If you’re in the Winter Haven, Florida are and have been considering using an FHA home loan to either purchase a home or refinance your existing home, one of your key concerns is most likely how much your credit history comes into play. The answer? Your credit history matters, but in a different way than it might with a conventional home loan.
Rather than looking at a raw score as is the case with conventional mortgages, underwriters who work with FHA loans focus mostly on the quality of your credit history over the last 12 months. Though you’ll have a hard time qualifying for an FHA home loan if your credit score is below 480, FHA underwriters are not really concerned about a few late payments any further out – say 18 to 36 months ago.
This said, you will need to take care of any and all outstanding collections – including those from hospital or other medical facilities before you close your FHA home loan. In truth, you’ll want to get these taken care of before you apply – just to keep things nice and easy.
What matters most to underwriters is that you’ve taken care of any issues that might have existed and that the loan, in relation to your current debt load and ability to pay it off makes sense.
If a Winter Haven home purchase or refinance is in your future, take time to review this short list of things to consider when you’re working to get your credit history in line. If any of them apply to you, take steps now to get them taken care of as soon as possible:
Federal Debt Delinquency or Default:
FHA underwriters take federal debt defaults and delinquencies very seriously, as such:
- Borrowers who are presently delinquent or in default of a Federal debt are not eligible for FHA home loans
- All Federal debts must be satisfied through full repayment or some sort of payment arrangement set forth in writing
Foreclosure and Bankruptcy
Though FHA underwriters understand that foreclosures and bankruptcies occur, they do require set time periods or “seasoning periods” to pass after they take place. These are as follows:
- Bankruptcy = 1 year from discharge date for Chapter 13; 2 years from discharge date for Chapter 7
- Foreclosure = 3 years from foreclosure date
A Note About Non-Traditional Credit
One of the things that many Winter Haven first-time homebuyers come up against is actually not having established enough credit. Luckily, FHA allows for borrowers to use specific “non traditional” credit references to show they are worthy of financing. Borrowers seeking this type of credit history verification can use up to 3 references from 2 FHA-specified groups:
Group 1 – This group includes references such as rental housing payments, utility payments (gas, electric, water). Also included are telephone, and cable TV bills. The reason this group is given first priority is because FHA underwriters consider data from these entities to be the most credible.
Group 2 – This group is given secondary status because the information obtained from these sources is deemed less credible than those from Group 1. Possible references from Group 2 may include: insurance payments, payment to day care, Internet or cell phone service, or 12 months of bank statements showing a steadily increased balance by month 12. Underwriters may also accept a signed individual loan agreement between the borrower and another party.
FHA Rules for Non-Traditional Credit
Borrowers must have at least 1 reference from Group 1, while the remaining 2 may come from either group. Keep in mind that collecting these references is not the only thing to keep in mind. When determining which sources to use, be sure that you stick to the following rules:
- No late payments on rental housing (group1)
- No more than 1- 30 day late on other payments (group1)
- No collection accounts (other than medical) in the last 12 months
Apply for a Florida FHA Home Loan Today
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Kevin Sandridge
The Florida Mortgage Pro
Signature Home Funding
410 Laurel Cove Way
Winter Haven, FL, 33884 |
Mobile: 863-604-3019
Fax: 888-496-0265
kevin.s@sigfunding.com
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