FHA Loans

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Can anyone help me understand FHA insured mortgages? After reading here and some other sites, I thought I had a good understanding of what they were about and how they operated. I was under the impression they were not score dependant. But a broker told me yesterday that everyone they uses requires a 585 to be approved, and that you can have no old open outstanding credit issues.

Guest 0.10 Dollars($)

It is true that FHA loans are not score dependent. But no lender will offer such loans to those having below 550 score.

Caron · Posted: Mon Mar 17, 2008 2:28 am Post subject: RE: qualify for FHA loans

Hi gabe,

Welcome to our forums.

I agree with Mac_7. Lenders approved by the FHA will not offer the loan just for your credit score but they do require you to have a moderate score of 550 and above. This is because lenders need some criteria to check your creditworthiness. After all, they are to do busines, so they just can't give away loans to anyone having a very poor score of 450s and the like.

To know, how to qualify for FHA, please check out the discussions on:

1. FHA loan and late payments
2. Requirements for FHA loan

Good luck

executivemortgageadvisor · Joined: 16 Mar 2008 Posts: 18 10.34 Dollars($)

FHA does not require credit scoring, however the final approval is investor specific. As outlined in Mortgagee Letter 99-15, HUD will use its regulatory authority to terminate mortgagees authorization to originate single family loans in geographic areas where mortgagees have excessive rates of early defaults and claims.

HUD/FHA will continue to systematically review the rate of defaults (loans 90 or more days delinquent) and claims on all FHA loans every three months, and analyze the performance of every participating mortgagee branch in each geographic area served by a HUD office.

If a mortgagee's rate of default and claims on mortgages originated within the preceding 24 months exceeds 200 percent of the default and claim rate within the geographic area served by a HUD field office, and also exceeds the national default and claim rate, HUD will terminate that branches authorization to originate FHA loans.

You can get a loan with a FHA loan with a score down to 539 with compensating factors, no lates in 12 months, if bankruptcies 24 months outside of a chapter 7, 12 months from a Chapter 13 with trustee approval, strong ability to repay.

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Guest 0.10 Dollars($)

Is that middle credit score or all credit scores above 550?

executivemortgageadvisor · Joined: 16 Mar 2008 Posts: 18 10.34 Dollars($)

That would be the middle of the 3 (example: 450-539-555) or the lowest of two (example: 555-539)

banker0679 · Posted: Tue Mar 18, 2008 9:06 am Post subject:

brokers may find a lender that can go lower than 400. Although, the rate rates are not subject to credit scores, these lenders will have much higher rates than normal.

It's also good to know an FHA lender that performs 'manual underwrite'.
If your loan is declined by the 'automated underwriting system', then these lenders can find compensating factors to approved you. If they dont peform manual underwrites, then your loan will be decline.

executivemortgageadvisor · Joined: 16 Mar 2008 Posts: 18 10.34 Dollars($)

That is absolutely correct, if your loan calls for a manual underwrite because you have not received a Automated Approval then your loan will be declined.

banker0679 · Posted: Tue Mar 18, 2008 9:25 am Post subject:

also, if your file requires a manual underwrite, then you maybe charged a price hit by most lenders. Normal hits are around 0.5-1% in discount points. You can pay for this directly as closing or can be included in your rate.

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