CREDIT
An FHA loan applicant should have an established credit history, for a minimum of two years, unless they have just become legal age to purchase property or are coming from college, the military or other schooling. Credit should generally be good, although a single slow rating is not considered reason for loan rejection in most cases. Any poor ratings should be explained in writing or corrected if possible. Other credit references not shown on the credit report can be used if a letter of credit is obtained from that credit source.
An FHA loan applicant should have an established credit history, for a minimum of two years, unless they have just become legal age to purchase property or are coming from college, the military or other schooling. Credit should generally be good, although a single slow rating is not considered reason for loan rejection in most cases. Any poor ratings should be explained in writing or corrected if possible. Other credit references not shown on the credit report can be used if a letter of credit is obtained from that credit source.
EMPLOYMENT
The lender is required to verify two years of satisfactory employment for the loan applicant. If the applicant was in the school or service that time would generally count towards the two years requirement. Long employment histories may offset credit deficiencies or other negative factors.
The lender is required to verify two years of satisfactory employment for the loan applicant. If the applicant was in the school or service that time would generally count towards the two years requirement. Long employment histories may offset credit deficiencies or other negative factors.
BANKRUPTCY OR FORECLOSURES
If the bankruptcy or foreclosure occurred more than 7 years ago and the loan applicant has re-established satisfactory credit, he may be approved for an FHA loan. If the time frame was between 3 and 7 years the applicant would be considered borderline at best. If the bankruptcy or foreclosure occurred within the past 3 years, generally, the applicant would not be considered acceptable for the loan, however, FHA makes exceptions if the bankruptcy or foreclosure was out of the control of the applicant.
If the bankruptcy or foreclosure occurred more than 7 years ago and the loan applicant has re-established satisfactory credit, he may be approved for an FHA loan. If the time frame was between 3 and 7 years the applicant would be considered borderline at best. If the bankruptcy or foreclosure occurred within the past 3 years, generally, the applicant would not be considered acceptable for the loan, however, FHA makes exceptions if the bankruptcy or foreclosure was out of the control of the applicant.
MONTHLY DEBT PAYMENTS
Generally, any monthly obligations that have less than 12 months to payoff would not be counted against the loan applicant. On credit cards or other revolving accounts the minimum payment due each month is what is counted for debt payments. If an obligation has less than 12 months remaining, but is over $100 per month, the underwriter may count the obligation against the buyer.
Generally, any monthly obligations that have less than 12 months to payoff would not be counted against the loan applicant. On credit cards or other revolving accounts the minimum payment due each month is what is counted for debt payments. If an obligation has less than 12 months remaining, but is over $100 per month, the underwriter may count the obligation against the buyer.
CASH REQUIRED
The loan applicant must have enough cash verified to pay the down payment and closing costs. No reserve cash cushion is required, although it would certainly be helpful in approving the loan.
The loan applicant must have enough cash verified to pay the down payment and closing costs. No reserve cash cushion is required, although it would certainly be helpful in approving the loan.
GIFT LETTER
If the loan applicant does not have adequate cash for closing, a gift from relatives or business associates may be allowed. The donor must provide a gift letter stating what the gift is intended for, the amount of the gift, the donor's relationship to the loan applicant and they must state that the money is a gift and does not have to be repaid.
If the loan applicant does not have adequate cash for closing, a gift from relatives or business associates may be allowed. The donor must provide a gift letter stating what the gift is intended for, the amount of the gift, the donor's relationship to the loan applicant and they must state that the money is a gift and does not have to be repaid.
CHILD SUPPORT
Child support income can be used to help the loan applicant qualify for the loan if (1) the child support income can be proved by canceled checks or payment through the courts and (2) the child support has a duration remaining of at least 3 years.
Child support income can be used to help the loan applicant qualify for the loan if (1) the child support income can be proved by canceled checks or payment through the courts and (2) the child support has a duration remaining of at least 3 years.
RENTAL INCOME
Income from rental properties may be used to help the loan applicant qualify if bonafied leases and proof of mortgage payments on the rental properties can be secured. However, FHA underwriters do not generally use 100% of such rental income. This is due to an estimate, which will be made to back out vacancy, maintenance and miscellaneous costs on the rental property. 50% -75% of the net rental income is generally counted as effective income.
Income from rental properties may be used to help the loan applicant qualify if bonafied leases and proof of mortgage payments on the rental properties can be secured. However, FHA underwriters do not generally use 100% of such rental income. This is due to an estimate, which will be made to back out vacancy, maintenance and miscellaneous costs on the rental property. 50% -75% of the net rental income is generally counted as effective income.
CO-BORROWERS
Unrelated parties may buy houses together but all parties should occupy the property if high ratio loans are requested. If relatives are buying property together, only one relative need occupy the property to obtain high ratio loans.
Unrelated parties may buy houses together but all parties should occupy the property if high ratio loans are requested. If relatives are buying property together, only one relative need occupy the property to obtain high ratio loans.
INVESTORS
FHA INVESTOR PROGRAM DISCONTINUED IN 1990.
FHA INVESTOR PROGRAM DISCONTINUED IN 1990.
