Debt To Income Ratio And Credit Scores For FHA Loans In Florida

This BLOG On Debt To Income Ratio And Credit Scores For FHA Loans In Florida Was UPDATED On May 20, 2017

Florida is one of the hardest hit states due to the Great Recession of 2008 and one of the states that real estate values plummeted. However, real estate values in the state of Florida has recovered and the state has one of the hottest housing markets in the United States. Home Buyers need to meet Debt To Income Ratio And Credit Scores For FHA Loans In Florida.

  • FHA Loans are the best loan program in the U.S. for first time home buyers and borrowers with less than perfect credit. The U.S. Housing And Urban Development ( HUD ), the parent of the Federal Housing Administration (FHA), is government agency that promotes home ownership.
  • FHA is not a lender nor does it originate nor fund FHA insured mortgage loans.
  • FHA main function is to insure home loans that meet FHA Guidelines to banks and private lenders who originate and fund FHA Loans in the event borrowers default on their FHA Loans and the loan goes into foreclosure.
  • Debt To Income Ratio And Credit Scores For FHA Loans in Florida are the two most important factors that determine whether or not a FHA home buyer is qualified and pre-approved for FHA Loans in Florida.

What Is A FHA Mortgage Pre-Approval?

Home buyers who are planning on becoming homeowners and are looking for a home need to know if they qualify for FHA Loans and if so, how much loan they qualify for.

  • Two Factors that play a key role on whether or not a home buyer is qualified for a FHA Loan in Florida is Debt To Income Ratio And Credit Scores For FHA Loans.
  • There are many other factors that need to be considered for home buyers to get pre-approved but Debt To Income Ratio and Credit Scores For FHA Loans is the first and most important factor before a borrower can proceed with the pre-approval process. 
  • Before home buyers can enter into a real estate home purchase contract, the sellers and/or sellers real estate agent will want to see that the home buyer is pre-approved.
  • A pre-approved home buyer can enter into a real estate home purchase contract. 
  • The pre-approval stage of the mortgage process is the most important step.
  • The number one reason why there is stress during mortgage process and the reason for last minute mortgage loan denial is due to borrowers not being properly qualified and loan officers issuing pre-approval letters without properly qualifying borrowers.
  • Pre-Approvals, which is a step above pre-qualification, is when a mortgage loan originator thoroughly reviews the mortgage applicants credit scores, overall credit payment history, debts, assets, income,employment, employment and residential history, bank statements, tax returns, W-2s, bankruptcy/foreclosure paperwork, divorce/child support paperwork,  public records, credit tradelines, and other important items on the borrower prior to the issuance of the pre-approval letter.
  • Loan officers should run the borrowers credit and financial profile through the Automated Underwriting System prior to issuance of pre-approval letters.
  • There is no reason why a borrower who has been thoroughly pre-approved for a FHA Loan not to be able to close on their mortgage and go through stress during the mortgage process.

What Are The Minimum Credit Scores Needed To Qualify For FHA Loans In Florida?

Mortgage lenders use the FICO  credit scoring model (Fair Isaac Corporation).

  • FHA borrowers need to meet minimum FICO credit score requirements to qualify for FHA Loans in Florida.
  • Each borrower has three credit scores, one from each of the three major credit bureaus,  which is a numerical indication of a borrower’s credit worthiness at a specific time.
  • Experian, Transunion, and Equifax are the three major credit reporting agencies.
  • The FICO credit scoring system is an intricate sophisticated automated system that takes many factors of the borrower’s credit report into account before giving them a FICO credit score.
  • Mortgage lenders will check borrowers FICO credit score before offering them a mortgage loan.
  • A mortgage is a loan to buy real estate.
  • A FHA Loan is a home loan that is insured by the federal government (FHA) in the event if the borrower were to default on their home loan and the bank lose money.
  • FHA guarantees the bank and/or lender who funded the FHA Loan if they did everything to follow FHA Credit And Income Mortgage Guidelines.

The Three Major Credit Bureaus

There are three major credit reporting agencies.

