Articles Tagged With: FICO Score

November 27, 2013

FHA Loans and Minor Credit Mistakes

When some borrowers apply for an FHA loan for the first time, they may worry that past minor credit mistakes could hurt their chances at loan approval. Do these minor credit problems affect a borrower’s chances at an FHA mortgage? Or can the lender ignore certain minor credit issues if the borrower’s overall pattern of repayment and credit management is good? There is no simple answer to this question since the answer depends on the specifics of the borrower’s situation, but FHA loan rules in HUD 4155.1 do offer a few clues as to what you can expect in these cases. Any delinquent account must be investigated by the lender, even if in the end it doesn’t affect the application. According to FHA loan rules, “The lender must document the | more...

August 16, 2013

FHA Updates Loan Rules On Credit, Collections, and Judgments

By Joe Wallace

A recent reader question asked, “I have an outstanding judgment in the amount of $8000. Can I still get a loan?” FHA loan rules are clear on the issue of credit, stating that past credit performance and patterns are considered one of the best indicators of whether an FHA loan application should be approved. But recently, the FHA has issued clarifications and updates to lenders on the subject of judgments, collections and other activities that could be considered negative credit data. According to FHA Mortgagee Letter 2013-24, Handling of Collections and Disputed Accounts, the FHA has amended its guidelines and policies for collections, disputed accounts, and judgments for most credit-qualifying FHA loan transactions. It applies to all affected FHA loans with case numbers assigned on or after October 15, | more...

July 25, 2013

FHA Loans and Your Credit

By Joe Wallace

For some borrowers, the credit approval process is a mystery, especially when it comes to FHA home loans. Do you understand what the lender needs in order to approve a home loan application? Borrowers should understand that FHA loan approval is based on several factors including FICO scores, debt to income ratio, but also the repayment history shown on your credit report. FHA rules and instructions to the lender on this area are found in HUD 4155.1 Chapter Four. In Section C, we get some insight into this process and how the lender is supposed to evaluate your repayment history as found in a credit report: “Evaluating credit involves reviewing payment histories in the following order: • first: previous housing expenses, including utilities, • second: installment debts, • third: revolving | more...

May 30, 2013

FHA Loan Credit Standards

By Joe Wallace

When applying for an FHA home loan, many borrowers are in the dark about credit score requirements and other issues related to FICO scores in general. We recently answered a reader question about FHA loan credit requirements and now is a good time to review FHA policy on FICO scores. The FHA requires the lender to use an available credit score to determine whether or not the borrower is eligible for an FHA home loan. The FHA has rules for interpreting or using FICO scores from credit reports. According to the FHA Frequently Asked Questions list on the official site: “When the credit report reflects: • 3 credit scores (one from each repository) – the middle score is used • 2 credit scores – the lower of the two scores | more...

January 25, 2012

FHA Loan Rules VS. Lender Requirements

By Joe Wallace

We encourage readers to submit their questions about the FHA loan process and related issues by using our comments section; as a result we’ve gotten a large number of comments about the difference between FHA regulations and lender requirements. For example, if the FHA requires a minimum FICO credit score, why does the lender require a higher score? Isn’t the borrower qualified at the lower, but still permissible score according to FHA loan rules? This is where a great deal of confusion can and does occur, mainly because of an expectation that the FHA rules have the final say in such matters. But the truth is that FHA lenders are free to require higher credit scores and other criteria so long as such requirements are applied equally for all applicants, | more...