2022 FHA Credit Guidelines | Guide For FHA Loan Approval

In this article, we will discuss and cover the 2022 FHA credit guidelines on how to get qualified for an FHA loan for 2022.  This will include how to get an approve/eligible per automated underwriting system and what credit guidelines are required on manual underwriting. we will cover the newest updates on recent late payments in the last 12 months. Homebuyers seeking to qualify for FHA loans need to meet FHA Credit Guidelines. FHA Credit Guidelines are much more lenient than Fannie Mae and Freddie Mac Guidelines on Conventional Loans. Just meeting the minimum credit scores required by FHA does not mean borrowers meet FHA Credit Guidelines.

2022 FHA Credit Guidelines on Timely Payments on AUS versus Manual Underwriting

Lower credit scores are better than having recent late payments in the past 12 months. It is alright for your to have derogatory credit tradelines with unpaid balances. However, lenders want to see timely payments in the past 12 months. You can get an approve/eligible per AUS with late payments in the past 12 months. Manual underwriting wants 24 months of timely payments. There are many factors involved in meeting the overall FHA Credit Guidelines with regard to the following:

  • credit
  • credit scores
  • credit disputes
  • credit payment history
  • outstanding collection accounts
  • charge off accounts
  • judgments
  • bankruptcies
  • foreclosures
  • deed in lieu of foreclosures
  • short sales
  • tax liens
  • late payments
  • mortgage late payments
  • late payments after bankruptcy

In this article, we will discuss and cover FHA Credit Guidelines with recent late payments to be eligible for an FHA loan.

FHA Credit Guidelines on Late Payments Versus Lender’s Own Requirements

Homebuyers with prior bad credit and low credit scores can still qualify for FHA loans. However, they must meet FHA Credit Guidelines. Home Buyers with bad credit also need to meet the mortgage lender’s overlays. Lender overlays are specific additional lending guidelines that a mortgage lender imposes in addition to the minimum FHA Credit Guidelines.

Not Every Lender Has The Same FHA Loan Requirements

Just because you meet FHA Credit Guidelines does not mean you are home free with securing an FHA loan. This is because depending on which lender borrowers go to, they may have additional mortgage lending requirements. Borrowers with bad credit and prior credit issues should consult with a lender who has no overlays, such as Gustan Cho Associates Mortgage. We do not have any mortgage lender overlays. GCA Mortgage Group just goes off the federal minimum lending guidelines on FHA loans, VA loans, USDA loans, and Conventional Loans.

FHA Credit Guidelines on Late Payments After Bankruptcy And Foreclosure

Home Buyers with a prior bankruptcy and/or foreclosure or short sale must meet minimum waiting period requirements to qualify for an FHA loan. FHA requires a minimum 2-year waiting period after a Chapter 7 Bankruptcy discharge date in order for a borrower to be eligible to qualify for an FHA Loan.

2022 FHA Credit Guidelines on Active Chapter 13 Payment Term

2022 FHA Credit Guidelines on Active Chapter 13 Payment Term

Home Buyers who have filed a Chapter 13 Bankruptcy can be eligible to qualify for an FHA Loan one year into the Chapter 13 Bankruptcy repayment period with the approval of the Chapter 13 Bankruptcy Trustee. 12 months of on-time payments need to be provided and no late payments are allowed in order to qualify for an FHA Loan. Homebuyers who had a Chapter 13 Bankruptcy discharge can qualify the day after the Chapter 13 Bankruptcy discharged date.

FHA Credit Guidelines After Chapter 13 Discharge in 2022

There is no waiting period after the Chapter 13 Bankruptcy discharged date. Any FHA mortgage loan applications after Chapter 13 Bankruptcy that has not been two years after the discharge date are all manual underwriting. HUD manual underwriting guidelines apply. FHA Credit Guidelines on manual underwrites requires verification of rent.

2022 FHA Credit Guidelines For Manual Underwriting

VOR is only valid if the renter can provide 12 months of canceled checks that the renter has paid to the landlord. If the renter is renting their home or apartment from a registered property management company, then a VOR form provided by the lender and completed by the property management company property manager can be used in lieu of canceled checks. There is a three-year waiting period to qualify for an FHA Loan after the recorded date of a foreclosure and/or deed in lieu of foreclosure. There is a three-year waiting period after a short sale to qualify for an FHA loan.

FHA Credit Guidelines on Credit Scores Required With Recent Late Payments

To qualify for a 3.5% down payment home purchase FHA loan, borrowers need at least a 580 FICO credit score. However, if credit scores are below 620 FICO, then the borrower’s debt to income ratios are capped at 43% DTI to get an approve/eligible per AUS. If the borrower has credit scores of 620 or higher, then the debt to income ratio caps are capped at  46.9% front and 56.9% back end for an AUS Approval.

HUD Guidelines On Outstanding Collection Accounts And Charge-Offs

HUD Guidelines On Outstanding Collection Accounts And Charge-Offs

HUD allows borrowers to qualify for FHA loans with outstanding unpaid collection accounts without having to pay them off. FHA classifies collection accounts into three categories:

  1. Medical collections
  2. Charge offs
  3. Non-medical collection accounts

Bad Credit on Collections and Charged-Off Accounts

Medical collection accounts and charge-off accounts are exempt from debt to income ratio calculations. However, non-medical collection accounts with outstanding unpaid collection balances are counted in debt to income calculations. This holds true even though no monthly payments need to be paid. If the borrower has a total of $2,000 or more in the outstanding non-medical collection account balance, then 5% of the unpaid outstanding collection account balance is counted as a monthly expense. It is counted in debt to income ratio calculations as a hypothetical monthly debt.

FHA Credit Guidelines on Credit Disputes

There are strict FHA Credit Guidelines on credit disputes. Borrowers cannot have any credit disputes on charge-off accounts. Borrowers cannot have any credit disputes on non-medical collection accounts with a total aggregate unpaid collection account balance of $1,000 or greater. Borrowers can have credit disputes on medical collection accounts no matter how large the unpaid outstanding medical collection account balance is.

Exempt From Credit Disputes During Mortgage Process

Borrowers are allowed to have credit disputes on non-medical collection accounts if the collection accounts show zero credit balance. Outstanding collections and charged-off accounts do not have to be paid to get FHA mortgage approval. However, late payments in the past 12 months are an issue. Late payments after bankruptcy and/or foreclosure are often referred to as a second offender. However, the team at Gustan Cho Associates are experts in helping borrowers with late payments after bankruptcy and/or housing event.

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