FHA loan requirements and qualifications
Q: I want to get FHA loan. With all the recent events with banks and mortgages, it is hard to understand what the FHA loan requirements are. I tried talking to a few loan officers who worked for FHA approved lenders but one or two who, supposedly knew something were too busy. The one that was available spoke too vaguely and did not seem to have a grip on many details. Can you give an idea on qualifications?
A: You can hear and read about FHA loans everywhere, and may think that everyone wishing to obtain FHA loan is automatically qualified. That is of course, to put it mildly, is incorrect. By the way some of the best and knowledgeable FHA loan originators currently are those who made a fortune selling subprime and Alt -A mortgages. Going back to the FHA loan requirements, I am noticing some funny things - some of the qualifications are becoming less stringent. I heard that Wells Fargo is now offering FHA insured refinance loans for the borrowers with FICO score of 750 and above with Loan To Values of up to 105%. As long as you show the latest paystab and your existent loan agrees with Fannie Mae and Freddie Mac guidelines, Wells Fargo will do it. The other lenders will certainly follow. But back to the question.
FHA loan requirements and qualifications
First and foremost, let us review present FHA credit requirements and what exactly actual FHA lenders want and don't want to see on your credit report.
- You must have at least 2 lines of credit or furnish some substitute documentation which almost always is 12 consecutive months of posted rental checks so keep them. If you don't have check copies, you may try to show other bills you are paying.
- Late payments will not automatically disqualify you as long as they are isolated cases, e.g. you were 30 day late twice within last 15 months or so, and have a reasonable explanation, you may be just fine. Also minimum credit score for FHA loan that banks will consider is currently 640, remember that.
- Collections, unpaid judgments and federal debts can derail your qualification for FHA mortgage. Minor collections and some medical collections usually do not need to be paid off as a condition for loan approval, according to FHA requirements and 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 or student loans, are not eligible for FHA insured mortgages.
- Chapter 13 bankruptcy is not a show stopper as long as you have made payments for at least 12 months. And you must obtain written approval from court trustee. Finally, you will have to explain in detail why you declared Chapter 13 and show that you have re-established good credit, qualify financially and have good job stability.
- Chapter 7 bankruptcy is a different story and FHA loan requirements are more stringent. At least 2 years must have elapsed since the discharge date of you and/or spouse Chapter 7. Don't confuse the discharge date with filing date. Again, you will have to explain in detail why you declared Chapter 7 and show that you have re-established good credit, qualify financially and have good job stability.
- If you were foreclosed or given a deed-in-lieu of foreclosure within the previous 3 years, you can not qualify for FHA insured mortgage, unless you can prove that the foreclosure of your primary residence was the result of extenuating circumstances. Then you may get if your credit is good. That is why it is crucial to establish credit anew after foreclosure. And the inability to sell your house isn't covered by extenuating circumstances. Also see reestablish credit after foreclosure, bankruptcy, divorce, job loss.
Updated October 2011
Fri Apr 24, 2009 03:04PM | Copyright: www.bad-credit-advisor.com | More in Mortgage | Comments (0)
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