For the first time in history, FHA will take credit scores into consideration. A 620 score means your mother will pay a higher fee to FHA at closing and for monthly insurance. Prior to July 14, the FHA Mortgage Insurance Premium will be 1.5% of the loan amount at closing and 0.5% of the loan amount per year (added into the monthly payment). On July 14 and thereafter, FHA will charge her 1.75% of the loan amount at closing and 0.55% of the loan amount per year.
These are part of the changes Congress has passed due to the massive FHA bailout for subprime home borrowers.
You don't have to have perfect credit to get an FHA mortgage. In fact, even if you have had credit problems, such as a bankruptcy, it's easier for you to qualify for an FHA loan than a conventional loan. With that said and having paid off previous collections 4 months ago, keep in mind it will be the overall pattern of credit for the last 2 years that will be evaluated.
Borrower's who are applying for a FHA mortgage do not need to have a certain minimum credit score. In fact the average credit score of an FHA borrower is about 620. Borrowers with credit scores above 620 will generally be able to get approved through the use of automated underwriting. Borrowers with credit scores below 620 may not get approved through the automated engines and may have to go through a manual underwriting process, which typically takes a few extra days and a little more paper work.
Other than credit score and pattern of credit, keep in mind how much your mother plans on paying as a down payment. FHA loans have a low 3% down payment and the money can come from a family member, employer or charitable organization as a gift. Other loan programs don't allow this. With an FHA loan, you can put down as little as 2.25 percent and allegedly they'll take a 580 credit score.
Other things that will be considered include:
1) Recent job history/stability looks like.
2) Current debt to income ratio is.
3) Whether or not she is a first time home buyer.
For more information on FHA loans go to http://portal.hud.gov/
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620 is good enought to get an FHA loan. Factors that may influence the final decesion would be her Debt to income Ratio. Take gross monthly income and divide it by Gross monthly debt. the numbe you are trying to stay under is 45% Since her bad debts have been paid for some time. How does the rest of the credit look? Has she madfe timely payments on all other accounts? Does she have reserves(savings checking 401 K) These will all influence the outcome of her loan.
There is not enough information here to answer that question. She needs to work with a loan officer that can look at her entire situation. Only then can you get that question answered reliably.