9 replies to this topic

[megaguru]

Question: When looking at FHA financing, I understand FHA has credit score requirements and the lenders have "overlays", which appear to be about 640 in most cases. Do all three CRA scores have to be above 640, or can one qualify with say 630,645, 650 (with the 645 being the mid?

[jop3]

Yes to your example. Just the middle score has to be above 640 in those cases.

[sharonmcd]

We just got approval today and my lender said 620

[NAC]

FHA's min is 580, but since it's a voluntary one, banks usually do 620 to limit risk.

[sharonmcd]

We just got approval today and my lender said 620

[Brian B The Loan Professor]

We just got approval today and my lender said 620

Each bank can set their own number on the scores - it will vary most want a 640 some will take 620 few will take less

[CAdamsRP]

many lenders will do what is called an FHA low program, and scores for that can be as low as 580, however to qualify for this program you must fit in a very tight box of qualifications, no bankruptcies or foreclosures within 7 years, no late payments in 12 mos, 3 open lines of credit, low total collections, no collections in 12 mo, no judgments at all, no govt debts at all. also they often require a larger amount of reserves and a larger down payment, also your debt to income ratios must be lower than that required for those with higher scores

[megaguru]

Thank you all for the information. sharonmcd-congratulations! Who is your lender?

We aren't quite ready yet. DH has scores in the high 700s-low 800s. Mine are in my siggy. They recently dropped due to a new collection which doesn't belong to me, and I am working to get removed (it really does happen!). Also, have some items that are paid, which are currently reporting unpaid. I am waiting for those to update. Our combined DTI is probably in the 15-20%. My DTI is under 10%. I am in a repayment/installment program with the IRS, which probably throws me out of being able qualify in the lower tier.

Thank you everyone for your input!

Secondary question: Do IRA contributions count toward DTI?

[CAdamsRP]

if you have been on the payment arrangement with the IRS for 12 months, it might not put you out of the running, of course this varies from lender to lender, but some that i have worked with can do it with 12 months on time cancelled checks to the IRS, or a letter from them saying you have paid on time for 12 months. the payment towards that would then have to count in your DTI as well. as long as your front end ratio is under 30 (total monthly payments/total monthly income) then you are probably ok for a low end program. then you would just have to be careful about the back end ratio, which will be the main determining factor in how much house you can afford, the back end should be less than 45 for low programs, sometimes as low as 43 (total monthly payments + proposed monthly mortgage payment/total monthly income)

[megaguru]

if you have been on the payment arrangement with the IRS for 12 months, it might not put you out of the running, of course this varies from lender to lender, but some that i have worked with can do it with 12 months on time cancelled checks to the IRS, or a letter from them saying you have paid on time for 12 months. the payment towards that would then have to count in your DTI as well. as long as your front end ratio is under 30 (total monthly payments/total monthly income) then you are probably ok for a low end program. then you would just have to be careful about the back end ratio, which will be the main determining factor in how much house you can afford, the back end should be less than 45 for low programs, sometimes as low as 43 (total monthly payments + proposed monthly mortgage payment/total monthly income)

Exciting to know that even though I am not ready, I finally feel like I've made progress!