How to Qualify for a FHA Loan

How to Qualify for a FHA Loan

1. The mortgage industry has changed dramatically in the last few years. In the old days obtaining an FHA loan was easy. Well, obtaining an FHA loan today is still easy.

The first thing you should do to qualify for an FHA loan is have your mortgage application submitted to Fannie Mae Desktop Underwriter or Freddie Mac Loan Prospector. These are the two underwriting decision engines that approve FHA loans.

If your loan is submitted to Fannie Mae an Approve/Eligible means your loan has been approved and if your loan is submitted to Freddie Mac an Accept means your loan has been approved. 

Since most FHA loans are sold in the secondary market a Fannie Mae or Freddie Mac approval will be needed. Once your application has been submitted to Fannie or Freddie a loan findings will be generated. Your loan findings will stipulate item per item that are needed to close your loan.           

Most lenders require a minimum credit score of 640 for a FHA loan.

A minimum credit score of 580 is needed for a 3.50% down payment.

FHA allows credit scores below 580 but it requires a larger down payment.

2. The mortgage process is very simple. Mortgage loans are submitted electronically to Fannie Mae or Freddie Mac. An Approved Eligible or Accept decision means your application is approved and eligible for sale to Fannie or Freddie.

All FHA loans should be submitted to Fannie or Freddie. Many times a loan officer will pull credit and the loan officer makes the decision that you do not qualify for a loan. The loan officer is not the decision maker - Fannie and Freddie are.

FHA does not have a minimum trade line requirement but most lenders do.

3. A minimum credit score of 580 is required to be approved for a traditional FHA loan. FHA will allow a 3.5% down payment that can be a gift from a family member and up to a 6% seller's concession.

FHA allows a home buyer with credit scores of 580 to put a 3.5% down payment when buying a home. The down payment funds must be the borrower's own funds and no seller's concession.

If your credit score is below 580 then a 10% down payment will be required and no seller's concession.

4. Generally, a borrower who has made timely payments for the last 12 months serves as a guide and demonstrates their willingness to repay future credit obligations. New FHA Policy changes require minimum FICO score to be 580 for a 97.5% loan-to-value refinance or a 85% loan-to-value cash out refinance. These FICO requirements went into effect in the spring 2010. However, most individual lenders will still require credit scores higher than 640.

A perfect credit score is not needed for an FHA loan approval. In fact, even if you have had credit problems, such as a bankruptcy, it's easier for you to qualify for an FHA loan than a for a conventional loan. Sometimes scores down to 530 are accepted if there are compensating factors that offset the credit risk.

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KEYWORDS:How to Qualify for a FHA Loan, FHA Loan Florida, FHA Loan New York, FHA Loan New Jersey,

Minimum Credit Score to buy a house or refinance

* 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%

FHA Credit Score

Requires a minimum credit score of 500 to buy a home or refinance

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Collection accounts

A collection is minor in nature usually does not need to be paid off as a condition for loan approval


Chapter 7 Bankruptcy at least two years must have elapsed since the discharge date


Foreclosure must have been resolved for at least 3 years

Government loan: Seasoning is determined by the date the claim was paid

Loans other than Government: Seasoning is determined by the date of sale the lender sold the property

Short Sale

FHA guidelines requires three year past from the date of sale of the property

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