FHA loan requirements
march 1, 2015
Thinking of buying a home and want to know FHA loan requirements?
Mortgage World Home Loans of New Jersey is a licensed residential mortgage broker licensed in the state of Florida and will match you with the lender that will approve your FHA loan down to a 500 credit score.
The FHA program has been in place since the 1930s to help stimulate the housing market by making loans accessible and affordable. Traditionally, FHA loans have helped military families who return from war, the elderly, handicapped, or lower-income families, but really, anyone can get an FHA loan – they are not just for first-time home buyers.
After the financial crisis of 2008 all the major banks raised their credit standards for approving FHA loans. Because the banks make the rules for loans they will approve, they may require a minimum credit score of 640 for their loans. These guidelines are the bank's guidelines. What this means is, all the major banks including Wells Fargo, Bank of America, Chase, Citigroup, etc. banks make the rules for loans they will approve.
When you apply for an FHA mortgage at a major bank and they tell you their minimum credit score requirement is 640. This does not mean that it's FHA's minimum credit score requirement. It means that they are the bank's credit score requirements.
Mortgage World Home Loans of New Jersey is an online mortgage company specializing in FHA loans for first time home buyers and home owners that want to refinance.
FHA after bankruptcy FHA after foreclosure FHA after short sale
New FHA loan requirements 2015
Credit score - FHA announced a new policy to address risk. FHA has changed the minimum credit score for new borrowers:
- FHA requirements new borrowers will now be required to have a
minimum credit score of 580 to qualify for 3.5% down payment
- FHA loan requirements new borrowers with less than a 580 credit score will be required to put down at least 10%
- This has allowed the FHA to better balance its risk and continue to provide financing for home buyers
FHA Back to Work Program - New borrowers may also be eligible for an FHA insured loan on a purchase transaction after 12 months from the completion, discharge, trustee's sale if the borrower meets the requirements for extenuating circumstances Economic Event.
Borrowers with a prior bankruptcy, foreclosure, deed-in-lieu, or short sale may be eligible for an FHA insured loan if the bankruptcy, foreclosure, deed-in-lieu, short sale was the result of a documented extenuating circumstance.
Collection accounts - New the FHA does not require collection accounts to be paid off as a condition of mortgage approval. However, FHA does recognize that collection efforts by the creditor for unpaid collections could affect the borrower’s ability to repay the mortgage.
- If evidence of a payment arrangement is not available, the lender must calculate the monthly payment using 5% of the outstanding balance of each collection, and include the monthly payment in the borrower’s debt-to-income ratio.
Debt-to-income ratio - FHA loan requirements include a maximum debt to income ratio. When a borrower applies for an FHA mortgage, they are required to disclose all debts, open lines of credit, and all possible approved sources of regular income. Using this data, the lender and FHA can calculate the borrower's debt-to-income ratio.
- Most lenders will limit maximum debt-to-income to under 50%
- FHA maximum debt to income ratio is 54.99%
- Manual underwriting maximum debt to income ratio is 43%
Are you a first time home buyer?
Get pre-approved for an FHA loan online.
FHA loan requirements
Charge off accounts - Collection accounts - Judgments
