I came across an article outlining FHA guidelines. I wanted to share this with other AR professionals who talk with people who believe they aren't able to buy a home.
Here's a few of the non-traditional credit guidelines that may help your clients:
1. The borrower may have no collection accounts appearing on their credit report within the most recent 12 months.
2. There may be no more then 1x30 day late in the most recent 12 months on any of the non-traditional credit trade lines.
3. Borrowers ratio’s may not exceed the 31/43% housing to income and debt to income ratio guidelines.
4. The borrower must have 2 months PITI in reserves after closing which must be borrowers own funds and can not come from gifts, grants etc.
5. There may be no non-occupying co-borrowers used to help the borrower qualify
Example: The Federal Housing Administration (FHA) has long permitted mortgage lenders to establish a borrower’s credit history through nontraditional means, including the compilation of performance on rental payments; utility bills; telephone and cellular phone services; cable television service; payments to local stores, etc.
Written By: Bonnie Wilt-Hild Senior DE Underwriter & NAMP Instructor
As we all jump back into the FHA game it seems that guidelines are changing as rapidly as the FHA program itself is changing. Each week new mortgagee letters are being issued to appropriate new and expanded guidelines and this week is no different.
FHA has long allowed non-traditional credit guidelines for borrowers who demonstrate no traditional credit trade lines. The approach that was always taken was that if a borrower chooses not to incur debt as a means to manage their financial responsibilities then that individual should be looked upon favorably as he or she managed their financial affairs without incurring debt. In these instances it was the lenders responsibility to develop an overall credit history using non-traditional credit sources to determine the borrowers ability to make monthly payments in a timely fashion.
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