How Your Credit Report Affects FHA Loan Approval
Credit Reports Are Offered By More Than One Company
One factor that’s easy to forget when applying for an FHA mortgage or refinance loan is that your credit score and credit history is calculated by three different major credit reporting agencies. What you see on one credit report might not be reflected in one of the others.
The three credit reporting agencies, Equifax, Experian, and TransUnion, all draw their credit data and make their reports, but is the information in your credit history accurate across all three? If you can’t say for sure, you might not be quite ready to fill out FHA mortgage loan paperwork.
FICO Score Requirements For Your FHA Loan May Vary
FHA loan minimums found in the FHA loan handbook include a baseline requirement for "maximum financing", which is a minimum 580 FICO score. But FHA loan rules are not the only ones that will affect what scores you need-a participating FHA lender may require a higher FICO score and may have additional rules for a borrower’s credit history.
What makes you a reliable credit risk for a particular lender? That depends on the lender’s requirements and state law (depending on circumstances) not just FHA mortgage loan rules.
The lender may require higher FICO scores for FHA loans, if the higher required FICO scores are applied in accordance with federal law such as the Fair Housing Act. The factors that determine FICO score requirements for FHA home loans should be specifically related to your financial qualifications rather than age, family status, country of origin, citizenship issues, etc.
FICO score requirements may be more flexible than you think; borrowers with lower scores may be able to get added consideration for supplying compensating factors such as a larger down payment.
FHA Loans And Your Credit History - An Important Issue
The participating FHA lender needs to know that her FHA home loan applicants have been reliable in paying their financial obligations, especially in the 12 months leading up to the application. Applying for an FHA mortgage or cash-out refinance loan with anything less than a full 12 months of on-time payments may seriously jeopardize your ability to borrow.
Always request the free copies of your credit report you are entitled to each year; examine your financial records ahead of time; just one late or missed payment on your record may or may not be an issue for your chosen lender, but a great deal of the leniency you may expect will hinge on the other patterns you have established in your credit history.
Homebuyers Benefit From the Work Done by Fannie Mae
HUD 4000.1 is Sometimes Called the FHA Handbook
Credit History Is Presented as Your FICO Score
Do you know what's on your credit report?
Learn what your score means.