reader question isn’t entirely clear, it seems the main issue is whether having outstanding debt might be an issue when applying for an FHA home loan. The real question for the lender in cases like this is whether the debt is typical monthly payments or a delinquency which needs to be resolved. According to FHA loan rules, outstanding debt can be an important factor in FHA loan approval or denial: “Past credit performance is the most useful guide to • determining a borrower’s attitude toward credit | more...

January 8, 2014

FHA Loan Rules For Non-Traditional Credit

By Joe Wallace

One common type of question about FHA home loan applications involves how the lender process credit information. When a borrower wants to apply for an FHA loan and has plenty of “traditional credit”, there’s no problem developing and processing the loan application. But what about borrowers who come to the FHA loan process with little or no credit history or only what’s termed “non-traditional credit”? Some borrowers don’t want or use credit cards, which makes establishing a typical credit history more difficult. That may lead some to believe that a lack of credit card can hurt your chances for FHA loan approval. But that’s not necessarily true. The FHA has rules and instructions for the lender in cases where the borrower has non-traditional credit. We find those rules and guidelines | more...

January 6, 2014

FHA Loan Down Payment Requirements: A Reader Question

By Joe Wallace

A reader asks, “I want to buy a house for $399,000.00…how much of a down payment will i have to make? I understand that banks require a 20% down payment. Does the FHA also require 20%? The minimum cash investment–a down payment on an FHA guaranteed mortgage–is set at 3.5%. However, there are many circumstances where a lender may require a higher down payment. This can include situations where a borrower’s FICO scores or other qualifying information are marginal or outside the usual range for FHA loan approval. A higher down payment can be considered a “compensating factor”. In cases where compensating factors need to be considered, a larger down payment is acceptable, but only if the down payment meets FHA guidelines. Those guidelines include a minimum 10% down, as | more...