Update On 2016 FHA Guidelines On Under 620 Credit Scores

New 2016 FHA Guidelines On Under 620 Credit Scores

2016 FHA Guidelines On Under 620 Credit Scores mortgage loan borrowers still remain the same with regards to debt to income ratios and compensating factors . FHA has minimum credit score requirements. FHA minimum credit score requirement to qualify for a 3.5% down payment home purchase FHA Loan is 580 FICO credit scores. Home Buyers who have credit scores between 500 FICO credit scores and 579 FICO credit scores can qualify for a FHA home purchase loan, however, a minimum of 10% down payment is required for all FHA mortgage loan borrowers who have credit scores of under 580 FICO . Not too many FHA mortgage lenders will accept mortgage loan borrowers with credit scores under 620 FICO even though FHA credit score requirements to qualify for a 3.5% down payment home purchase mortgage loan is 580 FICO. Reason most mortgage lenders do not want to approve mortgage loan borrowers under 620 FICO credit scores is due to their mortgage lender overlays . Mortgage lender overlays are mortgage lending requirements that are above and beyond the federal HUD minimum lending guidelines that every mortgage lender is allowed to do. It is not illegal or discriminatory for a bank or mortgage company to refuse to follow the minimum FHA lending guidelines and can decide in tougher lending standards. If you meet FHA Guidelines but are told that you do not qualify with the bank or mortgage company you visited, then contact me at 262-716-8151 or email me at gcho@gustancho.com. We are FHA Lenders With No Lender Overlays and only go by the minimum FHA mortgage lending guidelines and have no investor overlays on FHA Loans.

2016 FHA Guidelines On Under 620 Credit Scores: Debt To Income Ratio Requirements

2016 FHA Guidelines On Under 620 Credit Scores borrowers have a lower debt to income ratio cap than borrowers with credit scores of 620 FICO and higher. If your credit scores are at least 620 FICO and higher, the maximum debt to income ratios allowed on FHA Loans is 56.9% DTI. With credit scores under 620 FICO, then the debt to income ratios are reduced to 43% DTI. Debt to income ratios is when you take a total of all of the monthly minimum expenses of the mortgage loan borrower, including the proposed P.I.T.I ( Principal, Interest, Taxes, Insurance ) and divide that by the borrowers gross monthly income. If you have higher debt to income ratios and your credit scores falls below 620 FICO, then contact us at Gustan Cho Associates where we can help you get your credit scores to over 620 FICO so the debt to income ratio caps increases to 56.9% DTI. There are various quick fixes in boosting up your credit scores. Some quick fixes in boosting your credit scores are getting secured credit cards, paying down your credit card balances, and adding yourself on to another person’s credit card as an authorized user.

2016 FHA Guidelines On Under 620 Credit Scores: Verification Of Rent

One big hurdle that FHA mortgage loan borrowers with credit scores under 620 FICO is that the Automated Underwriting System may require verification of rent . Verification Of Rent can only be used by mortgage lenders if the renter can provide 12 months canceled checks and/or 12 months bank statements where it shows that the rental payments have been transferred from the renter’s bank account to the landlord’s bank account. You cannot be late on any rent payments in the past 12 months and you also need to have the landlord sign a verification of rent letter that is provided by the mortgage lender. Those who have been living rent free with family members may have issues if the Automated Underwriting System requires verification of rent.

2016 FHA Guidelines On Under 620 Credit Scores: Payment History

It is alright for a FHA mortgage loan borrower to have had prior bad credit, however, FHA mortgage lenders want to see that the borrower has re-established credit and want to see perfect payment history in the past 12 months. If you have credit scores under 620 FICO but had multiple late payment history in the past 12 months, this can be a problem and you may need to wait until you have made all of your payments timely for at least 12 months. One or two late payments will not be a deal killer, however, it will be looked at.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

Comments are closed.