Minimum Credit Scores on FHA Mortgage Loans
FHA just requires a 500 credit score, but with less than a 580 credit score a 10% down payment is required, with a 580+ score then just 3.5% can be put down. The difference with Wells Fargo is that they require anyone with less than a 600 score to put 10% down though - including other limitations (such as the down payment must come from your own funds, not a gift from family/relatives, lower debt ratio limits, and need to have cleaner credit history for a longer period of time).
Other than medical collection accounts, for FHA financing you'll need to have 12 months where no new collections have occurred, and some lenders are looking for up to 24 months. FHA doesn't have a defined time guideline on collection accounts, other than:
"The lender must document the analysis of delinquent accounts, including whether late payments were based on
a disregard for financial obligations
an inability to manage debt, or
factors beyond the borrower's control, such as
delayed mail delivery, or
disputes with creditors.
Minor derogatory information occurring two or more years in the past does not require an explanation. Major indications of derogatory credit, such as judgments, collections, and other recent credit problems, require sufficient written explanation from the borrower. The explanation must make sense, and be consistent with other credit information in the file."
However lenders generally abide by the 12-24 month time frame for no new collections. If there is a repeated pattern of collections, expect it to be closer to the 24 month mark... if the collections were the first time in your credit history you've had issues, and those issues have resolved themselves, 12 months may be more acceptable.
If you have unpaid collections, FHA does not require them to be paid (that goes for charge-offs with balances too), however each lender may impose their own guideline on when collections have to be paid (those guidelines are called "overlays") and some will require collections within X amount of time to be paid, or collections over X amount in total amount owed, or non-medical collections to be paid, etc. so it's good to ask about a lender's specific unpaid collection policy when determining if you want to proceed with a loan application with them.
Other FHA information on collection accounts:
"Collections and Judgments"http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?addr…
"Paying off Collections and Judgments"http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?addr…
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