Is My FICO Score Too Low

Bad FICO score? 
3 things you should do:

1. Clear up credit report with all three reporting agencies;

2. Write a credit explanation letter that addresses why your credit was damaged; and

3. Work with lenders that can do FHA loans and know how to manually underwrite your loan application.  

A high credit score is NOT required to get a loan! There are two ways to get an FHA loan approved.

 1. Automated Underwriting used by most major lenders.  If your overall credit history and income are sufficient for 'automated' approval, then your lender will use this method.  Automated approval is preferred simply because it allows the lender to basically skip the traditional underwriting process and the lender just has to verify that the information listed in your application is accurate.

 2. Traditional underwriting - also known as manual underwriting.  this is where FHA underwriting allows time for cases that can only be approved after a hands on review of the entire file by an FHA 'Direct Endorsement' underwriter. This is the best method when derogatory credit can be explained and not likely to recur. Here, what is important is what your MOST RECENT credit history, plus your consistency in making your rent payments every month, plus your total household income compared to the amount of the monthly payment for the home you wish to purchase.   

Disclaimer:  FHA is expected to change underwriting requirements by next spring to be more in line with conventional lending practices so now is the time to buy.