Buying A House With Credit Issues

This Article On Buying A House With Credit Issues Was Written By Bob Vogel NMLS 1446953

A common theme and phrase in American financial discussions today involve the economic downturn , and the bursting of the housing bubble that launched the Great Recession of 2008.

  • Almost every American was affected by the crisis and are still recovering today.
  • Many people are on the road to recovery and wanting to purchase a home but refrain from even applying thinking that there is no way they would ever qualify for a loan.
  • Well, there is Great News. FHA and Fannie Mae have loosened up some of their requirements.
  • It used to be that one had to wait four years after a bankruptcy discharge, foreclosure, or short sale to qualify for a home loan.
  • The waiting period has been reduced from four years to two years.

FHA Loan Low Credit Score

Buying A House With Credit Issues And Low Credit Scores

An FHA loan is the most common home loan for a primary residential dwelling:

  • An FHA loan requires a lower down payment and interest rates because the loan is insured.
  • The requirements to qualify for an FHA loan include a credit score of 580, stable income for two years, a down payment, and verifiable rent payments for one year.
  • If your credit score is less than 620, you will need to provide verification of rent.  
  • A borrower should have reestablished credit. Ideally, you should have to revolving credit lines. Secured credit cards are great for reestablishing credit history and increasing your credit score.  Under FHA Guidelines,
  • home buyers can qualify for a FHA Loan with credit scores under 580 FICO, however, the borrower needs 10% down payment.
  • Unfortunately, The Gustan Cho Team at CrossCountry Mortgage Inc. NMLS 3029  does not offer FHA Loans for borrowers with credit scores under 580 FICO but we can help you boost your credit scores to 580 so you can qualify.
  • Lenders that do qualify borrowers with credit scores of under 580 FICO as long as they get an approve/eligible per Automated Underwriting System.

Debt-To-Income Ratio

Buying A House With Credit Issues can have an impact with debt to income ratios:

  • Front end debt-to income ratio is the amount of your monthly housing payment including , mortgage, interest, insurance, and taxes.
  • You would take the amount of the total PITI payment and divide by your gross monthly income.
  • What is gross monthly income? It is your income before any deductions.  
  • Back end debt to income ratio is your PITI (house payment) plus all of your other debt, not including health care premiums, gym memberships, utility bills, etc.
  • It is usually everything that shows up on your credit report such as auto payments, credit cards, and student loans.
  • You take your entire monthly debt load and divide it by your gross monthly income to get the back end ratio.
  • Automatic underwriting system (AUS) approvals require debt to income ratio for those with a credit score of 620 and up at 56.9% back end and 46.9% front end.
  • If your credit score is less than 620, your deb-to-income ratio is 43% back end, with no front end debt to income calculation.

Qualifying For FHA Loan With Collections

You can qualify for an FHA loan if you have active collections:

  • There are three categories of collections.
  • There are non-medical, medical and charge offs.
  • If the aggregate amount of non-medical collections is $2,000 5% of that debt is used in the debt-to-income calculation.
  • For example, if your total non-medical collections are $10,000, your monthly debt load will be increased by 5% of the $10,000 which is $500.
  • Judgments and tax liens must be paid at closing.
  • You can still qualify for FHA Loans with outstanding collection accounts and tax liens as long as you have a written payment agreement and have made at least three monthly payments.
  • You need to provide the underwriter three months of canceled checks.
  • You cannot pre-pay the three months of payments upfront.
  • It needs to be seasoned for at least three months.  
  • Charge-offs and medical collections are disregarded in the calculations of debt to income ratios and you can qualify for FHA Loans with outstanding charge off accounts and medical collection accounts without having to pay for them.

The Path To Ownership

If you are planning to buy a house in the next 12 months there are steps that you can take to simplify the process:

  • You want to make sure that all rent payments you make are via check.
  • This makes it easier to verify.
  • You should keep a copy of all of the cancelled checks.
  • You want to file your tax returns and make sure that your tax returns reflect all of your income.
  • You should have your W2s available for the past two years.
  • Additionally, you will need two months of bank statements.
  • Make sure you pay all of your bills on time.
  • You don’t want any late payments showing up on your credit report.

Yes Buying A House With Credit Issues Is Possible

If you are looking to buy a home or even considering it call us 7 days a week and we can answer any questions that you have. We, at The Gustan Cho Team at CrossCountry Mortgage are a team of highly reputable mortgage loan originators who can help get you on the path to home ownership.

About The Author: Bob Vogel NMLS 1446953

This article on Buying A House With Credit Issues was written by Bob Vogel of The Gustan Cho Team at CrossCountry Mortgage. Bob  is a senior writer for Gustan Cho Associates is a licensed mortgage loan originator for The Gustan Cho Team At CrossCountry Mortgage and helps countless of borrowers nationally especially in the state of California. Bob Vogel has An MBA and Master’s Degree in Accountancy. Mr. Vogel of CrossCountry Mortgage has over 20 years of experience in individual and business taxation, business start ups, business plans, and tax debt negotiation and settlement. Bob Vogel has led government audits of large global and national corporations. Bob can help you with any type of residential finance or refinance option you are considering.

  • FHA loans with no overlays
  • FHA 203k loans
  • USDA loans with no overlays
  • VA loans with no overlays
  • Refinance
  • Cash out refinance
  • Reverse Mortgages
  • NON-QM Loans
  • CrossCountry Mortgage Inc. NMLS 3029 has no overlays on government and conventional loans and is licensed in 50 states.
  • CrossCountry Mortgage has a national reputation of closing loans in 21 days.

Bob Vogel’s goal is to make sure, you , the customer, are satisfied. That is the number one priority is to make sure you are getting the best advice on what options are available to you. Call Bob Vogel NMLS 1446953 of The Gustan Cho Team at CrossCountry Mortgage 7 days a week, even weekends and holidays, and she will be available to answer any questions you may have. You can reach Bob Vogel at or call Bob at 847-529-7920.

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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