FHA Credit Requirements To Qualify For FHA Loans Florida

This BLOG On FHA Credit Requirements To Qualify For FHA Loans Florida Was UPDATED On May 28, 2017

The FHA Credit Requirements To Qualify For FHA Loans Florida are as follows:

  • 580 FICO Credit Scores to qualify for a 3.5% down payment home purchase FHA Loan.
  • Home buyers with credit scores under 580 FICO and down to 500 can qualify for FHA Loans in Florida but need 10% down payment versus 3.5% down payment for borrowers with over 580 credit scores.
  • Just the credit scores are not the only FHA Credit Requirements to qualify for FHA Loans Florida.
  • A borrowers credit profile will be fully reviewed by mortgage underwriters.
  • Past 12 months payment history on credit report will be thoroughly reviewed.
  • Borrowers can have prior bad credit, outstanding collections, charge off accounts, prior bankruptcy, prior short sale, prior deed in lieu of foreclosure, and prior foreclosure and can still qualify for FHA Loans in Florida.
  • However, mortgage lenders want borrowers to have been timely in past 12 months on all of their debts.

Other Credit Requirements Besides Meeting The Minimum Credit Scores

Most mortgage programs have a minimum credit score requirements in order for the borrower to proceed with the mortgage process. However, just meeting the minimum credit score does not mean that borrowers met all the necessary credit requirements to qualify for a mortgage.

  • There are other credit requirements besides meeting the minimum credit scores.
  • One of those requirements that the majority of the mortgage lenders require is no delinquencies in the past 12 months.
  • Borrowers need to meet the HUD Guidelines on DTI for FHA Loans and Fannie Mae and Freddie Mac DTI Guidelines for Conventional Loans.
  • Many lenders have lender overlays on tradelines such as having at least three credit tradelines that has been paid timely for the past twelve months. 
  • How about for those borrowers who do not have three credit tradelines?
  • By tradelines, we mean three creditors such as credit cards, automobile loans, installment loans, and mortgage loans that report to the three major credit reporting agencies: Transunion, Experian, and Equifax.
  • Credit Tradelines are not required by HUD or Fannie Mae/Freddie Mac but is a lender overlay by individual lenders.
  • Borrowers who are asked for minimum credit tradelines by a lender can qualify with lenders with no lender overlays.
  • The Gustan Cho Team does not have any overlays on government and/or Conventional Loan Programs.

Why Are Credit Requirements On Tradelines Different From Lender To Lender?

Credit tradelines are important for any lender because it shows the past payment history of a borrower. Borrowers do not need traditional credit tradelines to qualify for mortgage. Non-Traditional Credit Tradelines can be a substitute for traditional credit tradelines. Traditional credit tradelines are creditors who report the consumer payment history and record to all three credit bureaus: Transunion, Experian, Equifax.

Here are examples of traditional credit tradelines:

  • Mortgage payments
  • Automobile payments
  • Student Loan payments
  • Installment debt
  • Revolving credit debt such as credit cards

Non-Traditional Credit Tradelines are creditors that do not report the borrower’s payment history on consumer credit reports.

Examples of non-traditional credit tradelines are the following:

  • Rent payment
  • Cell phone payments
  • Utilities
  • Insurance payments
  • Any other creditors that do not report on consumer credit reports

To be able to use non-traditional credit tradelines, consumers need to provide 12 months timely payment proof via canceled checks and/or bank statements. Undocumented cash payments does not count even though borrowers may have receipts.

Credit Tradelines

Borrowers  who do not have active credit tradelines who shop for mortgage with lenders that requires three credit tradelines as part of their underwriting credit requirements, they do have a choice with shopping for lenders with no lender overlays.

  • There are lenders like myself where no credit tradelines are required.
  • Credit Tradelines take at least a year of timely payments to the creditor for it to be valid.
  • A consumer cannot justt open up a secured credit card account and use it as a credit tradeline unless that card is seasoned for at least one year.
  • There are many lenders that require credit tradelines to be seasoned for two or more years.
  • Home buyers who are in a hurry to purchase a home but do not have three credit tradelines with a year of seasoning, contact us at 800-900-8569 or text Gustan on his cell at 262-716-8151 for faster response or email us at gcho@gustancho.com.

Other Credit Requirements Needed To Qualify For Mortgage

Whether the plan is to purchase a home right away or in the near future, home buyers with no credit should plan on opening up three to five secured credit cards and start establishing and rebuilding their credit.

  • Potential home buyers who plan on buying a home or not, it is strongly recommended that they establish credit by getting three credit tradelines. 
  • Secured credit cards is the most powerful tool in rebuilding and re-establishing credit.
  • Consumers should get three secured credit cards with at least a $500 credit limit for maximum effect.
  • Any credit limit under $500 limit will have little impact on raising credit scores.
  • Consumers with low credit due to no credit, getting 3 secured credit cards can boost credit scores by more than 100 points in a matter of a few months. 
  • Consumers who get secured credit cards should be able to qualify to get unsecured credit cards after 6 months to a year. 
  • Consumers purchasing a vehicle and have the cash to pay it should still finance it.
  • By financing it, it establishes credit tradelines on installment debt and will create a stronger credit profile.
  • Make sure make all monthly payments on time because one 30 day late payment can plummet credit scores and the late payment history will remain on credit report for seven years.

Reasons Why Borrowers With High Credit Scores Do Not Qualify For Mortgages

Here are the top reasons why borrowers with higher credit scores do not qualify for mortgages:

  • Late payments in past 12 months
  • Late payments after bankruptcy and foreclosure
  • Credit disputes on non-medical collections and charge offs
  • Recent collection and late payments in past 12 months

Borrowers who were told they do not qualify due to not meeting credit requirements, please contact Gustan Cho at 800-900-8569 or text Gustan on his cell at 262-716-8151 or email us at gcho@gustancho.com. Often times, borrowers do not qualify with a particular lender due to that lender overlays and not because they do not meet HUD and/or Fannie/Freddie mortgage guidelines. As long as mortgage applicants can get an approve/eligible per Automated Underwriting System findings, we can get them approved and closed on their home loan. We have no lender overlays on government and conventional loans.

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.

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