topic Re: FHA Loan, Not Enough Credit History in Mortgage Loans

FHA Loan, Not Enough Credit History

js2334 — Thu, 15 Sep 2022 22:33:19 GMT

Hi. I am trying to get an FHA loan from my credit union. They are saying they can't give me one because they require a 620 credit score and I don't have enough credit history to generate a credit score. This seems to conflict with what I'm reading here: 41551HSGH.PDF where it says they can't deny you due to lack of credit history and have to generate a non-traditional credit report. Can anyone shed some light on whether they have to follow these guidelines?

Re: FHA Loan, Not Enough Credit History

Anonymous — Thu, 15 Sep 2022 22:38:38 GMT

Hope @ShanetheMortgageMan can shed some light on this? Good question.

Re: FHA Loan, Not Enough Credit History

MortgageMama — Fri, 16 Sep 2022 15:49:09 GMT

Likely the lender received a REFER from FHA's automated system (TOTAL mortgage scorecard). That would mean you would be in the manual underwriting category. Lenders can and do have what are called "overlays," in which they can impose higher credit score or other stricter requirements for manual underwrites.

Begining at page 5 of this link you will find a lot of info about Non-Traditional and Insufficient Credit and how a lender should address it. One would think a lender must follow this and cannot deny your loan. A lender does not have to do a manual underwrite. They can have a policy that they will under certain situtations, but not all. So in other words, there is no "law" that they must do it. Some smaller lenders may not even have FHA approval to do a manual.

Re: FHA Loan, Not Enough Credit History

MortgageMama — Fri, 16 Sep 2022 16:01:29 GMT

Sorry, that was a bad link, try this: https://www.hud.gov/sites/documents/FY16_SFHB_MOD4_UNDER.PDF