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Scott Hoag

What is FHA Manual Underwriting: Does Credit Score Matter?

Thursday, November 15, 2007 - Article by: Scott Hoag - Message

Why do some people tell you you have "BAD credit" and others can get you approved in days? If your loan was turned down because you were told you have BAD credit, don't give up! Talk to someone that understands credit and how to minimize the effect negative items have on your credit. You may be able to qualify for rates in the 6.5%-7.0% range by doing the following:

  1. cleaning up credit report mistakes,
  2. write a GREAT credit explanation letter that addresses why your credit was damaged,
  3. work with lenders that can do FHA loans and know how to manually underwrite your loan application.

We assist people in putting their best foot forward by working with future home buyers to minimize the effect of negative credit.

High credit score is NOT required to get a loan!!

(Please note: FHA mortgages in Pinellas County and the surrounding areas are limited to a maximum loan amount of $222,300. It is however possible to increase this amount if the mortgage includes 'Energy Efficient' improvements.

There are two ways that your FHA loan can be underwritten (approved).

The easiest way is to run your application through the 'Automated Underwriting' software that is now available through all major lenders. If your overall credit history and income are sufficient for 'automated' approval, then we will certainly make every attempt to run your loan through the automated software. Automated approval is preferred simply because it allows the lender to basically skip the traditional underwriting process. In other words, if we have automated approval, then the lender simply has to verify that the information we listed in your application is accurate.

However, the fact is that the vast majority of my clients do NOT have sufficient credit to be approved by the automated software, and therefore most of my FHA loans require "traditional underwriting" - also known as manual underwriting. Traditional underwriting simply is the way underwriters had to review files BEFORE we had computers .... and they are still doing exactly this same process for many FHA loan files to this day.

After all ..... the very purpose of FHA loans is to provide home buying opportunities for people who are capable of making the home payment, but cannot get approved for a conventional mortgage due to some negative credit history or a less-than-perfect employment record. Therefore, it only stands to reason that FHA underwriting will always allow time for cases that can only be approved after a hands on review of the entire file by an FHA 'Direct Endorsement' underwriter.

And, to be approved, the good news is that credit scores, known as 'FICO' scores, are just about totally irrelevant for FHA mortgage (traditional) underwriting. Derogatory credit in your background is also irrelevant - IF it can be explained AND is not likely to recur.

What IS relevant is your MOST RECENT credit history, plus your consistency in making your housing / rent payments every month, plus your total household income compared to the amount of the monthly payment for the home you wish to purchase. It really is as simple as that!

So.... stop dreaming about that DREAM HOUSE... and call me !!!

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