topic Re: Chances of being approved for FHA loan in Mortgage Loans

Chances of being approved for FHA loan

jg1983 — Fri, 15 Mar 2019 00:52:41 GMT

I tried for a conventional loan through my credit union and they denied me but gave me some information which I'll get into below. First here is my info:

Scores from creditchecktotal.com (think they are FICO 8):

Ex: 631
Eq: 606
TU: 623

Scores credit union gave me (I asked if they were mortgage scores and he told me their FICO scores. Not sure which version though.):

Ex: 615
Eq: 582
TU: 592

I have one late payment on my car loan well over 3 years ago and no other late payments since on everything. I have 3 personal loans and some credit cards. Most over 2 years old without a single late payment. My credit card utilization is about 70% (I know thats high). No other negatives or collections. My income was $41k last year.

My wife:

My wife was a co signer on a $5000 personal loan with me 3 months ago and it has reported every month since then on her credit. That is the only thing positive or negative on her credit. Creditchecktotal.com is still showing no FICO scores for her. She moved here from overseas a couple years ago and had no credit prior to that. I am wondering if adding her to a couple of my lower balance credit cards might help her score. Her income last year was $24k bringing us to $65k together if we can be approved with her as a co signer with no credit score. Without remembering the numbers off the top of my head I calculated our DTI ratio both with only my income and both of our incomes and we are within the requirements for a FHA loan.

As I said above I was denied for a mortgage through my credit union. I was told with a 20% down payment and without my wife as a co signer they could approve me but with my credit being that low they need either 20% down or mortgage insurance and the insurance company requires a middle score of 620. We wont have any more than a few thousand or so for a down payment (looking to be in the $50k-$100k range for a mortgage).

So I am wondering what my chances of approval on a FHA loan are. From what I have read it appears my credit scores and DTI ratio meet the requirements. Should I try with my wife as a co signer or by myself? What is a good lender to apply with? What can I do to get my wife a credit score above 580 established in the shortest period of time possible? On a somewhat unrelated subject why do the FICO scores creditchecktotal.com gives me always seem to be higher than scores I have been given when I apply for things like credit cards and the mortgage I applied for? Had I known there is that much of a difference I probably wouldn't have applied for a mortgage with my credit union.

Re: Chances of being approved for FHA loan

Anonymous — Fri, 15 Mar 2019 01:15:51 GMT

Unsure of other questions you have but I know you can get a significant score boost just from paying down that high utilization. May want to see if you can do that first.

Re: Chances of being approved for FHA loan

MitchDeerfield — Fri, 15 Mar 2019 05:16:14 GMT

Do you have at least 5 percent down? That should be a minimum, with higher dp the better to get approved.

Re: Chances of being approved for FHA loan

jg1983 — Fri, 15 Mar 2019 08:53:15 GMT

I could probably come up with 5% in a couple months if I had to. I have it in my 401k but I have to look at the rules for taking a 401k loan. I'm also going to look into down payment assistance programs.

Re: Chances of being approved for FHA loan

Mortgage-Specialist — Fri, 15 Mar 2019 10:00:21 GMT

Your scenario sounds perfectly fine in its current state for FHA loan approval. Both 580 and no-score.

Re: Chances of being approved for FHA loan

jg1983 — Fri, 15 Mar 2019 13:27:29 GMT

Do you know of any decent lenders that can do a pre approval via their website? A Google search brings up many options and I don't know where to start. I should be okay with my wife as a co signer with no credit score then?

Re: Chances of being approved for FHA loan

pgtackle2003 — Fri, 15 Mar 2019 18:12:39 GMT

I am actually in a FHA loan process myself so I am familiar with most of the requirements. As you mentioned 580 is the MINIMUM required to have a 3.5% down payment. If your middle score is 580 or above you can quailify for an FHA loan with 3.5%. One thing to keep in mind is this is the FHA requirement and any lender can decide their own requirements. This means any give lender can require a 620 credit score if they want. It is also up to the lender to offer an interest rate based on your credit score. FHA loans are a bit expensive since it is required to have a Private Mortgate Insurance for the life of the loan, this adds to your monthly payment. So while yes you do technically quailify I might recommend improving your scores to somewhere in the 620-640 range first. I think this may give you more favorable terms on the mortgate.

