FHA Credit Requirements

Talk to lenders that can help you better understand FHA credit guidelines that are more flexible than traditional mortgage lending. FHA has been promoting fair lending since 1934. In most cases, FHA credit guidelines for purchase and refinance loans are more flexible than conventional mortgage loans. Interest rates have fallen to record levels for FHA lenders, so if you have credit problems in the past, maybe it's time to reconsider a government home loan. With a 500 credit score, you are eligible to get approved for refinancing or home financing with FHA. The Federal Housing Administration did implement a minimum credit score on FHA loans, but a 500 fico is easily attainable, even for people with bad credit.

Does FHA Still Offer Bad Credit Loans? Since the subprime mortgage crisis a few years ago, FHA loans have played a major role in the US home financing market. With FHA credit, borrowers with bad credit still have the opportunity to buy a home or refinance their existing mortgage. FHA guidelines have tightened recently, but FHA credit remains more flexible than conventional and non-conforming credit.

FHA Home Loans Ensure Affordable Financing for First Time Home Buyers
Credit Profiles for FHA Loan Guidelines

Are you delinquent on your mortgage? FHA loan modifications are available for borrowers who meet the Obama mortgage relief criteria.

Do you have a bad credit score that has prevented you from qualifying? If you have been late on your personal bills or maybe you had credit issues in the past, there is still opportunity with several FHA loan programs. Clearly good credit scores it makes the refinancing process easier, but FHA does offer second chances in many cases if the borrower can document compensating factors. Making your FHA loan payment on time is essential for FHA streamline refinancing, at least over the last 12 months.

The FHA suggests building a housing payment history for at least 1 year before applying for any FHA home financing. If you are renting make sure your landlord is keeping record of your monthly payments, so when the FHA underwriter requests documentation you won’t be delayed.

Credit Requirements for FHA Home Loans

One aspect of FHA loans that sets them apart from other ways to mortgage a home is that the FHA credit requirements needed to obtain a government loan are not as stringent as what is found with many lending companies. Since the housing downturn, when many people were for foreclosing on their homes, mortgage companies and lenders became more strict with who they were willing to loan money to, and this often meant that prospective home buyers would be required to have extremely high credit scores and be willing to put down a very high down payment on the home of their choosing. This is very attractive to those looking to purchase a house because they are more likely to be approved for their home loan when opting for an FHA loan.

Credit blemishes such as filing for bankruptcy, having a history of late payments, or even a lack of credit history will often cause big problems for those looking to obtain a home loan. However, with an FHA home loan, these bumps in the road do not necessarily mean that a home loan is not achievable. For those with no credit history, the FHA will allow a person to file substitute forms in order to try to achieve affordable home finaancing. If a person has filed for chapter 7 or chapter 13 bankruptcies, they may still be approved for an FHA loan if a certain time period has elapsed since the filing, and the person has been making sufficient payments towards their debts. Even if a person has experienced a previous foreclosure, they may still be able to be approved for an FHA home loan. However, for cases of foreclosure, the event had to have happened more than three years from the time of filing, and the borrower must have established satisfactory credit since the occurrence.

When it comes to the credit requirements, FHA is significantly lower than with other home loans. Often, the down payment and interest rates given with an FHA home loan will directly reflect a person's credit score, and those with higher scores will have lower interest rates and down payment requirements. FHA approved lenders will often look at other factors, rather than strictly referring to credit scores, in determining an applicant's financial status an ability to repay their home loan, allowing those with less than perfect credit scores to get approved for a reasonable home loan.