A lot of Realtors aren't aware of the lowest credit scores used by FHA approved lenders. This is very important as most loan officers will decline a borrower with a 400 credit score. If the mortgage broker has a lender that 'manually underwrites' their FHA loans, then they will have a good shot of receiving an mortgage approval.
Manual Underwriting is used when a low credit score appears or when there may be no credit score at all. Car insurance, phone bills, rental payments, and utilities are some of the nontraditional tradelines used with an FHA loan. One of the issues most realtors have is that their current lenders may not offer manual underwriting.
Normally, a loan officer will input the loan application in the Automated Underwriting System. If they receive a refer/eligible, they will normally decline the application. FHA loans allow low scores, but you're not allowed to have any credit lates in the last 12months. Chapter 13 bankruptcies need to wait 1yr after discharged, and Chapter 7/Foreclosures will need to wait at least 2yrs.
Subprime mortgages generally have mortgage rates higher than 8-9% while a FHA loan can be 7% or lower for a 30yr fixed mortgage. This will also depend on the loan amount.
