FHA Loan Requirements have changed for borrowers who do not have an established credit history or do not have a credit score to qualify for conventional mortgage financing. The Federal Housing Administration (FHA) has allowed for borrowers who lack a credit profile with Experian, Trans Union or Equifax to use other types of credit to qualify for FHA mortgages. Other types of credit includes: rent, phone bills, cell phone bills, cable and utility bills, payments to local rent-to-own stores, etc. These changes will impact the ability for buyers to obtain FHA mortgage loan financing who lack a traditional credit history.
The update is really designed to better determine a borrower’s bill paying habits. And so now a borrower with a lack of established credit will need to show a total of three “ALTERNATIVE” credit references. One of the credit references must show a 12 month record and must be one of the following:
- Rent payments
- Utility company payments
Two forms of credit can come from this group:
- Insurance
- Child care
- School tuition
- Retail stores
- Internet/Cell phone
- Auto lease
- Personal loan
Borrowers who don’t have established credit, don’t pay rent and don’t have any utility bills MAY still qualify for FHA Mortgage Loans but will be required to prove 2 months of mortgage payments in an asset account both before and after closing.
For more information on FHA Mortgage Loans, please call our office at 520-225-0380
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