FHA with a 600 FICO?

In today’s mortgage world, it has become the norm to see more conservative credit requirements making it more difficult for buyers to qualify. In a few short years, we’ve seen many lenders go from no minimum credit score on FHA loans to our current minimum of 640. As a result, many potential homeowners were eliminated from the buying pool.
At United Lending, we feel that on occasion a credit score may not be indicative of someone’s attitude towards the responsibility of credit and now allow borrowers with at least a 600 FICO to obtain FHA financing. In those cases, we have created qualifying guidelines (over and above the standard FHA guidelines) that establish if a borrower is willing and capable of making their payments when due. Here are some of the highlights:
• A FICO score of 620-639 would require the borrower to put down 5% and have two months of PITI (total monthly mortgage payment) in liquid reserves.
• A Fico score of 600-619 would require the borrower to put down 10% and have three months of liquid reserves.
• Any cash required at closing must be from the borrowers own funds; no gifts or seller concessions are allowed.
• The housing experience of all borrowers must be verified; meaning that they must have an immediate prior mortgage or rental history. Twelve months of cancelled checks (if rent checks are made out to an individual) or verification from an apartment or rental property management company will have to be provided.
• Borrowers may not have had any short sales, public records, judgments, bankruptcies, or tax liens in the most recent three years and no foreclosures in the past 5 years. There can also be no delinquent credit since any of those occurrences.
• Borrowers may not have had any collections, including medical, in the last 12 months and no 30 day late pays on mortgage, rent, or installment debt in the previous 12 months.
• Borrowers must have a 24-month job history and must have been employed with the same employer with the same or greater position for at least 12-months.
• The property must be a single-family home (no duplexes), condo or PUD.
For the right buyer, this is an excellent opportunity. Finally, after hearing lenders say we can’t do this and we can’t do that, it’s refreshing to hear that we can help more buyers. If you have a client you think could fit in this scenario, call or e-mail me to see if we can help them with the purchase of a new home.