image_description

FHA Loans

Credit Requirements for FHA Loans in Greater Chicago

FHA-Loans-United-Home-Loans

Everything You Need To Know About FHA Credit Requirements:

Loan Limits
Credit Scores
General Credit Requirements
Collections
Judgements
Chapter 7 Bankruptcies
Chapter 13 Bankruptcies
Short Sales
Foreclosures

FHA Loan Limits in Greater Chicago

Number of UnitsGeneral Loan Limit
One$365,700
Two$468,150
Three$565,900
Four$703,250

Loan limits are updated by the Department of Housing and Urban Development (HUD) on an annual basis and can be checked here.

Find out what loan amount you may qualify for here.

Credit Scores for FHA Loans in Greater Chicago

One of the biggest benefits of an FHA loan is the reduced down payment requirement of only 3.5%. FHA requires minimum credit scores to be eligible for 3.5% down. And, even though FHA may allow it, lenders may have higher credit score requirements to be able to work with their lending institution.

Credit ScoreMinimum Down Payment
580 or higher3.5% down
500 to 57910% down

Make sure your estimated credit score is determined by a scoring model that is acceptable to mortgage companies. Some of the free online credit providers use newer model scores that are not accepted by FHA, Fannie Mae or Freddie Mac.

General Credit Requirements

When qualifying for an FHA loan, underwriters are instructed to review your overall credit history, not just isolated unsatisfactory or late payments, to determine credit worthiness. Payment histories are supposed to be reviewed in the following order of importance:

  • Previous housing and housing related expenses such as utilities
  • Installment loans such as student and auto loans
  • Revolving accounts such as credit card payments

To review your credit and start a pre-approval, click here.

Do collections need to be paid for FHA loans?

Collections may not be required to be paid-off for an FHA loan approval, but collections will be evaluated as part of the overall credit worthiness of the borrower.

Do judgements need to be paid for an FHA mortgage approval?

Typically, court ordered judgements must be paid and satisfied prior to or at closing. Also, judgements will be evaluated as part of the overall credit history of the borrower.

What is the wait period on an FHA loan if you have had a Chapter 7 bankruptcy?

Two years must have passed since the bankruptcy discharge date prior to FHA case number assignment which typically happens at loan application. The borrower must provide the bankruptcy petition and discharge papers at application.

What is the wait period on an FHA loan if you have had a Chapter 13 bankruptcy?

Since a Chapter 13 is a court ordered reorganization and debt repayment plan, FHA is more lenient on these requirements and will allow a borrower to apply for an FHA loan as long as 12 months of timely and satisfactory payments have been made and the borrower has received court ordered permission to enter into the mortgage transaction.

What is the wait period for FHA mortgage approval if you have had a short sale?

Typically, a borrower must wait three years after the short sale to apply for a new FHA loan. The three year wait period begins on the date of transfer of title from the short sale. An exception may be made if the borrower made timely mortgage and installment payments for 12 months prior to the short sale.

What is the wait period for FHA loans if you’ve had a foreclosure?

This wait period closely mirrors the short sale period. Typically, a borrower must wait three years after a foreclosure to be eligible for a new FHA loan. Exceptions can be made if there were extenuating circumstances such as a serious illness or death of a primary wage earner.

If you have any questions about credit requirements for FHA Loans, contact us below or at 708-531-8388.