FHA Credit Requirements
Past credit performance is considered a useful guide in determining an individual's future actions. An individual who has made payments on past or current obligations in a timely manner represents reduced risk. Conversely, if the credit report shows continuous slow payments, judgments, and delinquent accounts, FHA credit requirements will require compensating factors and a reasonable explanation of the reason for the late payments.
Generally, FHA credit requirements are a 1 year period of acceptable credit. Four or more "trade lines" are required, but if you have not developed a credit history, "alternative" credit verification will be used. Alternative credit sources may include:
The following are 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.
Collections are not required to be paid prior to loan approval if mitigating factors are present
Judgements will be required to be paid before your loan closes.
Chapter 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.
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.
Government loan programs really are more lenient from a credit requirement perspective than conventional.
Read more about FHA credit compensating factors
I have included a page on how to calculate your qualification ratios.
I offer an analysis of your situation today can make suggestions on how small changes in how your FHA arm is structured today can have a life changing effect in the years to come. Read more
Prequalify for your FHA Mortgage