As a reference I had a Fico Middle score of 670 and got a low 4% rate mortgage (FHA). As for taking money out of your 401k, FHA does allow this. I'd recommend looking into Down Payment Assistance (DPA) first as depending on where you live this might be a better choice then pulling from a retirement fund.

Good Luck!

Re: Chances of being approved for FHA loan

jg1983 — Mon, 18 Mar 2019 18:12:22 GMT

Just applied through Quicken loans. They told me I need a 620 score for a FHA loan (if I had a 620 score I could get a conventional loan at my credit union). I told them I have heard 580 is high enough. They said 580-619 has special requirements. I told them I thought 500-580 has special requirements and anything over 580 is okay. All they said to that is different lenders have different rules (I thought they all had to follow minimum guidelines for FHA loans). They said they cant even put my wife on the loan because of no credit score. Guess that was a waste of an inquiry. I got the feeling they didnt want to waste time with me the way they were talking. Are they giving me bad info or is it really different depending on the lender (other than who will approve 500-580)? What is a good lender that will accept a minimum of 580? I don't want to apply somewhere else only to be denied and have another inquiry potentially dropping my score below 580.

Re: Chances of being approved for FHA loan

pgtackle2003 — Mon, 18 Mar 2019 18:46:33 GMT

They are not giving you bad info. As mentioned before lenders are allowed to set their own minimum criteria that is 580 or above. The 580 score set by FHA means that no lender can have a Federally insured loan with a credit score BELOW 580. It is correct that lenders all have different rules. I cannot say which lenders will work with 580 as I don't know of any. Remember you are allowed to "rate shop" meaning any further credit inquiries for a mortgage loan will count as 1 inquiry when it comes to scoring. So at this point if you want to do everything you can to find a lender I would continue looking. You mentioned your credit union would do a conventional loan at 620? Would they not do a FHA loan at 580?

Re: Chances of being approved for FHA loan

jg1983 — Mon, 18 Mar 2019 19:00:41 GMT

@pgtackle2003 wrote:
They are not giving you bad info. As mentioned before lenders are allowed to set their own minimum criteria that is 580 or above. The 580 score set by FHA means that no lender can have a Federally insured loan with a credit score BELOW 580. It is correct that lenders all have different rules. I cannot say which lenders will work with 580 as I don't know of any. Remember you are allowed to "rate shop" meaning any further credit inquiries for a mortgage loan will count as 1 inquiry when it comes to scoring. So at this point if you want to do everything you can to find a lender I would continue looking. You mentioned your credit union would do a conventional loan at 620? Would they not do a FHA loan at 580?

Thanks for clarifying whether I was getting bad info or not. So what you are saying is that after I have one mortgage inquiry subsequent inquiries within a given time period (What is that time period?) won't affect my credit score? Did I understand that correctly? I was trying to be careful not to lower.my score more but if this is the case I may keep applying until I find a lender to approve me. As far as my credit union goes they don't do FHA loans. If this doesn't work out my plan b will be to get my score above 620 and go through my credit union. I have enough cash from a personal loan to get my credit card utilization down significantly but we're saving the money to go to the Philippines later this year to visit my wife's family. If I can be reasonably sure paying down the credit cards with this money will raise my credit score enough this may be an option.

Re: Chances of being approved for FHA loan

pgtackle2003 — Mon, 18 Mar 2019 19:09:57 GMT

There is a link here from MyFico which talks about mulitple inquiries.

https://www.myfico.com/credit-education/credit-reports/credit-checks-and-inquiries

Ultimately this goes on to say for older Fico Scores (which most mortgage lenders still use) the shopping period is 14 days. For newer Fico scores it's 45 days. So you should have 14 days to shop around for another lender.

As for paying down credit card balances to help your credit score, in almsot eveyr case this should help raise scores. However, to say how much your scores will raise by paying them down is hard to say. It's really dependant on other factors of your credit profile. Things such as any late payments and/or collections, charge-off's etc. However, if your credit utlizilation is signficantly high, getting the percantage to below 30% should give you a boost in scores.

In still may be worth waiting a while to raise your scores. You're likely to get a better rate and just have a much easier time with the loan process. With a score in the 580 range you'll likely need some bit of manual underwriting which will make the entire process longer (and likely stressful)