FHA Loans With Low Credit Scores Mortgage Guidelines

This Article Is About FHA Loans With Low Credit Scores Mortgage Guidelines

Over the past few months, Gustan Cho Associates have received numerous phone calls for potential FHA borrowers with lower credit scores. In this blog, we will detail how to obtain an FHA mortgage financing with a low credit score. We will also explain the difference between credit scores below 580 and above 580. We are experts in mortgage, FHA financing and are available to help clients in numerous states.

Benefits Of Qualifying For FHA Loans With Low Credit Scores 

What are the benefits of qualifying for FHA loans with a low credit score

FHA stands for the Federal Housing Administration. FHA has been in charge of helping Americans find low-cost housing since 1934. They are currently overseen by HUD or the U.S. Department of Housing and Urban Development. The current secretary of HUD is Secretary Ben Carson. This government entity offers low-down payment financing options for many Americans. FHA is funded by the mortgage insurance premiums charged on all of their mortgage products. Mortgage insurance is on EVERY FHA mortgage, even if you put down 20%. These mortgage insurance premiums are collected upfront and as a monthly expense. FHA survived the real estate crash of 2008. This time period put the FHA in a vulnerable situation. But they have rebounded and rebuilt and are now in good financial health.

Conventional Loans Versus FHA Loans With Low Credit Scores Mortgage Guidelines

FHA guidelines are more forgiving compared to conventional mortgage guidelines. They have lower credit score requirements, lower down payment requirements, allow for higher debt to income threshold, and have lower Tradeline requirements. FHA loans are easier to get approve/eligible per automated underwriting system for borrowers with less than perfect credit and lower credit scores. FHA mortgages also allow for manual underwriting.

Down Payment Requirements On FHA Home Mortgages

Down payment requirements for FHA mortgage lending. Down payment requirements are very black-and-white for FHA financing. If your credit score is 580 or above, a minimum of 3.5% down payment is required. For credit scores between 500 and 579, a 10% down payment is required. Even a credit score is below 580 may receive what’s called an approved eligible AUS (automated underwriting system). This means the loan does not need to be manually underwritten. If you do not get an automated approval, you may downgrade the file to a manual underwrite. FHA loans with credit scores below 580 still allow for manual underwriting. Please see this blog on AUS for more information.

FHA Loans With Low Credit Scores Mortgage Guidelines And Eligibility Requirements

What are the mortgage guidelines and eligibility requirements

Basic FHA requirements, these requirements will vary based on AUS qualifications. We encourage you to reach out to Mike Gracz on 630-659-7644 to discuss your situation further. In order to prepare to apply for an FHA loan, it is important to know the basic requirements. You will want to save the down payment requirements discussed above PLUS money for closing costs and RESERVES.

FHA Loans With Low Credit Scores Mortgage Guidelines: Importance Of Timely Payments In The Past 12 Months

Credit history: As always, the cleaner credit history the better, but we can help individuals and families with less than perfect credit. Remember, we do not have added LENDER OVERLAYS. The basic rule of thumb is to have at least 12 months of no missed payments OR no non-medical collections. If you have missed payments in the past 12 months, it does not necessarily disqualify you, but there may be added requirements.

How Low Payment Shock Is Considered A Strong Compensating Factor

Rental/housing payment history, housing payments, and other installment loans may be reviewed as far as 24 months (depending on AUS requirements). If you do not have a mortgage or rental payments reporting to the credit bureaus, manual verification can be required. If you pay rent to a professional management company, the lender may compete for verification of rent. If you pay a private landlord we will need to verify on-time payments with canceled checks or bank statements. Some clients may be living rent-free with a family member. In that case, we will simply need a rent-free letter signed and dated by the owner of the residence.

Do I Meet To  Qualify For FHA Loans With Low Credit Scores Mortgage Guidelines

Am I meeting to qualify for FHA loans with low credit scores

If you are interested in obtaining FHA mortgage financing with Gustan Cho Associates, please call Mike Gracz at 630-659-7644. If email is better, please use [email protected] You may discuss any questions you have surrounding the mortgage process and go over your mortgage financing goals. Mike Gracz will pair you with a licensed loan officer in your state or give you advice and steps to follow to qualify for an FHA mortgage in the future. We do not have any lender overlays on our FHA mortgage products. During the COVID-19 coronavirus outbreak, most lenders added more lender overlays to their available mortgages. Gustan Cho Associates have not added any lender overlays.

Qualifying For An FHA Loan With Low Credit Scores With A Lender With No Overlays

Over 75% of our clients have been turned down by their current lender or are not receiving the customer service necessary. We are mortgage experts and are here to help. We are available seven days a week to answer any of your questions. As stated above, we are experts in FHA mortgage financing. In the near future, we hope to see some of our FHA specialty products come back such as FHA CONSTRUCTION LOANS. Please reach out to us today with any questions.

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