An individual who has made payments on past or current
obligations in a timely manner represents reduced risk. FHA will require compensating factors and a
reasonable explanation of the reason for the late payments.
Generally, a 1 year period of acceptable credit will be required. Three or more "trade lines" are required, but if you have not developed a credit history, "alternative" credit sources may include:
Utility Payments
Rental Payments
Automobile Insurance Payments
The following are some credit guidelines set forth by FHA
Previous rental or mortgage payment history Your payment history is reviewed for the previous 12 months.
Recent and/or undisclosed debts A satisfactory explanation of new credit or inquiries will be required.
Judgments will be required to be paid before your loan closes.
Collections are not required to be paid prior to loan approval if mitigating factors are presentChapter 7 Bankruptcy will not disqualify you if 24 months from the Discharge Date has passed and you have reestablished credit. FHA will consider a loan after 12 months if you can document the bankruptcy was caused by events beyond your control. In most cases FHA requires that you do not have any derogatory credit after the bankruptcy.
Chapter 13 Bankruptcy is allowed after 12 months of the pay out period has elapsed with court approval.
Previous mortgage foreclosure will be allowed after three years. In rare cases, an exception may be granted with very well documented extenuating circumstances after 2 years.
Final underwriting to be determined by underwriter.
