FHA home loans technically do not have minimum credit score requirements, but every lender now has "overlays" to the guidelines which impose a minimum credit score standard.
The general rule is that you will need a 620 credit score or higher (middle score of three credit bureaus) in order to qualify, and many lenders have standards that are even higher. On the other side of the fence, there are a few lenders who will still take credit scores below 620, but your qualifying factors must be very strong to overcome the low credit score.
Even though you may qualify with a credit score in the low-600's, expect to pay a higher rate, as lenders who accept lower scores will charge a higher rate to compensate for the risk they are assuming.
In addition to credit score requirements, the following general guidelines must be met in order to qualify for an FHA mortgage:
- At least 4 open and active accounts being reported on your credit. There are lenders who will take "alternative" credit lines such as utility bills, and some still don't require any credit lines. But again, expect to pay higher rates because these lenders are also taking on more risk.
- Bankruptcy: A chapter 7 bankruptcy must be discharged for at least 2 years. A chapter 13 bankruptcy must be 2 years from the filing date to qualify, and it must be discharged at the time of application. You must have a clean pay history on all accounts since the bankruptcy.
- Foreclosure: A foreclosure must be at least 3 years old in order to qualify. A home that was included in a bankruptcy is considered a foreclosure.
- Tax liens: State tax liens are acceptable if you have been under a pay plan on the liens for at least 12 months and can document that you have made all of the payments on time. Federal tax liens are unacceptable until satisfied.
- Judgements: Judgements must generally be paid off as a condition of approval.
- Collections: Collections are case-by-case, but generally medical collections or collections > 24 months old do not have to paid off.
- Child Support: Deliquency unacceptable.
- Late/slow pays: Most lenders will require a 12 month clean pay history on all accounts. Some will be looking for 24 months clean.
- Mortgage Late Payments: Generally not acceptable to have any mortgage late payments over the past 24 months, 12 months for a refinance, but some programs will allow for one 30 day late payment.
If you have more FHA question or are wondering if you qualify, please fill out our quick quote form and one of our FHA home loan experts will be in touch today!
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