If you are a borrower and you are seeking an FHA loan, you need to be aware of the 2016 FHA Credit Guidelines. The 2016 FHA Credit Guidelines are a lot more lenient than Fannie Mae and Freddie Mac guidelines for the sake of conventional loans. The first misconception people have is just because they have the minimum FICO score required that they are assured a loan, but they still are not. Your credit score is just a piece of the overall puzzle needed by underwriters to approve your loan. The 2016 FHA Credit Guidelines take into account credit scores, credit history, collection accounts, payment history, bankruptcies, foreclosures, short-sales, deed-in-lieu foreclosures, tax liens, late payments, and judgements. The 2016 FHA Credit Guidelines allow for a credit score as low as 580 to get approved for a loan, but all other areas need to be researched before the loan will be approved. If you have bad credit and have had prior credit issues, you should consult a mortgage professional who doesn’t work with lender overlays like myself. Lender overlays are additional requirements by lenders so that borrowers fit properly into their risk portfolio before funding a loan.
Don’t fear if you are a borrower with a previous bankruptcy or foreclosure. The 2016 FHA Credit Guidelines can assist borrowers like you in obtaining a loan even with the negative credit history given you adhere to the guidelines. 2016 FHA Credit Guidelines requires a 2 year waiting period after a Chapter 7 Bankruptcy discharge date. For Chapter 13 Bankruptcy 2016 FHA Credit Guidelines say that you can qualify for a mortgage the day after the Chapter 13 discharge date. However, the issue is that if you are not 2 years out from your discharge date you will need a manual underwrite and additional manual underwriting guidelines will apply to the loan. During the manual underwriting process, you will need to show 12 months of good payment history if you are renting by means of cancelled checks. 2016 FHA Credit Guidelines also state that there needs to be a 3 year waiting period after the recorded date of a foreclosure and/or deed-in-lieu of foreclosure. Finally, there is also a 3 year waiting period after a short-sale if you wish to qualify for an FHA loan.
According to the 2016 FHA Credit Guidelines you can qualify for an FHA loan with as little as a 580 credit score and obtain a 3.5% down-payment home. The caveat here is that any score under 620 will require a debt-to-income (DTI) cap of 43%. However, if your FICO score is only 40 points higher at 620, you can then have a debt-to-income ratio of 56.9%. If you are looking for an FHA loan and your FICO score is 580-619 we have resources to help you increase your credit score and we can get you over 620 where the 2016 FHA Credit Guidelines are more lenient.
2016 FHA Credit Guidelines allows for borrowers to qualify for FHA loans with unpaid collection accounts without having to pay them off. You first need to determine if they are medical or non-medical expenses as they are treated differently. Per FHA guidelines medical collection and charge-off accounts are exempt from your debt-to-income ratio. However, non-medical expenses are treated different in the sense that if there is more than $2,000 owed, 5% of the amount is calculated in your monthly DTI ratio. In terms of Credit Disputes you cannot have any credit disputes on non-medical accounts. However, on medical accounts you can have credit disputes no matter how large the bill may be.
In conclusion, you need to have a professional in your corner when dealing with the 2016 FHA Credit Guidelines. Feel free to reach me anytime at firstname.lastname@example.org, www.loanconsultants.org, or 888-900-1020. With a experienced loan officer behind you, I can get you the loan you deserve WITHOUT any lender overlays. I can make the loan to the minimum guidelines, plain and simple.