Articles Tagged With: FICO Score Requirements

How much can I borrow with an FHA refinance loan?

September 12, 2016

FHA Loan FICO Score Rules: What You Should Know

What does it take to get approved for an FHA mortgage? There are a variety of factors that go into mortgage loan approval, and the borrower’s FICO score is just one of those factors. However, your credit report and credit score are an important ones and there can be confusion over how this score is reviewed. What do FHA loan rules tell the lender about FICO scores? HUD 4000.1 instructs the lender about reviewing credit scores, and since a borrower can have three different FICO scores, this is an important part of the rules to be aware of; how does the lender proceed when reviewing more than one credit score? Let’s examine what HUD 4000.1 says on this issue, starting with a definition. All three of a borrower’s credit scores | more...

August 18, 2016

FHA Loans and 401K Income

By Joe Wallace

A reader got in touch with us recently in the comments section to ask a question about 401K retirement income as it relates to FHA loan approval. “Does the fact that you have a 401k count as income or does it benefit your chances in any way of getting a home loan?” FHA loan rules in HUD 4000.1 cover a variety of income sources including 401k income. Individual retirement account income from a 401K may be used to qualify a borrower for an FHA mortgage provided the income meets FHA and lender standards. HUD 4000.1 instructs the lender on how to review 401K income, beginning with a definition of it: “Individual Retirement Account (IRA)/401(k) Income refers to income received from an IRA.” With the definition spelled out, the FHA loan | more...

August 16, 2016

FHA Loans and Social Security Income: A Reader Question

By Joe Wallace

A reader asks, “I am halfway though a 15 year mortgage on a 2009 manufactured home. I am disabled, collecting SSD and my wife works as a school teacher.Would I qualify to refinance my home?” FHA loans and refinance loans have rules that do permit the use of Social Security income to qualify for a loan, provided the income meets certain requirements. The lender is required to determine that the income is likely to continue. HUD 4000.1 has guidelines and instructions to the loan officer that include the following about Social Security and other disability benefits: “Disability Benefits are benefits received from the Social Security Administration (SSA), Department of Veterans Affairs (VA), other public agencies, or a private disability insurance provider. The Mortgagee must verify and document the Borrowers receipt | more...

July 25, 2016

FHA Loan Questions: Credit Scores and Down Payments

By Joe Wallace

We get many questions about FHA loan standards for FICO scores and similar issues. Here’s one of the latest: “I am looking to purchase a mobile home for 25000. I have a 610 credit score and a stable job (been there for 8 years). I want to put down 40% of the loan. Do you think I would have any major issues even with a low credit score?” Questions like these are a good reminded that plenty of misconceptions about the home loan process exist. Unfortunately one of the prevailing misconceptions is that FICO scores are THE determining factor in home loan approval. That is not to dismiss the importance of FICO scores. Lender standards require a borrower to have a minimum FICO score (often between 620 and 640 depending | more...

June 6, 2016

Mortgage Rate Trends: Lower After Jobs Report

By Joe Wallace

Ever since the Fed began discussing the possibility of another interest rate hike, we’ve seen upward pressure on mortgage loan interest rates. 30-year fixed rate conventional mortgage loan interest rates had fallen as low as 3.5% for some of the most competitive lenders (best execution) prior to that Fed talk, but once the upward movement began it wasn’t long before conventional rates began hitting 3.75% territory. During all this time, FHA mortgage loan rates held steady in a best execution range between 3.25% and 3.5%. As we frequently mention, FHA mortgage loan interest rates can and do vary more among participating lenders, so it pays to shop around. The FHA best execution range of rates mentioned here persisted even when conventional rates were going back and forth between a range | more...

May 10, 2016

FHA Loan Credit Score Requirements: Which Score Gets Used?

By Joe Wallace

How does the lender decide which FICO score to use when processing a borrowers mortgage loan application? This is a common question about FHA mortgage loans, and its not surprising why there is confusion in this area. After all, many borrowers will have three FICO scores, reported from the three major credit reporting agencies. Which of the three will the lender use? FHA loan rules governing this are found in HUD 4000.1 starting on page 127. This section begins by describing what the FHA loan rulebook calls the Minimum Decision Credit Score. According to HUD 4000.1: The Minimum Decision Credit Score (MDCS) refers to the credit score reported on the Borrowers credit report when all reported scores are the same. That doesn’t help clear things up for the borrower confused | more...

April 29, 2016

FHA Loan Questions: Minimum Income?

By Joe Wallace

Recently we were asked if FHA home loans have either an income limit, or a minimum amount the borrower must earn per month/year in order to qualify. FHA loan rules in HUD 4000.1 do not specify a maximum income. FHA loans are designed for those who want to purchase a home and want an alternative to conventional mortgages. FHA home loans are not created for a specific income bracket. Let’s examine the rules for income in HUD 4000.1: “The Mortgagee must document the Borrowers income and employment history, verify the accuracy of the amounts of income being reported, and determine if the income can be considered as Effective Income…” “…The Mortgagee may only consider income if it is legally derived and, when required, properly reported as income on the Borrowers | 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...

March 11, 2016

FHA Loans And Your Credit Report: HUD 4000.1 Guidelines

By Joe Wallace

We get many questions about FHA loan credit standards. Some examples: “I have a charge-off on my credit report. Am I still eligible for an FHA mortgage?” “My credit reports show some missed payments on student loans. Will this affect my ability to get an FHA mortgage?” These are definitely questions worth asking long before you start the house hunting process. Some borrowers are concerned with FICO score issues, others may have disputed accounts, or collection actions on their credit record. These things can worry a future home loan applicant, and with good reason–some credit issues are a barrier to loan approval, while others may not be quite so serious. Knowing what a lender is required to collect with regard to your credit data is a good way to ease | more...

March 10, 2016

FHA Loan Standards: Charge-Offs and Collections

By Joe Wallace

We’ve gotten several questions in the comments section about certain credit issues related to charge-offs, collections and other forms of derogatory credit information. With those questions in mind it seems like a good time to review the rules as published in HUD 4000.1 that instruct the lender on how to interpret these things and decide on loan approval. But before we start looking at the rules, it’s very important to point out that the information listed here are FHA minimum standards. A given lender or financial institution may have more strict requirements depending on circumstances, state laws, or other factors. Remember that FHA loan rules don’t override state law and lenders are free to require higher standards as long as they are in compliance with federal laws. When it comes | more...