BLOWNMORTGAGE.COM LENDER HOTLINE: 888-581-5008 An FHA loan is supposed to be one of the best loans for first-time home buyers and more recently, for anyone looking to purchase a home. There are many reasons for its attractiveness including a low down payment requirement and low interest rates. FHA loans do have certain credit report requirements in order to be approved, however, and in some states, a credit report is required for both people in a marriage, regardless if one is a non-borrowing spouse. Typically the credit of the non-borrowing spouse will not be a reason for denial of the loan, but the debts will play a factor in the debt-to-income ratio. What does the Credit Report Need to Say? There are several things that the FHA loans will require on a credit report in order to be approved. Up first is the need to have at least two open trade lines. This can sometimes be difficult for first-time home buyers that have little to no credit history, but it is important in order for the lender to determine whether or not you have a history of paying loans back on time. If there are no trade lines on a borrower’s credit report, sometimes alternate sources can be used, such as a rent history, utility payment history or insurance payment history. Not every lender will accept these alternate sources, as many are requiring a minimum credit score in the wake of the housing crisis, but it is worth finding out if your lender is willing to substitute credit items. What if there is a Bankruptcy? A bankruptcy does not ruin your chances for obtaining an FHA loan, but it could make it a little more difficult. Plan to have a paper trail leading up to the event of the bankruptcy as well as a well written explanation of the situation that put you in that scenario. In addition, you will need to have established a good credit history following the bankruptcy as well as have the credentials to qualify for the loan. Last but not least, you also need to be gainfully employed with a steady income. There are two different types of bankruptcies that you can have experienced and each of them has different rules regarding how soon that you can apply for an FHA loan: Chapter 7 – You must be 2 years out from the discharge of your bankruptcy. This is not the date that you filed the documents, but the date that the judge dismissed all of your debts. Chapter 13 – You must have been making timely payments on your Chapter 13 bankruptcy for a period of 1 year before you can apply for an FHA loan. In addition, the trustee that is overseeing your bankruptcy needs to provide approval of your ability to add the new mortgage into your debt repayment plan. What about Credit Blemishes? Everyone has experienced a credit hiccup at least once in the last few years.

1. FHA Credit Report
Requirements
BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008
BLOWNMORTGAGE.COM

2. An FHA loan is supposed to be one of
the best loans for first-time home
buyers and more recently, for anyone
looking to purchase a home. There are
many reasons for its attractiveness
including a low down payment
requirement and low interest rates.
BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008

3. FHA loans do have certain credit report
requirements in order to be approved,
however, and in some states, a credit report is
required for both people in a marriage,
regardless if one is a non-borrowing spouse.
Typically the credit of the non-borrowing
spouse will not be a reason for denial of the
loan, but the debts will play a factor in the
debt-to-income ratio.
BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008

4. What does the Credit Report Need to Say?
There are several things that the FHA loans will require on a
credit report in order to be approved. Up first is the need to
have at least two open trade lines. This can sometimes be
difficult for first-time home buyers that have little to no credit
history, but it is important in order for the lender to determine
whether or not you have a history of paying loans back on time.
If there are no trade lines on a borrower’s credit report,
sometimes alternate sources can be used, such as a rent
history, utility payment history or insurance payment history.
Not every lender will accept these alternate sources, as many
are requiring a minimum credit score in the wake of the
housing crisis, but it is worth finding out if your lender is willing
to substitute credit items.
BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008

5. What if there is a Bankruptcy?
A bankruptcy does not ruin your chances for
obtaining an FHA loan, but it could make it a little
more difficult. Plan to have a paper trail leading up to
the event of the bankruptcy as well as a well written
explanation of the situation that put you in that
scenario. In addition, you will need to have
established a good credit history following the
bankruptcy as well as have the credentials to qualify
for the loan. Last but not least, you also need to be
gainfully employed with a steady income.
BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008

6. Chapter 7 – You must be 2 years out from the discharge of
your bankruptcy. This is not the date that you filed the
documents, but the date that the judge dismissed all of your
debts.
There are two different types of bankruptcies that you can
have experienced and each of them has different rules
regarding how soon that you can apply for an FHA loan:
Chapter 13 – You must have been making timely payments
on your Chapter 13 bankruptcy for a period of 1 year before
you can apply for an FHA loan. In addition, the trustee that is
overseeing your bankruptcy needs to provide approval of
your ability to add the new mortgage into your debt
repayment plan.
BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008

7. What about Credit Blemishes?
Everyone has experienced a credit hiccup at least
once in the last few years. The FHA has made their
guidelines so that underwriters are looking at the
overall picture of your credit history, not just one
incident of a late payment. If you have a history of
late payments that have not become current within
the last year, it might preclude you from being
approved for an FHA loan, but one or two mishaps
likely will not have a negative impact.
BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008

8. Even minor collection accounts are often
overlooked as long as the rest of the credit history
is in good condition. What is not overlooked,
however, are judgments. Although judgments do
not require an automatic denial, they will be
required to be paid before the loan can close. If
any of your judgments are government related,
such as taxes or student loans, you will not be
eligible for an FHA loan.
BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008

9. FHA loans are easier to qualify for in
comparison to conventional loans,
especially if you have a bit of a blemished
credit history. It is worth talking to your
lender honestly about what your financial
history looks like and what can be done to
get you approved for an FHA loan.
BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008

10. T O L E A R N M O R E
BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008
C L IC K HE R E
BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008

11. Justin McHood is Americas Mortgage
Commentator and has been providing
Mortgage commentary for over 10 years.
INFORMATION PROVIDED BY:
JUSTIN MCHOOD
MORTGAGE COMMENTATOR
Information Originally Published:December 31, 2014 BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008

12. LEARN MORE ABOUT MORTGAGE COMMENTATOR:
MORTGAGECOMMENTATOR.COM
FACEBOOK.COM/MORTGAGECOMMENTATOR
@MORTGAGECOM_
LENDER HOTLINE: 888-581-5008
BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008