My wife and applied for a mortgage loan 11/1/09...our scores were too low and our Loan Officer said we needed a 620 combined to qualify for a FHA. Our scores have rebounded and are now close to the 620...Jumping ahead and assuming we do get our score over the 620 mark what "issues" or problems will we have to close a loan if our score is over the 620 mark and still have BADDIES on our reports?
Everything is sort of up to the discretion of the underwriter (UW) for the lender. The biggest issue will likely be 'recent' baddies. From what I've read here, I think most UWs are looking for 12 months completely clean. Anything within the past year brings up red flags for them.
Beyond that, expect to provide documentation on the baddies - what caused them, how did you respond/fix them and what is different now that will allow you to prevent them in the future.
12 month clean history
24 months no major baddies
money to pay any charge offs/collection accounts as required (it is up to the UW, but most are requiring lately it seems)
good solid work history at same job 2 years
solid rental payment history
3 tradelines (credit cards or loans) in good standing with no lates past 12 months
all down payment/closing money seasoned and documented
DTI under 31/43% (31 housing 43 total)
If you have all this, it will probably not be any real problem. They will jsut have you write some letters on the lates.
If you are missing an item or tow here, they should be able to work around it.
If you are way off the mark on this list, you may run into some serious hurdles.