Qualifying for a FHA Mortgage Loans

Qualifying for an FHA mortgage is not as easy as it used to be-and it was never that easy! A common misconception is that your credit score is not taken into consideration when qualifying for an FHA loan. That would be true if the FHA was giving you the loan directly, because they do not have a minimum credit score requirement. The problem is that the FHA insures your loan for the lender which presents your loan to them. They provide a type of government insurance which pays the lender if you don't pay your mortgage. And the lenders, oftentimes banks, are not considering your loan for submission to the FHA in today's market if your middle score is below 580, and in most cases, a 620. This means that, if you look at your tri-merge (all three credit bureaus) credit report and throw out your low and high score, you are defined by your middle score (the one left).

One thing the FHA does consider, regardless of your credit scores, is your payment history for the last twenty-four months. They do not want to see any collections or late payments during that time period. If you have collections and/or late payments, you must write a letter of explanation regarding the circumstances which led to each one. And none of today's lenders want to see any judgments or liens on your credit, so these must be settled in advance of applying for the loan.

Other factors to consider are bankruptcy and foreclosure. If you had a Chapter 7 bankruptcy discharged more than twenty-four months ago, or successfully completed a Chapter 13 with satisfactory payment history, you are still eligible for an FHA mortgage loan . However, if you have had a deed in lieu of foreclosure or foreclosure within the last thirty-six months (they use the date of the actual auction, not your eviction date) you would be ineligible for an FHA loan.

Now that we've covered all of the negatives, let's consider the positives. Do you have at least two months of mortgage payments in a bank account (not cash in the sofa cushion, they want to see it documented)? Do you have two years of employment in the same line of work (not necessarily the same employer), or two years of social security income? Do you have at least 3.%% of the home's purchase price available for down payment? Great! You're well on your way to an FHA mortgage.