FHA World - How many trade lines does FHA require?
Trade Lines Require. FHA does not have any trade line requirements. Getting a loan approved with Fannie Mae requires a loan to be submitted to Desktop Underwriter or DU. DU does not have a trade line requirement but does have a credit score requirement. This means that DU will approve a borrower with a credit score even if the borrower does not have any open trade lines.
With a credit score of 580 few lenders will allow you to buy a home with only 3.5% down payment. And if you wanted to refinance again few lenders will let you refinance up to 96.5% of the value of your home.
Today, most lenders do have trade line requirements and most lenders require a 640 credit score. This means that a lender may require one, two, three or four trade lines to do your loan along with a 640 credit score.
The first thing you should do to be approved for an FHA loan is have your application submitted to Fannie Mae (DU) or Freddie Mac (LP). These are the underwriting decision engines that approve FHA loans and remember FHA does not have any trade lines requirements.
If your loan is submitted to Fannie Mae an Approve/Eligible means your loan has been approved and is eligible for sale to Fannie Mae. If your loan is submitted to Freddie Mac an Accept means your loan has been approved and Freddie Mac will buy the loan.
Since most FHA loans are sold in the secondary market a DU or LP 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 what items are needed to close your loan.
Most lenders require a minimum credit score of 640 to qualify for a FHA loan.
A minimum credit score of 580 is needed to qualify for a 3.50% down payment.
FHA allows credit scores below 580 but it requires a larger down payment of 10%.
It is important to understand that just because one lender will not approve you for an FHA loan that does not mean that another lender will not approve you for an FHA loan.
FHA World - How to qualify for a FHA Loan
The mortgage process is very simple. Mortgage loans are submitted electronically to Fannie Mae or Freddie Mac. An Approved Eligible decision means your application is approved and eligible for sale to Fannie. An Accept means Freddie will accept your loan.
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 make the rules.
Another perfect example is a borrower who only has one trade line and/or one credit score. A loan officer will see this and say sorry you do not qualify for a loan.
FHA does not have a minimum trade line requirement.
Again, just because one lender says you do not qualify does not mean that another lender will not approve you.
FHA World - FHA Credit Score
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 85% loan-to-value cash out refinance. These FICO requirements went into effect in the spring of 2010. However, most individual lenders will still require a credit score 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 500 are accepted if there are compensating factors that offset the credit risk
FHA loan requirements new borrowers with less than a 580 credit score will be required to put down at least 10%
FHA requires a minimum credit score of 500 to buy a home or refinance
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
FHA guidelines requires three year past from the date of sale of the property
What documentation will I need?