With the recent rise of FHA loan limits to $729,750 for Orange County, Los Angeles, Ventura, and many additional areas across the country, totaling over 660 markets and with as little of a down payment as low as 3.5%, the large possibility it provides for future homeowners has grown tremendously. With larger loan limits provided FHA loan programs, more and more people are now eligible to qualify for a government insured home loan.
Now that the limits have been lifted up by the mutual agreement of congress for FHA loans, 1st home buyers are interested in an applying for FHA loan programs but asking the question, “would we still qualify for an FHA loan with having a non-traditional credit history?”
For many, the recent years of economic up’s and down’s, employment and or release of a position, families have had to be creative in their history as they continued to manage their financial accounts, bills, and other living expenses. It was not uncommon for people to drastically reduce and or eliminate the use of credit in order to maintain a health financial structure for their living. So what does this mean for those wanting to move forward into home ownership who have chosen not to use means of credit?
Within the FHA rules and regulations, it states that applicants with non-traditional credit histories should be examined and worked with carefully by the lender; however, it also continues to state that non-traditional credit, or lack there of for a credit history, is not quite enough to disqualify a potential borrower from attaining an FHA home loan as shown below:
• HUD 4155.1, Chapter 4, Section C states | “The lack of a credit history, or the borrower’s decision to not use credit, may not be used as the basis for rejecting the loan application…some prospective borrowers may not have an established credit history. For these borrowers, including those who do not use traditional credit, the lender must obtain a non-traditional merged credit report, [known as a NTMCR], from a credit reporting company, or develop a credit history…”
A Non-Traditional Merged Credit Report (NTMCR), states that items acceptable are to be derived from any available source within the list followed below:
• History of rental payments
• Record of utility payments
• Automobile insurance payments
• Other means showing direct access from the credit provider
Thus, despite having both a high credit score as well as a long standing line of credit history, YES, FHA loan programs do accept and are available to potential borrowers with non-traditional and/or lack of credit histories whom are looking to become a 1st home buyer and noted that each applicant for an FHA loan is considered and reviewed independently based on a case-by-case basis. So be prepared and be sure you are able to provide all the necessary documents required. Attaining an FHA home loan for any 1st time home buyer is a great achievement and one that is within reach for all those ready to buy.