New FHA Loan requirements

[thegrapelady]

I am finding so much mixed information about the current FHA loan requirements. Can someone tell me if this is true, and if I would have an issue obtaining an FHA loan? My mortgage broker said that FHA looks at the last 2 years of your credit history, and not further. He also said they check your employment, salary, and that you have a credit score about 580. Is this all true? My credit scores are as follows: Transunion: 617 Equifax: 604 Experian: 638 I make 80K a year, have a car payment that is $319 and is about 50% paid off, have 3 credit cards. One has a zero balance, the other has maybe $150, and the third with the lowest interest rate carries most of the debt (maybe 1K, which I will have paid off within 2-3 months). My credit has been perfect for the past 2 years, and close to perfect for the last 4 years. I have about 7 items on my credit report mostly from 2002 and a few from 2003 which have been "charge offs". I have been able to collection company of 2 of the debts and paid them off. The other items I have been unable to track down who to pay. Some are old medical bills. I have one "public record" on two reports from 2005 which was paid in full and just says "Judgment satisfied". I have one items on my report for under $200 from 2005 which were also paid (I had forgot to return a leased cable modem on time when I moved, and didn't get a bill for it, it just went straight to collections). I am looking at a home in the 250K-260K range (cheap for the area I love in) and am able to put 3% down. Based on this, does anyone know if I would make the requirements for an FHA loan? Thanks! And, are the requirements all still the same other than the fact that they now require a 580 score?

[ShanetheMortgageMan]

thegrapelady wrote:
I am finding so much mixed information about the current FHA loan requirements. Can someone tell me if this is true, and if I would have an issue obtaining an FHA loan? My mortgage broker said that FHA looks at the last 2 years of your credit history, and not further.  FHA is primarily concerned with the past 24 months but if there is a history of missed payments could consider credit beyond 24 months ago to determine your financial habits.  It's rare that beyond 24 months of credit is looked at, except for in the case of a foreclosure (which requires 3 years to pass from the event) and if you've had a BK (then any negative credit after the BK, whether it's 4 months ago or 4 years ago, is looked at).

He also said they check your employment, salary, and that you have a credit score about 580. Is this all true?  A lot of lenders are requiring a minimum of a 580 score to be able to qualify for FHA these days but there are still several who can go down to a 500 score... this is the middle score we're talking about.

My credit scores are as follows: Transunion: 617 Equifax: 604 Experian: 638 I make 80K a year, have a car payment that is $319 and is about 50% paid off, have 3 credit cards. One has a zero balance, the other has maybe $150, and the third with the lowest interest rate carries most of the debt (maybe 1K, which I will have paid off within 2-3 months). My credit has been perfect for the past 2 years, and close to perfect for the last 4 years. I have about 7 items on my credit report mostly from 2002 and a few from 2003 which have been "charge offs". I have been able to collection company of 2 of the debts and paid them off. The other items I have been unable to track down who to pay. Some are old medical bills. I have one "public record" on two reports from 2005 which was paid in full and just says "Judgment satisfied". I have one items on my report for under $200 from 2005 which were also paid (I had forgot to return a leased cable modem on time when I moved, and didn't get a bill for it, it just went straight to collections). I am looking at a home in the 250K-260K range (cheap for the area I love in) and am able to put 3% down. Based on this, does anyone know if I would make the requirements for an FHA loan? Thanks! And, are the requirements all still the same other than the fact that they now require a 580 score?  If you have at least 2 times the proposed housing payment after closing in reserves (401k, IRA, savings/checking, etc.) then I'd say you have an excellent chance at qualifying for an FHA loan on a home in the $250-260k range.  You shouldn't be required to pay off any of the owing collections or charge-offs either, so I wouldn't mess around with those until after you buy the home... as you wouldn't want to wake up any "sleeping giants" that would update date of last activity on negative accounts and bring your scores down.

Welcome to the FICO forums!

[thegrapelady]

Thanks! Luckily no foreclosures or BK, and I have 11K in a 401K, 1K vested in stocks and 15K unvested (which will vest about 10% every 3 months for the next 3 years), and 3K in a general savings type account. Hopefully that will help. Thanks so much!

[ShanetheMortgageMan]

You are welcome, it sounds like you will be in a good position to qualify then.  Good luck to you and feel free to come back here with as many questions as you can think of (might want to stick them in this thread though).

[Anonymous]

So, Shane, anyone with negative information on their credit report after a BK will be denied a FHA loan, unless they have a good explanation? Is that even with establishing good credit over the past 12 months?

[ShanetheMortgageMan]

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Pjackson wrote:

So, Shane, anyone with negative information on their credit report after a BK will be denied a FHA loan, unless they have a good explanation? Is that even with establishing good credit over the past 12 months?

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I never said denied, it's really open to interpretation.  If you get an automated approval then negative credit after a BK is acceptable, if you don't get an automated approval then your loan would need to be manually underwritten and that is when underwriters scrutinize credit history after a BK or foreclosure.  In that situation having a good explanation for the negative credit (such as an extenuating circumstance) can certainly help.

[thegrapelady]

Thanks so much! I think I am addicted to these forums now.