  • Each of the three credit bureaus has their own unique credit scoring system and hold their own credit records of consumers.
  • Each credit bureau calculates its own credit score, and each credit reporting agency needs to provide consumers with at least one free copy credit report each year on demand by consumers.
  • Credit scores are different – they are based upon your credit report, but not exclusively so.
  • A FICO score is not the same as a credit score. 
  • The three credit agencies are Equifax, Experian and TransUnion.
  • Each credit bureaus calculates its own credit score.
  • Consumers must pay to receive credit scores and it is not included in their free annual credit report.

Consumers who need their credit scores can purchase them through only true myFICO.com. The FICO credit score is used by mortgage lenders to base the qualifying credit scores of borrowers.

Which Credit Scores Due Mortgage Companies Use?

Mortgage lenders will not just look at the qualifying credit scores of mortgage applicants but will also review overall payment history on consumer credit reports.

  • Late payments in the past 12 months is something lenders will pay attention to and many lenders will automatically disqualify borrowers who had any late payments in the past 12 months.
  • The Gustan Cho Team has no overlays on FHA, VA, USDA, and Conventional Loans so borrowers with late payments in the past 12 months can qualify for FHA Loans in Florida as long as they get Approve/Eligible on Automated Underwriting System.

There are three credit scores for every mortgage borrower:

  • Experian
  • Equifax
  • Transunion

Mortgage companies use the middle credit score of borrowers. If there is a co-borrower, then mortgage companies will use the lower of the two borrower’s middle credit score as the qualifying credit score.

  • Consumer credit reports will state the amount of credit the borrower has and the overall payment history.
  • Credit reports will also detail the consumer payment patterns and behavior such as when the consumer opened up a particular credit tradeline, the late payment history, the limit on revolving credit accounts, the balance, credit inquiries, collection accounts, charge off accounts, public records such as bankruptcies and foreclosures, and other credit and financial information of consumers.
  • The type of credit such as revolving debt, installment debt, federal student loans, auto loans, furniture credit, and other details on creditors will be stated on consumer credit reports.

What Are The Minimum Credit Scores For FHA Loans In Florida?

Home buyers can qualify for a 3.5% down payment FHA Loans In Florida if they meet the following FHA Guidelines:

  • The Gustan Cho Team has no overlays on FHA Loans in Florida
  • 580 minimum credit scores for FHA Loans In Florida
  • Borrowers with under 580 FICO and down to 500 FICO credit scores for FHA Loans can qualify in Florida with 10% down payment
  • Two year waiting period after Chapter 7 Bankruptcy discharged date 
  • Home buyers can qualify for FHA Loan one year into a Chapter 13 Bankruptcy Repayment Plan with the approval of the Trustee
  • There is no waiting period to qualify for FHA Loans in Florida after Chapter 13 Bankruptcy discharged date
  • There is a three year waiting period to qualify for Florida FHA Loans after recorded date of foreclosure, deed in lieu of foreclosure, short sale
  • No late payments in past 12 months
  • Outstanding collections and charge off accounts do not have to be paid to qualify for FHA Insured Mortgage Loans in Florida

What Are The Debt To Income Ratio Requirements To Qualify For Florida FHA Loans

FHA mortgage borrowers can qualify for FHA Loans with the following debt to income ratios:

  • To get an approve/eligible per AUS FINDINGS, the maximum front end debt to income ratio cannot exceed 46.9% DTI and the maximum back end debt to income ratios cannot exceed 56.9% DTI for borrowers with at least a 620 FICO credit score
  • Borrowers under 620 FICO, maximum debt to income ratio is capped at 43% DTI to get an approve/eligible per Automated Underwriting System. There is no front end debt to income ratio requirements on under 620 FICO credit scores

Florida home buyers who need to qualify for FHA Loans with a lender with no overlays, contact Gustan Cho at 800-900-8569 or text Gustan on his cell at 262-716-8151 for faster response. Or email us your mortgage inquiries to gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

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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