Revised FHA Total Scorecard Underwriting Guidelines

This guide is about the FHA Total Scorecard and how it works.  The United States Department of Housing and Urban Development (HUD)  also known as HUD uses the FHA TOTAL Scorecard. This tool helps mortgage underwriters evaluate borrowers credit and income to decide if they can get an FHA loan. To qualify for an FHA loan borrowers must meet the guidelines set by HUD 4000.1 in the FHA Handbook.

FHA loans are very popular among people buying a home for the time those with bad credit and low credit scores and those with a lot of debt compared to their income.

The team at Gustan Cho Associates knows a lot about helping homebuyers with credit scores low as 500 FICO and those with no credit scores. The FHA TOTAL Scorecard works like the automated systems used by Fannie Mae and Freddie Mac. Loan officers can enter borrowers information into the Fannie Mae DU AUS or Freddie Mac LP AUS. The FHA TOTAL Scorecard gives a decision, which is called DU FINDINGS for Fannie Mae and LP FINDINGS, for Freddie Mac. This decision can be an automated approval.

What Is The Automated Underwriting System (AUS)

The Automated Underwriting System is also referred to as AUS. FHA TOTAL Scorecard was implemented and launched by HUD, the parent of the Federal Housing Administration (FHA) to help mortgage underwriters determine the creditworthiness and predictability of borrowers’ future ability to repay their new home loan.

There are two different types of automated underwriting system. The Desktop Underwriter or DU.is the Fannie Mae version of the automated underwriting system.

The Loan Prospector or LP is the Freddie Mac version of the automated underwriting system. The automated underwriting system is a sophisticated computer system that will render an automated decision on the mortgage loan applicant based on the data entered. The automated underwriting system determines the potential default rate of the new FHA loan and will render a recommendation on how it needs to be evaluated. All data of borrowers submitted to FHA TOTAL Scorecard is quickly analyzed with using an automated standardized scoring system.

What are the Three Types of Findings from AUS?

It results in fairness and impartiality and renders a determination that is impartial. The mortgage underwriter normally inputs data including the completed 1003 mortgage application into the FHA TOTAL Scorecard. Within seconds, the system will render a decision of approval or denial on the subject borrower.

The automated underwriting system will render an approve/eligible per AUS within seconds after determining the mortgage loan applicant meet all the agency mortgage guidelines.

The AUS has the latest most updated algorithm on the agency guidelines of HUD, VA, USDA (GINNIE MAE), Fannie Mae, and Freddie Mac. An approve/eligible means the mortgage loan applicant meets all agency guidelines. This system is a real-time automated response. The three types of AUS Findings are approve/eligible, refer/eligible, or refer with caution. Approve/eligible means the automated underwriting system approval, refer/eligible means the AUS is referring the file for a manual underwrite, and refer with caution means an automated underwriting system denial.

How Many Scores Do You Need for FHA?

FHA has developed a credit assessment engine known as the FHA TOTAL Mortgage Scorecard to analyze the creditworthiness of borrowers and to predict the likelihood of default for FHA loans. The FHA TOTAL Scorecard is used with FHA loans that are submitted through the automated underwriting system also referred to as AUS.

What are FHA Guidelines?

The FHA has rules that people must follow to get a Federal Housing Administration loan. The government is behind these loans. These rules make it easier for people to buy a house. They do this by allowing people to put down money and have a lower credit score than they would need for a regular loan. Federal Housing Administration loans are really good for people who are buying a house for the time. They are also good for people who do not have a lot of money saved up.

The FHA guidelines look at a things. They look at how money you put down on a house and your credit score. They also look at how money you owe compared to how much money you make. This is called your debt-to-income ratio.

The debt-to-income ratio is like a report card for how much of your money goes to paying debts. For Federal Housing Administration loans this ratio can be a little higher than it is for loans. It can be as high as 43%. The Federal Housing Administration also wants to make sure the house you are buying is safe and nice. So they have rules for the house too. The Federal Housing Administration guidelines and the extra insurance fees help keep lenders safe. This makes Federal Housing Administration loans an option, for people who want to buy a house but do not have a lot of money.

What is the Purpose of the FHA Total Scorecard for Mortgage Lenders

The FHA Total Scorecard helps mortgage lenders manage workflow while analyzing and expediting the endorsement process. After evaluating borrower’s mortgage credit risk profile, FHA TOTAL Scorecard makes a recommendation of “Accept” or “Refer”.

Homebuyers with outstanding collections, charge-offs, low credit scores, high debt-to-income ratios can get approved for an FHA loan. Having bad credit is fine.

You don’t have to pay outstanding collections and charge-off accounts, can have late payments, have repossessions, and qualify for an FHA loan as long as you have timely payments in the past 12 months. An “Accept” classification means that the FHA will insure the borrower’s loan with reduced documentation. “Refer” means that the lender will be required to manually underwrite the loan. Not all mortgage lenders do manual underwrites on referred findings. 

