The Washington State Housing Finance Commission (WSHFC) is now allowing borrowers without established credit (aka “non-traditional”) to qualify for a mortgage.
Here are some of the requirements: [Read more…]
Helping Washington State homeowners learn more about their mortgage options.
The Washington State Housing Finance Commission (WSHFC) is now allowing borrowers without established credit (aka “non-traditional”) to qualify for a mortgage.
Here are some of the requirements: [Read more…]
EDITORS NOTE: This post was originally published in 2008. Underwriting guidelines ALWAYS change. Please contact me if you have any questions.
FHA insured loans, which are quickly becoming the mortgage of choice unless you have 20% down payment and 720 credit scores, allows people to obtain mortgage financing if they are shy on an established credit history reported to the credit bureaus. Typically, a borrower needs to the following shown on their credit report for it to be considered “established”:
Sometimes, if someone does not have established credit that is reported to the credit bureaus, they need to use “alternative credit” or “non traditional” credit, which may be acceptable with FHA financing. Proving you have credit that is not reported to the bureaus requires that you obtain documentation from three different sources that you have made on time payments to during the last 12 months.
Possible types of non-traditional credit (preferred–at least one of these types of sources are required):
Other acceptable sources of non-traditional credit are (two out of three sources may come here):
Note: Debts that are paid automatically from your payroll are not allowed to be used in documenting non-traditional credit. Lenders want to make sure that you are able to make timely payments “voluntary”.
The “form of proof” can be:
In order to qualify for a non-traditional credit approval with FHA, over the last 12 months, there must be:
Qualifying ratios are restricted to 31% for the payment to income ratio and 43% for the total debt to income ratio. Two months reserves (two months mortgage payments in savings after closing) is also required. When non-traditional credit is used, the mortgage is a “manual underwrite” meaning that you need to allow for more time during the underwriting process as a real live human is underwriting your transaction.
Last but not least, do make sure that you are working with a Mortgage Professional who is qualified to provide FHA mortgage loans. Not all mortgage companies are approved and, with many products no longer available, they may try to illegally provide an FHA mortgage with hopes of finding another lender to broker it to. Ask your Mortgage Professional if they have provided FHA loans before, how long and how long their company has been approved for FHA loans. By the way, I cut my mortgage teeth on FHA 8 years ago and our company has been providing FHA loans since our inception. (We are a Direct Endorsed HUD lender). You can always check out HUD’s site to confirm whether or not your lender is approved.
Questions or concerns about FHA (or any) mortgages for Washington State properties? Contact me.
Rhonda Porter is a Licensed Mortgage Originator MLO121324 living in the greater Seattle area. Rhonda began her career in 1986 in the title and escrow industry and began her mortgage career in 2000. She enjoys helping people understand the mortgage process and started writing The Mortgage Porter in late 2006. Read More…
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