Anyone an expert with FHA Home Loans?

NikkiQSM

Quite Involved in Discussions
#1
I've been working very hard on my credit for the last 4 years.

I desperately need to get my family out of the tiny trailer rental we have been in, and into a home.* It is my ultimate dream.

Most of you have read my previous posts, and are aware of my struggles and achievements.*

2 months ago I was pre-approved for an FHA home loan, with a credit score of 620.* After a lot of searching, 2 offers being turned down, I have found an amazing home!* I put an offer on it, and THEY ACCEPTED!

My closing date is September 29th.*

But... I just checked my credit score out and it has dropped down to 610 :(* I am heart broken, as I thought the minimum was 620.

My credit report is sparkling clean - no collections, no late payments, NOTHING.* My credit card had a high utilization % so it dropped my score.

I have contacted both my realtor and my lender.* My realtor found several online articles that said there is no minimum credit score requirement for FHA.

My lender was very vague and just stated to make an appointment to see her and finish applying for my home loan.

Does anyone out there know if there is a minimum credit score requirement?*

After all the work I have done - I would hate to lose this house.

Thoughts?

Thanks in advance.
 
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Marc

Hunkered Down for the Duration
Staff member
Admin
#2
I can't say I know about FHA loans, but I would think if you were pre-approved and only a drop of 10 it would be OK. I'd make the appointment and see what the lender says.

I did find this on Google:

"For those interested in applying for an FHA loan, applicants are now required to have a minimum FICO score of 580 to qualify for the low down payment advantage, which is currently at around 3.5 percent. If your credit score is below 580, however, you aren't necessarily excluded from FHA loan eligibility."
 

NikkiQSM

Quite Involved in Discussions
#3
Thank you Marc!!!

I have an appointment on Monday. I just want to make sure I don't lose out on this great home for my family :)
 

Marc

Hunkered Down for the Duration
Staff member
Admin
#4
Like I say - I don't know much about loans. I do know lots of people get home loans who don't have great credit scores, but it varies significantly by lender and state.

Just don't panic.

My West Chester home I made a deal with the seller. In April 1996 I gave him a down payment and we drew up an agreement for me to pay him off within 5 years, which I did. Didn't go through a bank. The interest rate was a bit higher than a bank, but no red tape. They call these types of agreements a "Land Contract". Any such agreement should be looked at by a lawyer, though.
 

Jen Kirley

Quality and Auditing Expert
Staff member
Admin
#5
Have you seen the web site I was looking at? Its information (580 minimum) is as Marc described. Your credit score could have been affected by agencies inquiring about it - I understand that is one of the metric's inputs.

Buying a home is a nerve wracking experience and can seem like an eye-bulging, hair-flying, scream-out-loud experience. It isn't over until it's over. You just do it: make the necessary preparations as you have done - and a nice job you have done too! :applause: Then provide documents out the wazoo and hope nothing goes wrong. When you sign the papers, it's over.

The house I am in now was a HUD foreclosure. We went through an escrow made painful by the fact that it was a second home, at least until we sold the Maine house. When the escrow lawyers got the paperwork on the Friday before closing date, they noticed discrepancies that ended up collapsing the whole thing. Gaaaaaa! We went through the process again a few days later; the pain was lessened by the agency's lowering the price by 10%, which meant we would not need as much down payment. Yay! :D Another fun-filled escrow process and it was done. This time I had all the documents assembled and just fed them to the lender in huge .zip files: a fire hose of information! I even still had the receipt for the range they found so important. (like we are going to habitate the house without one? :rolleyes: )

My point is meant to be to just advise to hang on tight, give them what they ask for, and try to keep in mind that things have a way of working out as they ought to.
 

NikkiQSM

Quite Involved in Discussions
#6
Thank you Jen. It has been a super long, hard, and stressful journey. But I have found such a wonderful 4 bedroom home, 10 minutes from work, and just the right amount of land. I don't want to lose out on this one. We were able to see it and put down an offer on it before anyone else even knew it was for sale :)

I am keeping my fingers crossed that the credit score of 580 minimum, is the same required for my loan. I've come too far to lose this awesome house.

I wont give up :)
 

Wes Bucey

Quite Involved in Discussions
#9
Good luck! Hope it all goes well!
I CERTAINLY ECHO THIS SENTIMENT.

I was a partner in an investment bank for years and I want to assure you, Nikki, and all similarly situated folks that responsible lenders do not make any decision solely on "credit score."

Whether a borrower is a first-time home buyer or a huge multi-national corporation doing dozens of loan transactions a month (or year), lenders pay close attention to the 4 C's of Credit, so much so that it is a mantra we taught to all new employees.
Briefly, they are:

  • Capacity to pay back the loan. Lenders look at your income, employment history, savings, and monthly debt payments, such as credit card charges and other financial obligations, to make sure that you have the means to take on a mortgage comfortably.
  • Capital. Lenders consider your readily available money and savings plus investments, properties, and other assets that you could sell fairly quickly for cash. Having these reserves proves that you can manage your money and have funds, in addition to your income, to pay the mortgage.
  • Collateral. Lenders take into account the value of the property and other possessions that you're pledging as security against the loan.
  • Credit. Lenders check your credit score and history to assess your record of paying bills and other debts on time. (Even if you don't plan to buy a home now, it's always a good idea to build and maintain strong credit. Landlords often check it to make sure that you can pay the rent. It's also important if you want to apply for a mortgage or other credit line in the future, such as a student loan, car loan, or credit card.)
If the ONLY change in your circumstances is the 10 point change in credit score, there should be no problem in completing your transaction. Be sure, however, to have documentation available to demonstrate this non-change status to the lender. (No anecdotal evidence - it MUST be documented, as Jen indicated with her receipts for a range.)

I hope this helps you sleep before your meeting.

IMPORTANT - ADDED IN EDIT
There is really a FIFTH C of credit which many lenders (including me) ALWAYS consider, mostly because we deal face-to-face with our borrowers, regardless of the size of the loan:
CHARACTER! (modified by CONDITIONS)
Like it or not, a loan officer is influenced by how spouses treat each other while at his desk. I investigated how employees, customers, and suppliers of my would-be borrowers thought about the bosses and their policies. We simply said "no quote" when the character of the borrower came into question.
 
Last edited:

NikkiQSM

Quite Involved in Discussions
#10
Thank you Wes and all who have commented.

I leave in 20 minutes to head to the loan appointment - I will update and let you all know how it pans out.

The situation has become much more stressful as I have been informed that if I remain in my current location, my son (diagnosed non-verbal autistic) will no longer be able to attend his special needs school, once he reaches school age (1 year away). The school district doesn't allow it. By getting this home - we will be in a location where he can continue without hesitation.

Fingers and toes crossed!

Thanks again everyone!
 
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