Qualifying for an FHA Mortgage

 ANALYZING THE FHA MORTGAGE APPLICANTS CREDIT

 Past credit performance serves as the most useful guide in determining an FHA mortgage applicants  attitude toward credit obligations and predicting the  FHA mortgage applicants future actions.  An FHA mortgage applicants  mortgage applicants who has made payments on previous and current obligations in a timely manner represents reduced risk.  Conversely, if the credit history, despite adequate income to support obligations, reflects continuous slow payments, judgments, and delinquent accounts, strong compensating factors will be necessary to approve the loan.

 When analyzing a mortgage applicants credit history, examine the overall pattern of credit behavior, rather than isolated occurrences of unsatisfactory or slow payments.  A period of financial difficulty in the past does not necessarily make the risk unacceptable if the borrower has maintained a good payment record for a considerable time period since the difficulty.  When delinquent accounts are revealed, the lender must document their analysis as to whether the late payments were based on a disregard for financial obligations, an inability to manage debt, or factors beyond the control of the borrower, including delayed mail delivery or disputes with creditors.

 While minor derogatory information occurring two or more years in the past does not require explanation, major indications of derogatory credit–including judgments, collections, and any other recent credit problems–require sufficient written explanation from the borrower.  The FHA mortgage applicants  explanation must make sense and be consistent with other credit information in the file.

 Neither the lack of credit history nor the mortgage FHA mortgage applicants  decision not to use credit may be used as a basis for rejecting the loan application.  We also recognize that some prospective FHA mortgage applicant may not have an established credit history.  For those borrowers, and for those who do not use traditional credit, the lender must develop a credit history from utility payment records, rental payments, automobile insurance payments, or other means of direct access from the credit provider.  The lender must document that the providers of non-traditional credit do, in fact, exist and verify the credit information.  Documents confirming the existence of a non-traditional credit provider may include a public record from the state, county, or city records, or other means providing a similar level of objective confirmation.  To verify the credit information, lenders must use a published address or telephone number for that creditor.

 As an alternative, the FHA mortgage lender may elect to use a non-traditional mortgage credit report developed by a credit-reporting agency, provided that the credit reporting agency has verified the existence of the credit providers and the lender verifies that the non-traditional credit was extended to the applicant.  The FHA Mortgage lender must verify the credit using a published address or telephone number to make that verification. 

 The basic hierarchy of credit evaluation is the manner of payments made on previous housing expenses, including utilities, followed by the payment history of installment debts, and then revolving accounts.  Generally, the FHA mortgage applicant with no late housing or installment debt payments should be considered as having an acceptable credit history, unless there is major derogatory credit on his or her revolving accounts.

 Florida home buyers should know the many advantages of the FHA mortgage loan programs. FHA loans were created to help increase home ownership. For the Florida home buyer the FHA program can simplify the purchase of a home, making financing easier and less expensive than a conventional mortgage loan product. Some highlights of the Florida FHA loan program include:

Minimal Down Payment and Closing costs.

Down payment less than 3% of Sales Price Gifts are allowed Seller can credit up to 6% of sales price towards closing and prepaid costs. 100% Financing available No reserves required. FHA regulated closing costs.

Easier Credit Qualifying Guidelines such as:

  No minimum FICO score or credit score requirements. FHA will allow a home purchase 2 year after a Bankruptcy. FHA will allow a home purchase 3 years after a Foreclosure.

http://www.fhamortgagefhaloan.com/

 When reviewing the FHA mortgage applicants  credit and credit report, the FHA mortgage lender must pay particular attention to the following:

The lender must determine the borrower’s payment history of housing obligations through either the credit report, verification of rent directly from the landlord (with no identity-of-interest with the borrower) or verification of mortgage directly from the mortgage servicer, or through canceled checks covering the most recent 12-month period. The FHA mortgage applicant must explain in writing all inquiries shown on the credit report in the last 90 days. The borrower must explain in writing all collections and judgments. Extenuating circumstances include serious illness or death of a wage earner, but do not include the inability to sell the house because of a job transfer or relocation to another area. Additionally, the FHA mortgage lender must document that the FHA mortgage applicants  current situation indicates that the events that led to the bankruptcy are not likely to recur.

 Past Chapter 13 bankruptcy does not disqualify a FHA mortgage applicant from obtaining an FHA-insured mortgage provided the FHA mortgage lender documents that one year of the payout period under the bankruptcy has elapsed and the borrower’s payment performance has been satisfactory (i.e., all required payments made on time).  In addition, the borrower must receive permission from the court to enter into the mortgage transaction. 

 

 

 

 



By: FHA home loan Lender

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Filed under: Mortgage Direct

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