FHA mortgage loans are a great mortgage loan program for first time home buyers and to home buyers who have less than perfect credit or for home buyers with very little down payment. You can also take advantage of FHA mortgage loans with no lender overlays.
FHA mortgage loans allow a home buyer to be able to purchase a home with as little as 3.5% down payment. Home buyers with a prior bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale can have a second chance and be able to purchase a new home as long as they have re-established their credit.
The Federal Housing Administration also allows FHA mortgage loan borrowers to have their down payment gifted from relatives or family members.
FHA mortgage loans have much lenient lending guidelines than Fannie Mae or Freddie Mac conventional mortgage loan programs. Minimum credit scores to qualify for an FHA Loan is 580 FICO with a 3.5% down payment. For conventional loans, minimum credit scores required to qualify for a conventional loan is 620 FICO. Down payment requirements for a conventional home buyer is 3% down payment for first time home buyers and 5% for seasoned home buyers.
Not all FHA mortgage lenders have the same FHA mortgage lending criteria. Many FHA mortgage lenders have mortgage lender overlays which are above and beyond the bare minimum FHA mortgage lending guidelines set by the Federal Housing Administration. For example, a no overlay lender would ask only a minimum credit score to qualify for an FHA mortgage loan, plus just a minimum of a 3.5% down payment per FHA mortgage lending guidelines of a 580 FICO score.
(READ: The Ultimate Guide to FHA Approved Lenders)
However, an FHA mortgage lender may have a mortgage lender overlay on credit scores that they will not accept any FHA mortgage borrower with at least a 640 FICO score. Other examples of mortgage lender overlays are minimum credit tradeline requirements. Some FHA mortgage lenders require a minimum of 3 credit tradelines that has been seasoned for at least 24 months while others require 12 months. Some FHA mortgage lenders require rental verification even though DU FINDINGS does not require rental verification. You can get approved for FHA mortgage loans with unpaid old collections. A certain FHA mortgage lender might require that all collections be paid off prior to closing. The maximum back end debt to income ratio to qualify for FHA mortgage loans is 56.9%. Many FHA mortgage lenders will have their mortgage lender overlays capping back end debt to income ratios at 50% or even lower.
If you are a home buyer and are in need of an FHA mortgage lender without lender overlays, you are in luck. Dozens of wholesale FHA mortgage lenders with no overlays are available to help with your mortgage loan. As long as you, as the FHA mortgage loan borrower, can get an approved/eligible status from Fannie Mae’s Automated Underwriting System DU FINDINGS. Your approved/eligible status is your guarantee.