FHA Loan - Credit Qualifying for FHA Loans
In addition to your ability to pay for a mortgage (as indicated by your debts
and income), FHA will look at your ability to repay as indicated by your credit report.
Your willingness will be judged by your credit report records -- that is, how well you've paid
your loans and other debts in the past.
If you are unsure what your credit report is like, you may want to
begin by getting a free credit report that you can view immediately online by clicking
To help you understand why credit is important and why FHA will look
at your credit, please try to understand the following:
- Perfect credit is what you are supposed to have.
Whenever you borrower money (credit cards,
auto loans, student loans, etc.) you are making a commitment to that
creditor to pay them back on the terms mutually agreed upon. If you
are late making the payment then you broke the commitment and the
lender can indicate this on your credit report.
The lender does not know why you are late, they just know that you
broke the commitment agreed upon. They are not responsible on helping you manage your
bills and debt, as they simply make and offer and the borrower accepts the terms.
This is why your credit is very important in qualifying for a home
loan. Although you are supposed to have perfect credit, FHA will allow for minor
past credit issues, as long as there is a "reasonable" reason why there was an
FHA will look mostly at the last two years of your
credit history. If there are some credit issues, we may be able to overcome them with
sufficient explanations and supporting documents of why the issues occurred. Following is
some the the reasons FHA will accept:
- Lost of Job
- Job Transfer
- Serious Illness
As long as it seems to make sense, and it is not just because you
did not make the payment or because you had too much other debt.
You should not rule yourself out of qualifying for FHA loan to buy a
home or refinance your existing mortgage because of credit issues until a mortgage
professional has reviewed your credit.
There are some credit issues that you must allow for a certain time
(seasoning) to past before you can qualify for a FHA loan. They are follows:
- Two years from the date of discharge for a Bankruptcy
- Three years from the date of Foreclosure
Also FHA would typically require that any outstanding collection
accounts, judgments, charge off's be paid off in full before closing your loan but not
necessarily before "approving" your loan.
If you have a "Federal Tax Lien" that is in a repayment
agreement, you do not have to pay it off in full but you must be able to qualify with the
monthly payment of the repayment agreement. "State Tax Liens" typically must be paid in full prior to
closing your FHA loan.
Another advantage of FHA loans is that FHA does not require a credit
scoring item called a FICO (Fair Issac Company) score. So if you
have no credit at all you may still qualify for a FHA loan. If you
have some credit you will typically need a minimum middle credit
score of 580 to qualify for a FHA loan. If you are not sure what
your credit score is, you can click here to
your credit scores online. This allows more home buyers to
qualify to purchase or refinance a home.
When you apply to get pre-qualified for a FHA home loan, we will
order a credit report for you. The credit report will show your record of payments on
loans, charge cards and other similar debts. If you have never had a loan or a charge
card, you can show that you have a good record of payment on your utility bills and rent
We will review your credit report with you. Should you have some
credit issues that prohibit you from qualifying for a FHA loan now, we will show you how
to correct the issues so that you we can help you qualify to purchase a home or refinance
your mortgage in the future or you can contact a law firm specialized in credit repair.
Learn how FHA will look at your bank accounts and savings in
determining your loan qualification by clicking