FHA Credit Guidelines
Credit scores must meet certain guidelines for all FHA mortgages (except for some streamline refinances which may not require any credit check).
Right now, borrowers with lower than a 500 middle score are NOT eligible for FHA financing, further, the FHA requires a minimum credit score of between 500 and 580 for borrowers to be eligible for a mortgage with a maximum of a 90% loan to value (LTV) for the property. Per FHA rules, borrowers are eligible for maximum FHA financing (96.5% LTV) with a 580 credit score and above. HOWEVER, lenders who offer FHA mortgages have recently been very reluctant to provide those mortgages to borrowers with lower than a 620 middle credit score. If you do not already know your credit score, you can find it out for FREE with our affiliate here.
Here at MyFHA, in our research we have found very few lenders (and NO lenders who operate in all fifty states) who are able to provide mortgages to borrowers with lower than a 620 credit score. For a more detailed discussion on this, please read this blog article, here. If your credit score falls below the 620 range, we suggest that you do something about it. MyFHA has affiliates who can talk with you about developing a strategy for addressing your credit issues.
Non-Traditional Credit is acceptable if the borrower does not have any prior credit history or if that length of credit history is too short to qualify. We would need at least three letters from any repeated monthly obligation such as rent, utilities, store accounts, cell phone accounts, and/or any other acceptable sources. Make sure to let your FHA Loan Officer know about your current credit situation to avoid any mishaps in the processing of your mortgage.
Court ordered judgments must be paid completely, unless the borrower has been making regular and timely payments and the creditor is willing to subordinate that judgment to the new insured mortgage. The borrower must provide a satisfactory written explanation.
Handled on a case by case basis.
–Chapter 7 requires a minimum two-year lapse period since discharge date; minimum one-year lapse period may be acceptable if bankruptcy was caused by extenuating circumstances that are not likely to recur the reason cannot be debt caused by uneducated choices. Only extenuating circumstances will be considered and only after one year has passed. In all cases the borrower must have re-established credit and must demonstrate the ability to manage financial affairs.
–Chapter 13 is permitted if a one-year payout period has elapsed and performance has been satisfactory. The borrower must receive court approval to enter into the mortgage transaction.
Require a minimum of three years since the completion of the action and the borrower must have re-established good credit.
Delinquency or Default on Federal Debt:
If the borrower is presently delinquent on any federal debt or is obligated on any type of federal lien, he or she is not eligible for an FHA loan until the delinquent account is brought current, paid, or otherwise satisfied, or a satisfactory repayment plan is made between the borrower and the federal agency owed and is verified in writing.