What Are Compensating Factors on FHA Loans

Compensating factors are required for manually underwritten mortgage loans. Example of compensating factors are the following:

• higher down payment
• second income with at least one-year longevity but not used as qualified income
• reserves
• verification of rent with payment shock of less than 5%

Basics of FHA Total Scorecard and Purpose

One very important matter to understand is lenders cannot decline a loan solely based on an FHA scorecard risk assessment. Human underwriting intervention still needs to take place.

Some of the Things That FHA Scorecard Does Not Do Include the Following:

• Determining Loan-To-Value or Debt-To-Income Ratio
• The Automated Underwriting System calculates and analyzes this
• Deny mortgage loan application
• Full analysis and review subject property to see if it is eligible for financing
• Assessing requirements of the down payment on home purchase down payment

HUD does require that all transactions be scored through TOTAL. FHA Streamline Refinance Mortgage Loans are exempt and so are mortgage borrowers with no credit scores.

Each AUS finding using TOTAL provides mortgage lender with a result of documents. Mortgage Underwriters will receive the result documents from TOTAL. The mortgage underwriter then makes its decision on risk factors 

The last TOTAL score run must be included in the case binder which has been submitted by the Housing and Urban Development (HUD). This is regardless of what the results and evaluations are. It may mean that readings and evaluation may differ from the decision.

What are the Maximum Ratios for FHA Manual Underwrite?

For FHA manual underwriting, the maximum ratios are generally more conservative than standard FHA loans. When we talk about the Housing Ratio, which is also called the Front-End Ratio, people who want to borrow money should try to keep their housing expenses at or below 31 percent to 33 percent of the money they make each month. The Debt-to-Income Ratio also known as the Back-End Ratio is usually 43 percent to 45 percent. This means that the total amount of money people pay for debts each month including the money they pay for housing should not be than 43 percent to 45 percent of the money they make each month. These Housing Ratio and Debt-to-Income Ratio numbers can be a little different depending on the lender and the person who wants to borrow money. They give us a general idea of the limits, for FHA manual underwriting.

Automated Approval Versus Lender Overlays

There are many instances where the Scorecard will render an approve/eligible per Automated Underwriting System, however, a mortgage underwriter will deny a borrower. This is due because every lender/investor can have additional lending guidelines called lender overlays.

HUD Guidelines to Get Automated Underwriting System Approval

Here are Basics of an Approve/Eligible Where Borrowers Fully Qualify and Get an Automated Approval:

• 580 credit scores
• Front-end DTI 46.9%
• Back-end DTI 56.9%
• Outstanding collections and charged-off accounts do not have to be paid
• Gift Funds allowed
• Non-Occupant Co-Borrowers allowed
• Recent late payments in the past 12 months
• Late payments after housing event and/or bankruptcy

All of the above factors are allowed to get an automated approval, and FHA will insure the FHA Loans of the borrower. However, it is up to the mortgage lender to set its own mortgage guidelines. As long as borrowers meet the above guidelines, FHA TOTAL Scorecard can render automated approval. Lenders are allowed to have stricter mortgage guidelines that are above and beyond FHA Guidelines.

Common Lender Overlays Imposed by Lenders

Here are Examples of Lender Overlays That a Particular Lender Can Impose:

• Higher credit scores than the minimum of 580 required by FHA
• Most lenders will require 620 to 640 credit scores
• Many lenders will have overlays on debt-to-income ratios where they may cap it at 45% to 50%
• Lenders can require outstanding collections and charged-off accounts to be paid off
• Non-occupant co-borrowers can be added for borrowers with higher credit scores
• Late payments in the past 12 months may not be allowed
• Late payments after housing event or bankruptcy may not be allowed

Do All Mortgage Lenders Have the Same Requirements?

Not all lenders have the same mortgage lending requirements on the same loan program. All lenders need to meet the minimum agency guidelines of HUD, VA, USDA, Fannie Mae, or Freddie Mac but they can have higher lending requirements called lender overlays. The good news is that not all lenders have the same mortgage lending requirements on FHA loans. Gustan Cho Associates are mortgage brokers licensed in 48 states including Washington DC and Puerto Rico. 

The team at Gustan Cho Associates has a national reputation of being able to originate and approve mortgage loans other lenders cannot do. Over 80% of our clients are borrowers who could not qualify at other mortgage companies.

Gustan Cho Associates has a national reputation for its no overlays on government and conventional loans. We just go off FHA TOTAL Scorecard. If we get an approve/eligible per automated underwriting system, we will close the loan. Not just close the loan but will close it on time. We have zero overlays and just go off FHA TOTAL Scorecard/AUS FINDINGS. To qualify and get pre-approved, please contact us at Gustan Cho Associates at 800-900-8569. Text us for a faster response. Or email us at alex@gustancho.com.

FAQs: Revised FHA Total Scorecard Underwriting Guidelines

FHA loans are really great because they do not need a lot of money down. You can get an FHA loan with a payment of only 3.5% of the purchase price. This makes it easier for people to buy a house. FHA loans can also be available to people with credit scores low as 580. If your credit score is lower than that you might still be able to get an FHA loan if you put money down.

This Guide About the Revised FHA Total Scorecard Underwriting Guidelines Was Updated in June 4, 2026.