Sep 03 2007
FHA is Back
With higher risk loan types known as C, B, and Alt-A gone or going the old standard is back in style; FHA. The interesting part of this is that if you are a loan officer or a realtor who as come into the business in the last five years you may have never done or been involved with an FHA loan.
A loan product that had a lion’s share of the business several years ago almost disappeared for the last five years. So why is it back? There are many reasons, here are the top 7:
- It is a non FICO score driven program, so lower scores still have a hope of getting financing. A solid credit explanation letter can help an underwriter understand a credit glitch.
- Non-occupant co-borrower is allowed. Mom and Dad, or other family members, can co-sign on your loan if you are short of qualifying income.
- 100% of the down-payment, closing costs and pre-paids can be a gift.
- If you qualify for down payment assistance from approved sources you can get 100% financing.
- If you are buying a home that needs work you can do an FHA 203(k) loan and finance the purchase and repairs in one loan.
- You get a loan that is traditionally much more conservative than C,B or Alt-A loans and there is no prepayment penalties.
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If you lack credit history, even no FICO scores, we can use non-traditional sources of credit to qualify.
FHA is a great option and maybe the only option for awhile, so take the time to find an FHA approved lender.
This was very usefull information. Thank you
What do you mean when you say it’s a non fico score driven program?
Thank You
K.S. Jones
FICO score refers to a persons credit score or rating. Many loan programs use FICO score as the first filter to see if you qualify for a loan program. For instance, if the loan guidelines state you need a 680 FICO score and you have a 650 you can not get that loan. FHA does not use FICO score to eliminate possible borrowers. A low FICO score can be explained to an underwriter and they still could say yes.