FHA credit and income requirements.

For the FHA Construction Loan program you will need a minimum credit score of 620. Keep in mind that 620 isn't the only credit requirement. If you have had a major credit issue, such as a bankruptcy, foreclosure or short sale, you will have a waiting period of 1-3 years depending on the issue and the reason for the issue.


FHA will want to see you re-establish good credit after a major credit issue. It is very common to see people with past credit issues to go to a "cash only" lifestyle. Keep in mind that the absence of any credit usage is NOT the same as good credit.


You will need to establish 3 lines of credit, paid as agreed, for one-year. Items like rent, utilities, and insurance (if paid monthly) can count as credit lines even if they don't appear on your credit report. You will have to present documentation (canceled checks or bank statements) to show your payment history. 


FHA will want to see 2 years of steady employment. Leaving one job, for a better paying job, in the same field isn't a problem. Switching from a salary or hourly job to a commission based position or  self employment can be an issue. If you work on commission or are self employed you will need to show two full years of tax returns before FHA will count your income. The income you will be credited with will be the income you paid taxes on.


FHA will not want your total debt service to exceed more than 43% of your monthly income. Your debt service is defined as you total house payment (loan payment, property taxes, home insurance and mortgage insurance) plus any credit payments, PLUS child support and alimony. The child support and alimony can be a real deal killer.


As always, call me to discuss your situation.

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