Traditional Underwriting has Returned.
Even in an FHA mortgage loan, lenders are really looking at loan applications in a traditional sense. They want good credit, solid assets and a compelling reason to say yes. Above all, credit history is the most influential component for an approval.
Long known for the manual underwriting flexibility of the FHA mortgage program, many underwriters and lenders are getting tougher on mortgage applicant's credit. Recently, a man with 7 years on the job, 16 months worth of reserve savings (that's a balance in savings that is 16 times the monthly mortgage payment), low debt to income ratios (meaning monthly budget is not an issue) and a great rental payment history was turned down because of credit problems. He had a prior bankruptcy and minimal re-established credit and that concerned the underwriter.
The message to potential borrowers is to make sure you are taking care of your credit. Make all you payments on time, including that small $10 credit card payment. Anything you have borrowed on credit needs to be paid as agreed. Other wise it can hurt you down the road.
If you are not sure where you stand, touch base with a lender. Let them see where you qualify today. If you can not buy today, a good lender can give you advice on how to correct the course of your credit. If the lender you are talking to can only tell you to "fix your credit and come back" I suggest you find another lender. You need someone experienced to walk you through the steps of rebuilding.
The days of quick fixes getting you into a home may be over. A long term focused approach to your credit will allow you to qualify for the home you are dreaming of. Don't get discouraged... even with the worst credit issues, you can overcome them and accomplish your goals and dreams.