Chris "refines" FHA Credit Score answer

Hi everyone.

There was a great question brought to my attention yesterday in the meeting. Gary asked how low we would go on FHA loans because a lot of other lenders are raising their credit score limits on FHA. The Gary mentioned was a broker and the limit of their lowest credit score is 680, I also know another local bank will only go as low as 660. One reason for the rise of the lowest credit score was because of the biggest bank that brokered FHA was seized by the government and shut down. Also if the loan is not done properly the bank has to buy it back and brokers do not have the overhead to buy those loans back. It can vary bank to bank what is required deemed by the bank. It would all usually be relative to what they have had to buy back

Our company low is 580 but with a recommendation of 600-620. Depending on the department (call center and also varies from Mortgage Advisor to Mortgage Advisor), we can send them to be pre approved with a 580 score. However, not all 580’s are equal. Some customers with 580 credit scores have recent charge offs and a lot of late payments, or even a bankruptcy that is too recent, which would not qualify regardless of credit score. While other 580 scores just do not have much credit with a collection or two.

An example we discussed in our meeting was a loan I just closed with a 580 credit score. He started out with a mid 574 and we waited a month and re-pulled new credit and it was exactly 580. He had no late payments and he only had one item he paid for which showed on his credit report, however, he had a ton of medical collections. I sent it to underwriting for a manual pre approval and plead my case that FHA does not care about medical collections. The underwriter agreed that I was correct and pre approved him contingent on him showing three non traditional lines of credit (bills that are paid monthly that do not show up on a credit report; such as electric, water, cable, rent). I started talking to him in April or May and he closed in July.

I do want to warn everyone that these loans do take a little longer and cannot be rushed. There is a lot more coaching the customer and extra documentation needed with these loans which is why some of our departments and Mortgage Advisors choose not to do them.

I just wanted to let you know this information incase you were not in attendance at the meeting. I will do these loans or any loan if I can find a way. My job is to make us both successful. It is not always an immediate transaction but will usually be an eventual sale 9 times out of 10. These customers will love you for taking the time and will tell everyone about you.

As always, if you have any questions please let me know!

Chris Stevens
Mortgage Advisor, MBS
CB/PHH Mortgage Services
513-226-2235 (Cell)
1-856-917-1347 (E-Fax)
chris.stevens@mortgagefamily.com