Basic FHA Loan Requirements
Two Years of steady employment, preferably with the same employer.
Provide 1040’s & W-2’s showing last 2 years of income. Income should be the same or increasing.
Every persons credit report differs from other and as such requires individual attention. In general, the less late payments in the last 12 moths the better. FHA allows for credit scores as low as 500 with 10% down and no more than three 30 day lates in the last 12 months. At a 580 credit score it jumps down to a 3.5% down payment and more lenuency in regards to late payments
They must be at least two years old, with perfect credit since discharge. Except if you qualify for the ‘back to work’ program in which your Bankruptcy can be less than two years.
It must be at least three years old, with perfect credit since. Except if you qualify for the ‘back to work’ program in which your foreclosure can be less than three years.
As quoted directly by FHA: “FHA requires judgments to be paid off before the mortgage loan is eligible for FHA insurance. An exception to the payoff of a court ordered judgment may be made if the borrower has an agreement with the creditor to make regular and timely payments. The borrower must provide a copy of the agreement and evidence that payments were made on time in accordance with the agreement and a minimum of three months of scheduled payments have been made prior to credit approval. Borrowers are not allowed to prepay scheduled payments in order to meet the required minimum of three months of payments. Furthermore, lenders are instructed to include the payment amount in the agreement in the calculation of the borrower’s debt-to-income ratio.” as per 4155.14C.2e HUD
Capacity analysis includes any of the following actions:
1. AT the time of or prior to closing, payment in full of the collection account (verification of acceptable source of funds required).
2. The borrower makes payment arrangements with the creditor. If the borrower has entered into a payment arrangement with the creditor, a creditor report or letter from the creditor verifying the monthly Payment is required. The monthly payment must be included in the Borrower’s debt-to-income ratio.
3. IF evidence of a payment arrangement is not available, the lender must calculate the monthly payment using 5% of the outstanding balance of each collection, and include the monthly payment in the borrower’s debt-to-income ratio.” as per 4155.1.4C.2e HUD
All Medical collections and charge off accounts
are excluded from this guidance and do not require resolutions.
As quoted directly by FHA:
“FHA does not require collection accounts to be paid off as a condition of mortgage approval. However, FHA does recognize that collection efforts by the creditor for unpaid collections could affect the borrower’s ability to repay the mortgage. To mitigate this risk, FHA is requiring a capacity analysis of collection accounts with an aggregate balance equal to or greater than $2,000, as described below, If the total outstanding balance of all collection accounts for all borrowers is equal to or greater than $2000, the lender must perform a capacity analysis as detailed below.
Have any Questions?
These are some of the most basic of FHA loan requirements for qualifying for an FHA loan. If you have any questions or would like discuss your particular situation, please let us know when to contact you below.
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