September 27, 2018
We get many reader questions asking about scenarios they are worried might cause trouble when it’s time to apply for an FHA mortgage. Here are some of the most common questions related to situations that may or may not be an issue when applying for an FHA home loan or FHA refinance loan.
I have a FICO score of 500. Can I Qualify For An FHA Mortgage?
Technically the answer is yes, if you go by FHA loan standards alone. However, lender standards for FICO scores and loan approval will also apply and the lender’s FICO score requirements are likely to be higher than the FHA loan minimums.
Those with FICO scores between 500 and 579 are technically eligible for an FHA loan but they are required to pay 10% down instead of 3.5%.
I Have A Bankruptcy In My Credit History. Can I Still Get Approved For An FHA Mortgage?
Your FHA lender will process your loan application on a case-by-case basis where bankruptcy is concerned. Those who have not had their bankruptcy discharged must wait a minimum seasoning period or waiting time before being allowed to apply for a new loan.
Expect to wait a minimum of one year but as long as three years or more depending on state law, lender standards, and circumstances.
Those who have not had their bankruptcy discharged yet are not eligible to be approved for an FHA mortgage. The minimum waiting period is calculated starting when the bankruptcy is discharged, not when it is initially filed.
I Have Gaps In My Employment History. Is This A Problem For My FHA Loan Application?
FHA loan rules say gaps in the applicant’s job history can be addressed in writing by the borrower and the lender may require some additional documentation.
But a borrower who can show two years of employment history and who has a current job should not worry as much about those employment gaps as someone who is on the margins of the FHA two-year work history requirement and has only recently started a new job.
These situations are reviewed case-by-case, so borrowers should expect to discuss the particulars of their employment situation with the lender. Lender standards and state law may apply in addition to FHA loan rules.
I Missed Payments On My Bills This Year. Should I Wait To Apply For An FHA Mortgage?
For best results, it is advise that all borrowers come to the FHA loan process with a full 12 months of on-time bill payment with no lates or missed payments. It may be wise to delay your application for an FHA mortgage or refinance loan until you have the full 12 months of on-time payments on your record.
Borrowers looking to refinance an FHA or non-FHA mortgage should know that most FHA refinance loans (except those specifically designed to catch a delinquent borrower up on missed payments and avoid foreclosure) will require the borrower to be current or be brought current on the home loan. Skipped payments are not allowed with FHA refi loans.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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