FHA Loans and FHA Mortgages

FHA loans are a hot item now when it comes to financing your home, may it be a new purchase or refinancing. The problem that exists is that there seems to be a lot of rumors and misleading information when applying for a FHA mortgage.  More and more lenders are trying to get FHA approved, thinking that its the new wave of subprime lending.  Its not, because FHA / HUD has been around since 1934. What is happening is that there are many inexperienced loan officers out there that dont know how to truly read a credit report. Ill explain.

When it came to a subprime loan, you generally looked at two major things. Your middle credit score and how much money you were putting down or how much equity that you had in your house. There would be a matrix and depending on where the two lined up on this matrix, is what you would qualify for in rate. In regards to FHA loans, it is not the same. Yes, some lenders can go down to a 500 credit score on FHA mortgages, but there are still general guidelines that apply.

FHA loans need a special touch and a keen eye when reviewing credit. Yes, it can be up to the underwriter to overirde certain guidelines, because HUD allows this to happen with an open door to home ownership. And you can still have decent credit or actually FHA worthy credit and still have a 500 credit score. But sometimes this reuires 10% down or 6 months in reserves. This is what we call compensating factors. We also need better than average credit explanations and documentation depending on the serverity of your lates on your credit. FHAs golden rule is usually wanting a clean history in the last 12 months. But as mentioned, depending on the circumstances, proof, explanation, and compensating factors, I can usually still get an approval. But there is a problem with this.. read on.

As I mentioned, you have many loan officers out there that just want to get a deal through the door. So many make promises upfront that wont hold true by settlement. In several cases, some clients never go to settlement and the lender makes excuses. The reasons for not closing dont usually happen or are known last minute. If they do, seek advice from a mortgage professional that understands how FHA mortgages work.

Summary :  Many lenders cant even go below a 580 credit score now. At Infinity Home Mortgage Company, I still have the ability to go down to a 500 credit score. I dont want to sit here and talk negative about the industry, but if you have an uneasy feeling about what your loan officer is telling you, that your settlement date has changed, that they changed your rate or raised your fees, call a few more lenders to get more advice. Each client is different from each other. And not every lender can approve someone that might be approved by another lender. It starts with an experienced, yet creative and honest loan officer. If you feel your questions dont get answered in a timely manner or that you get the run around, why stick it out with that loan officer. Again, there are many Red Flags out there and you as the client, needs to be aware of them. Dont let it come down to the last minute. I closed 3 loans in the last 41 days that all 3 consumers were told that they were approved by their other lender. All 3 failed to make the settlement date for one reason or another. All 3 borrowers found me on the internet and I was able to close all 3 of them. This is not about me, but to explain to you that if you dont feel uncomfortable, to call at least 2 more lenders in hopes of getting some answers. Overall, I want to educate the client and not just with a bunch of promises. Knowledge can be powerful and many loan officers are afraid if you are armed with it, that you might shop them easier.  Never hesitate to ask questions¦.

To understand more about credit, please read :   FHA Credit Understanding what works

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