Out with the old…

… and in with new FHA guidelines. Given the time of year, it seems almost appropriate.  Regarding the new change…

FHA loans now require borrowers to not only have a minimum qualifying credit score to be approved for a loan, borrowers also need to have at least three trade lines (accounts) in their credit history.  The three trade lines must:

• Trade lines can be a credit card(s), student loan, car loan, mortgage
• Have at least 12 months of history (current or closed account)
• If an account is closed, it cannot be closed more than 24 months ago or it will not be counted toward the required three trade lines

Because of this new change, even if a borrower has the minimum down payment (3.5%) and a qualifying credit score (620+), they would still not qualify if the new trade line requirement is not met.

Why would FHA require this? There has not been an official statement, but they could be thinking “if there are only one or two trade lines, is the credit score an accurate score based on the limited history.” Regardless of the reason, this is just one more item to keep in mind when looking to buy a home.

I’ve said this before and I will say it again, planning ahead is key.  Knowing where you stand, how much you can afford, and when it the best time to move forward is essential in this ever changing market.

Tags: credit history, credit score, down payment, FHA, FHA guidelines, FHA loan, get prequalified, minimum down payment, mortgage advice, new guidelines, prequalify, trade lines