FHA Mortgage Lenders Credit Qualifying
In addition to your ability to pay for the FHA mortgage as indicated by your FHA debt to income ratios FHA Mortgage Lenders will look at your ability and willingness to repay an FHA mortgage loan as indicated by your credit report. Your willingness will be judged by your credit report as well as your payment history. FHA mortgage lenders know the best prediction of the future is the borrowers past payment history. Generally speaking a borrower is considered to have an acceptable credit history if they can verify timely housing payments or installment debt payments for at least the last 12 months, unless there is major derogatory credit on his/her revolving accounts.
If you are unsure what your credit score is, you will want to apply with FHA Mortgage Lenders right away so you can clearly understand the credit qualifying requirements. To help you understand non traditional means for FHA qualifying we have included information on the following FHA credit qualifying topics;
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 more than 30 days late on the monthly payments the lender will mark your credit report.
FHA mortgage lenders do not know why you are late, they just know that you broke the commitment on the agreed upon repayment.
This is why your credit is very important in qualifying for a FHA mortgage loan. Although you are not required have perfect credit, FHA will allow for minor credit issues, as long as there is a “reasonable” reason as to why you were late.
FHA mortgage lenders will look mostly at the most recent (2) two years payment history. If there are some late payments, you may be able to overcome them with a good letter of explanation and supporting documents of why you were late on the bills. Following is some the the reasons FHA will accept:
- Lost of Job
- Job Transfer
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 an FHA mortgage lender 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:
- 12 =months with a Chapter 13 Bankruptcy or 2 years after a chapter 7 Bankruptcy.
- 3 =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 “Judgement” or “Tax Lien” on your credit report that is in a repayment plan, 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.