Home Buying in Fremont>Question Details

Cap, Other/Just Looking in

husband and wife, our credit score are 620 and 520. Do we have a chance to get approved for FHA loan? I heard there is a new guideline. Please help.

Asked by Cap, Wed Dec 15, 2010

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Most lenders currently have a 540 low middle score (lowest middle score of the 3 bureaus for both applicants) as the minimum needed to qualify for an FHA loan program.

If your husband is the breadwinner - then, if you can raise his score a bit, you can use only his name on the application and be fine. They will pull your credit as well - but that would be to check for any additional debt only, not for score. They will apply any additional debt to the application and then qualify from there.

At 620, there may be only a few things needed to raise his score. I like Anna's suggestion (below) about visiting with a qualified lender who should be able to review your credit and give you some insight on the best ways for a quick turn around in score. This is something I do all the time for clients and most are very willing to bring that up if possible. Many just needed to see what was affecting their scores and then understand the process to correct them.

Hope this helps! John
0 votes Thank Flag Link Thu Dec 16, 2010
You can start by visiting with any qualified loan officer, after reviewing your overall financials and checking your credit scores--their scoring is oftentimes different--he/she can make a determination on qualification--if your scoring needs improvement, your loan officer may offer great suggestions as how to do so in the fastest time--then go from there; in the meantime, dispute any negatives, pay all bills on time, pay off old debt, pay down debts, keep credit cards below 50%, etc.
0 votes Thank Flag Link Wed Dec 15, 2010
Hello Cap,

I believe under the new guidelines for FHA, most FHA-approved lenders will not approve a borrower with a credit score below 620.

Recent developments show that lenders are raising the bar once again. Some lenders recently increased their credit score requirements minimums for FHA loans from 620 to 640.

You may want to contact credit score counseling company and improve your credit score to get into housing market at the right time where the home prices are low and the mortgage rates are still low.

Good luck to you,

Charo Bhatt
0 votes Thank Flag Link Wed Dec 15, 2010

You will have great difficulty obtaining an FHA loan with those scores because most lenders have "overlays" on the FHA guidelines. So, in other words, if the FHA says you need one score, the lender can say, "fine, but we will only make loans that are at x minimum..."

Perhaps a better effort would be to address the items that are causing your scores to be at that level. I don't know if that's an option at this point, but if it is and you think I can help, please let me know.

Thank you,

Rob Spinosa
0 votes Thank Flag Link Wed Dec 15, 2010
Your best bet is to talk to a lender who will help you evaluate your options. It's likely that the person with the higher credit score will have to attempt to qualify alone, if possible, for the purchase since 520 may be too low.

Be sure that the lender assesses all of your documentation before they preapprove you. They tend to ask for tax information for the last two years, recent bank statements and pay stubs. They'll also want any information about assests and debts so that they can determine how much cash you have available for down payment and closing costs, and how much money you spend each month on debt. You'll want to make sure that you can actually qualify for the purchase before you start making offers so that you don't waste money on appraisals and inspections if the lender may eventually find that something about your situation will keep you from qualifying for the loan.

I recommend Sandra Smith of Prospect Mortgage in Alameda. She's very knowledgeable about FHA loans. I have clients from all walks of life, some with unusual situations. She is very thorough and has never preapproved someone who could not actually qualify with underwriting and complete the transaction. Her number is 510-748-3801 and her e-mail address is sandra.smith@prospectmtg.com. Sue Thomas of LaSalle in Montclair is also great.

Good luck!
0 votes Thank Flag Link Wed Dec 15, 2010
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