Where to Get Financing - James H. Hill

15 October 2013
Category:
Financing

FHA’s “BACK TO WORK PROGRAM” CREDIT REQUIREMENTS

Those who have had economic hardships still need to meet certain FHA requirements to take part in this program. Borrowers must prove that a major economic event, such as job loss or severe reduction in income was the main reason for them losing their home. They need to show that their income has fully recovered and they have a satisfactory credit score.
To be considered having “satisfactory credit,” borrowers will need to meet the following for at least 12 months:

Traditional borrowers:
•The borrower’s credit history is clear of late housing or installment debt payments, and major derogatory credit issues on revolving accounts;
•Any open mortgage is current and shows twelve (12) months satisfactory payment history. Mortgages may have been brought current through loan modification, which may be “temporary” or “permanent” so long as all payments have been documented as being received in accordance with the modification agreement(s); and
•The borrower meets the requirements of the HUD Mortgage Letter.

Nontraditional Borrowers:
When evaluating a borrower with non-traditional credit history, the lender may deem a borrower to have Satisfactory Credit if the borrower’s non-traditional credit history covering at least twelve (12) months in duration includes:
•No history of delinquency on rental housing payments; and
•No more than one thirty (30) days delinquency on payments due to other creditors; and
•No collection accounts/court records reporting (other than medical and/or identity theft).

And before the economic hardship, the borrower’s credit must have been satisfactory and in good standing. However, even with the new rules, whether a particular borrower actually gets financing is ultimately at the discretion of individual lenders. Individuals can have tighter credit standards than the FHA, preventing them from lending even if FHA approves.

Credit information from the Department of Housing and Urban Development (HUD).

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