FHA Requirements
Credit Guidelines That FHA Lenders Follow
Before approving a loan, the lender analyzes the integrity of the borrower's past credit performance. Based on FHA requirements, those who have a good credit history demonstrated by a solid track record of timely payments will likely be eligible for a loan. Potential borrowers whose credit history is marred by slow payments, poor financial judgment and delinquent accounts is not a good candidate for loan approval.
The following is a list of items concerning the borrower's credit:
No Credit History
Two lines of credit are necessary to apply for an FHA loan. However, in the event a borrower does not have sufficient credit on their credit report the FHA will allow substitute forms.
Chapter 13 Bankruptcy
FHA will consider approving a borrower who is still paying on a Chapter 13 Bankruptcy if those payments have been satisfactorily made and verified for a period of one year. The court trustee's written approval will also be needed in order to proceed with the loan. The borrower will have to give a full explanation of the bankruptcy with the loan application and must also have re-established good credit, qualify financially and have good job stability.
Chapter 7 Bankruptcy
At least two years must have elapsed since the discharge date of the borrower and / or spouse's Chapter 7 Bankruptcy, according to FHA guidelines. This is not to be confused with the bankruptcy filing date. A full explanation will be required with the loan application. In order to qualify for an FHA loan, the borrower must qualify financially, have re-established good credit, and have a stable job.
Late Payments
During an underwriter analysis of borrower credit, the overall pattern of credit behavior is being reviewed rather than isolated cases of slow payments. If a good payment pattern has been maintained, regardless of a specific period of financial difficulty preceded it, the borrower may escape disqualification.
Foreclosure
FHA insured mortgages are generally not available to borrowers whose property was foreclosed on or given a deed-in-lieu of foreclosure within the previous three years. However, if the foreclosure of the borrower's main residence was the result of extenuating circumstances, an exception may be granted if they have since established good credit. This does not include the inability to sell a home when transferring from one area to another.
Collections, Judgments, and Federal Debts
A collection is minor in nature usually does not need to be paid off as a condition for loan approval. It is stated as such in FHA guidelines. Any judgments will have to be paid in full prior to closing. Borrowers who are delinquent on any federal debt, such as tax liens, student loans, etc., are not eligible.
FHA Loan Requirements
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FHA Loan Articles and Mortgage News
April 29, 2024 - U.S. News and World Report published an article in April 2024 that included data from a U.S. News survey of American mortgage trends this year. In that survey, nearly 70% of house hunters who responded say they are waiting for home loan interest rates to fall before buying a house this year.
April 28, 2024 - Buying in cash does not necessarily mean you will get a big discount on the house. It’s all the same to the seller, who gets their money, either way. In more competitive housing markets, the cash offer is more appealing to some because it may work faster than dealing with a lender.
April 26, 2024 - During the second quarter of 2024, 30-year fixed-rate FHA mortgage rates were listed in the low 7% range, a place many hoped would be in the rearview mirror by now. What do respected market watchers say about the current state of the housing market regarding mortgage rates?
April 24, 2024 - Finding or building your dream home means paying attention to many important details. Is the house you want large enough to live in for 5 to 10 years without outgrowing it? Is your house close enough to essential services like child care or school?
April 21, 2024 - Are home loans riskier in 2024 due to elevated potential for scams and fraud? Fraud prevention company Funding Shield reports high fraud vulnerability in roughly half of all portfolio loans, including residential mortgages, in the first three months of 2024.
