Articles Tagged With: FICO Score Requirements

March 25, 2015

Significant Changes In Borrower Financial Status: An FHA Loan Question

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...

March 24, 2015

Basic FHA Loan Eligibility Requirements

By Joe Wallace

We get many questions about FHA loans–questions about FICO score requirements, questions about credit and income, residency, etc. The FHA official site (www.fha.gov) has many answers to these questions–but what ARE the basic requirements for an FHA mortgage? FHA loan rules specify a minimum FICO score needed to qualify for maximum financing, and a minimum FICO score for basic eligibility with a larger down payment in cases where the applicant’s FICO score is close to the margins of acceptability. “FHA insures mortgages” the official site says, “made by approved lenders to individuals and nonprofit and government agencies that are approved to participate in HUD’s programs; HUD does not loan money to homebuyers.” The FICO score requirements mentioned previously (580 for maximum financing, and FICO scores above 500 for program eligibility | more...

March 20, 2015

FHA Loan Questions: Tax Records

By Joe Wallace

A reader asks, “Is an fha requirement for a home buyer to have two years of taxes?” This is a difficult question to answer in general except to say that borrowers should be prepared to include tax information as part of an FHA loan application. The actual requirement can vary depending on lender standards, state law, and whether the borrower is self employed or not. Consider what FHA loan rules found in HUD 4155.1 Chapter Four Section D have to say about self-employed FHA loan applicants, or those who own a family business: “Self employed borrowers must provide –signed, dated individual tax returns, with all applicable tax schedules for the most recent two years –for a corporation, “S” corporation, or partnership, signed copies of Federal business income tax returns for | more...

March 19, 2015

FHA Loan Reader Questions: New FHA Loans After Foreclosure

By Joe Wallace

A reader asks, “my husband property was forclosed on out of his control of his job moving to a different state can we try to by if we havent waited 2 years” This reader question doesn’t provide quite enough information to give a specific answer. FHA loans after a foreclosure are possible, but much depends on whether the borrower had an FHA home loan or not, and the borrower’s credit history following the foreclosure activity. Here’s what FHA loan rules in HUD 4155.1 Chapter Four Section A say about attempting to get an FHA loan after a previous home purchased with an FHA mortgage was foreclosed upon: “If the borrower has had past delinquencies or has defaulted on an FHAinsured loan, there is a three-year waiting period before he/she can | 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 17, 2015

More On FHA Appraisals Versus Home Inspections

By Joe Wallace

In our last blog post we addressed a reader question about FHA appraisals and why appraisals are not considered home inspections. This is a very important issue and deserves some extra attention here for one important reason: an FHA appraisal is never a substitute for a home inspection. Borrowers may be tempted to save a few hundred dollars and skip having the voluntary (as in, not required as a condition of the loan) home inspection performed, but doing so is a very bad idea. An FHA appraisal is, as the FHA official site points out, for the lender and addresses the lender’s needs only. A home inspection, which is not required by the lender as a condition of the loan, is for the borrower and is designed to look out | more...

March 16, 2015

FHA Loan FICO Score Requirements: Are There Exceptions?

By Joe Wallace

Many potential FHA borrowers want to know if their FICO scores qualify them for an FHA mortgage; others want to know if they can qualify for an FHA loan even if their FICO scores aren’t quite high enough based on what they might have heard the FHA loan minimum scores are. Do participating FHA lenders have the power to make exceptions when it comes to certain qualifying factors or ratios associated with an FHA home loan? The simplest answer is that it depends greatly on the lender. In general, FHA loan standards permit a degree of flexibility on FHA loans if the lender determines that a borrower doesn’t quite meet the standards required for the loan. But when could a lender make such exceptions based on the FHA loan program | more...

March 13, 2015

FHA Loan Reader Questions: Seasoning Period Following Bankruptcy

By Joe Wallace

A reader asks, “On 3/11/15 I was told by a potential lender that consumers who have claimed bankruptcy must wait 4 years to potentially qualify for ANY loan… conventional or FHA. My bankruptcy was discharged in August 2013 and I have been rebuilding my credit ever since…. with the hopes that I could start looking at buying a home at the near 2 year mark, post discharge. Can someone please clarify this for me? And give the source of the data that is accurate? The lender just blew me off…” This reader’s question asks if what a lender told her about waiting four years after bankruptcy may be true if those are that particular lender’s standards. Those standards may vary from bank to bank, lender to lender. But if the | more...

March 11, 2015

Disputing Bad Credit Information Before Applying For An FHA Loan

By Joe Wallace

A recent article published by Marketplace reports that disputing bad credit information on your credit report is going to be easier than in years past. According to the article titled, “Disputing bad credit is about to get a whole lot easier”, “The nation’s three biggest credit reporting companies—Experian, TransUnion, and Equifax—are changing the way they collect and report the credit scores. The changes involves the way bureaus handle credit-rating disputes, as well as how they report unpaid medical bills.” That can be a big help for borrowers who need to deal with credit agencies or manage credit applications while dealing with medical expenses. According to the article, “Under the Fair Credit Reporting Act, all credit error claims are entitled to a ‘reasonable investigation’. In practice however, that wasn’t happening. Chi | more...

March 6, 2015

FHA Loan Questions: Going Back To Full-Time Employment After Owning a Small Business

By Joe Wallace

A reader asks, “Can I qualify for a Back to Work Loan if I lost a job and then when I couldn’t find work, started a business with a partner. Two years later the partnership breaks up and I am forced to pursue full-time employment.” “During the time that I operated the business, my draws reflected a greater than 20% net loss. Now that I am employed full-time, my earnings are the same or greater than the earnings I made prior to losing my job. Also the business is still operated by my former business partner.” Questions like these are difficult to answer except in general terms. The lender’s standards will play a role in loan approval, so it’s unclear above and beyond FHA loan minimum requirements what the answer | more...