Advice In Buying A House With A FHA Loan

Advantages Of Buying A House With A FHA Loan

There are many benefits with buying a house with a FHA Loan. Many home buyers often have many questions about mortgage loan programs once they make up their mind to become home buyers. Two of the most popular mortgage loan programs available to home buyers, especially first time home buyers, are FHA Loans and Conventional Loans. Buying A House With A FHA Loan is more advantageous than Buying A House With A Conventional Loan because FHA Loans have much more lenient credit and debt to income ratio requirements than Conventional Loan Programs. FHA requires a minimum credit score of 580 FICO credit score for home buyers where Conventional Loans require a minimum 620 FICO credit scores for home buyers. HUD, the United States Department of Housing and Urban Development, is the parent of the Federal Housing Administration or FHA and sets the FHA Mortgage Lending Guidelines for all FHA insured mortgage loans. Fannie Mae and Freddie Mac are the two mortgage giants in the United States that sets the mortgage lending standards for Conventional Loans. Conventional Loans are also called Conforming Loans because they need to Conform to Fannie Mae and/or Freddie Mac conventional mortgage lending guidelines. Buying A House With A FHA Loan is highly recommended for home buyers who had prior credit issues such as a prior bankruptcy, foreclosure, deed in lieu of foreclosure, short sale, collection accounts, tax liens, charge off accounts, late payment history, and higher debt to income ratios. FHA is way more lenient with borrowers with less than perfect credit, high debt to income ratios, and gaps in employment.

Buying A House With A FHA Loan: Prior Bad Credit

FHA understands that a mortgage loan borrower may have had prior bad credit due to unemployment, loss of business, medical reasons, divorce, or other extenuating circumstances where the flow of the borrower’s income may have gotten interrupted where it affected the mortgage loan borrower to be able to be able to make his or her monthly debt payments on time where it affected the mortgage loan applicant’s credit. FHA does not require a mortgage loan borrower to pay off outstanding unpaid collection accounts with balances and/or charge off accounts. You can still qualify for a FHA Loan without having to pay off any outstanding collection accounts.  There are FHA mortgage lenders who will require FHA mortgage borrowers to pay off outstanding unpaid collection accounts in order for them to qualify for a FHA Loan with their lending institution. However, this is not a FHA Guidelines On Collection Accounts  . FHA does not require borrowers to pay off outstanding unpaid collection accounts. If FHA lenders require to pay off outstanding collection accounts or charge off accounts, it is due to the individual mortgage lender’s own internal mortgage lender overlays , which is each individual mortgage lender’s own lending requirements that is on top of the FHA mortgage lending guidelines.

FHA does understand that FHA Borrowers that went through financial hard times and have bad credit and lower credit scores as well as outstanding unpaid collection accounts as well as charge off accounts. However, having prior bad credit and outstanding unpaid collection accounts and charge off accounts in the past is different than having recent bad credit and recent late payments. FHA wants to see that all FHA mortgage borrowers have been timely with all of their monthly debt payments in the past 12 months and really frown upon the fact if a FHA Borrower has had late payments after a bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale.

Buying A House With A FHA Loan: Bankruptcy And Foreclosure

Home buyers who had a prior bankruptcy and/or foreclosure can become eligible to purchase a home with a FHA Loan two years after a bankruptcy and three years after a foreclosure, deed in lieu of foreclosure, or short sale with re-established credit. Again, minimum credit scores to qualify for a FHA Loan after bankruptcy and foreclosure is 580 FICO credit scores and a 3.5% down payment is required. FHA mortgage lenders do not want to see any late payments after bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale and re-established credit is required and mortgage lenders want to see timely payments in the past 12 months.

Buying A House With A FHA Loan: FHA Loan After Chapter 13 Bankruptcy

There is no waiting period to qualify for a FHA Loan after a Chapter 13 Bankruptcy discharged date. However, if the Chapter 13 Bankruptcy discharge has not been discharged for at least 2 years, then all FHA Loans after a Chapter 13 Bankruptcy discharge are all manual underwriting. All manual underwriting FHA Loans require verification of rent . Verification of Rent is only valid if the renter can provide 12 months of timely canceled checks and/or 12 months timely online bank statements payments to the landlord.

Buying A House With A FHA Loan is very simple. Your FHA mortgage lender will go over your credit report, credit scores, credit payment history, your two years tax returns, two years W2s, most recent paycheck stubs, bank statements, and will run your mortgage loan application to the Automated Underwriting System for an automated approval. I am a FHA mortgage lender with no lender overlays so as long as you have an automated approval per Automated Underwriting System and you can meet all the conditions, you should have no problem in closing on your FHA home loan on time. If you are in need of a pre-approval, please call me at 262-716-8151 or email me at gcho@gustancho.com.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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