I've spoken to a few people who have recently gone through the FHA assumption process. All were handled through the seller's mortgage servicer with all but one taking 60+ days to close from beginning to end. As far as I could tell they all had to pass manual underwriting guidelines and weren't able to utilize automated underwriting.
Manual underwriting is less of a guessing game than automated underwriting is, because manual underwriting has black & white guidelines that must be met. The biggest guidelines to meet are debt to income ratio and payment history requirements. With manual underwriting guidelines, FHA says that:
The underwriter may consider a Borrower to have an acceptable payment history if the Borrower has made all housing and installment debt payments on time for the previous 12 months and has no more than two 30-Day late Mortgage Payments or installment payments in the previous 24 months.
The underwriter may approve the Borrower with an acceptable payment history if the Borrower has no major derogatory credit on Revolving Charge Accounts in the previous 12 months.
Major derogatory credit on Revolving Charge Accounts must include any payments made more than 90 Days after the due date, or three or more payments more than 60 Days after the due date.
If a Borrower’s credit history does not reflect satisfactory credit as stated above, the Borrower’s payment history requires additional analysis.
The Mortgagee must analyze the Borrower’s delinquent accounts to determine whether late payments were based on a disregard for financial obligations, an inability to manage debt, or extenuating circumstances. The Mortgagee must document this analysis in the mortgage file. Any explanation or documentation of delinquent accounts must be consistent with other information in the file.
The underwriter may only approve a Borrower with a credit history not meeting the satisfactory credit history above if the underwriter has documented the delinquency was related to extenuating circumstances.
Debt to income ratio guidelines depend on your qualifications, the limits are shown below.
Cash reserves are defined as:
Verified and documented cash Reserves may be cited as a compensating factor subject to the following requirements.
• Reserves are equal to or exceed three total monthly Mortgage Payments (one and two units); or
• Reserves are equal to or exceed six total monthly Mortgage Payments (three and four units).
Minimal Increase in Housing Payment is defined as:
• the new total monthly Mortgage Payment does not exceed the current total monthly housing payment by more than $100 or 5 percent, whichever is less; and
• there is a documented 12 month housing payment history with no more than one 30 Day late payment. In cash-out transactions all payments on the Mortgage being refinanced must have been made within the month due for the previous 12 months.
• If the Borrower has no current housing payment Mortgagees may not cite this compensating factor.
No Discretionary Debt is defined as:
• the Borrower’s housing payment is the only open account with an outstanding balance that is not paid off monthly;
• the credit report shows established credit lines in the Borrower’s name open for at least six months; and
• the Borrower can document that these accounts have been paid off in full monthly for at least the past six months.
Significant Additional Income is defined as:
Additional income from Overtime, Bonuses, Part-Time or Seasonal Employment that is not reflected in Effective Income can be cited as a compensating factor subject to the following requirements:
• the Mortgagee must verify and document that the Borrower has received this income for at least one year, and it will likely continue; and
• the income, if it were included in gross Effective Income, is sufficient to reduce the qualifying ratios to not more than 37/47.
This compensating factor may be cited only in conjunction with another compensating factor when qualifying ratios exceed 37/47 but are not more than 40/50.
If your credit cards are required to be paid off, then you should be able to just pay them off at closing rather than before.