Can I Qualify For FHA Loan With Tax Lien
Can I Qualify For FHA Loan With Tax Lien And Close On My Home Loan?
FHA Loans are government insured mortgage loans that offer very lenient credit and income requirements and is the most popular mortgage loan program available to home buyers, especially first time home buyers and mortgage loan borrowers with bad credit. HUD, the United States Department of Housing and Urban Development, is the parent of the Federal Housing Administration or FHA. HUD 4000.1 FHA Handbook is the official handbook that outlines all of the FHA mortgage lending guidelines and also lists the requirements for borrowers in qualifying for a FHA Loan With Tax Lien and other derogatory collections and credit items. FHA is not a mortgage lender. FHA is a government enterprise whose role and main function is to guarantee FHA Loans that are originated and funded by private banks and mortgage lenders who are FHA approved. The mortgage lender needs to be approved by HUD and these HUD Approved mortgage lenders need to follow FHA Guidelines in order for the FHA Loans that they originate and fund to be insured in the event if the FHA borrower defaulted on their FHA Loans. FHA only requires a 3.5% down payment on a home purchase for mortgage borrowers who can meet a minimum of a 580 FICO credit score. FHA will allow borrowers with credit scores between 500 credit scores and 579 credit scores to qualify for FHA Loans as long as they can put a 10% down payment on their home purchase. FHA allows a maximum of 56.9% debt to income ratio for FHA borrowers who have at least a 620 credit score. Borrowers under 620 FICO credit scores need to have debt to income ratios that do not exceed 43% DTI. FHA allows home buyers with a prior Chapter 7 Bankruptcy to qualify for a FHA Loan as long as the Chapter 7 Bankruptcy discharged date has been seasoned for at least two years. FHA allows borrowers with a prior foreclosure, deed in lieu of foreclosure, and short sale to qualify for a FHA Loan if the foreclosure, deed in lieu of foreclosure, or short sale has been seasoned for at least three years. FHA Guidelines On FHA Loan After Chapter 13 Bankruptcy Discharge states that there is no waiting period to qualify for a FHA Loan after Chapter 13 Bankruptcy discharged date but if the Chapter 13 Bankruptcy discharged date has been seasoned for less than two years, then the file needs to be a manual underwriting . All FHA manual underwriting guidelines applies.
Qualifying For FHA Loans With Collection Accounts
Under HUD 4000.1 FHA Handbook , FHA does not require FHA borrowers to pay off outstanding collection accounts and charge off accounts. However, outstanding collection accounts with outstanding credit balances do affect the borrower’s debt to income ratios. FHA categorizes collection accounts into three separate distinct categories:
- Non-Medical Collection Accounts
- Medical Collection Accounts
- Charge Off Accounts
On non-medical collection accounts, you are allowed up to a total of $2,000 in outstanding unpaid collection account balance before it affects the debt to income ratios of the borrower. Any outstanding unpaid collection account balance of over $2,000 balance, 5% of the outstanding unpaid collection account balance will be used as a monthly debt obligation of the FHA borrower and will be used in the debt to income calculations of the FHA borrower even though the FHA borrower does not have to make any monthly payments. If the 5% of the outstanding collection account balance is a large monthly figure and will disqualify the FHA borrower from qualifying due to exceeding the 56.9% DTI allowed, then the FHA borrower can enter into a written payment with the creditor where whatever is agreed upon on the written payment agreement, that figure will be used in lieu of the 5% of the outstanding collection account balance.
FHA does not require medical collection accounts and charge off accounts with outstanding collection balances to have a percentage of the outstanding account balances to be included in the calculations of the borrower’s debt to income ratios no matter how much the outstanding collection account balances are.
Qualifying For FHA Loan With Tax Lien And Judgments
Tax Liens and Judgments are the worst thing you can have on your credit report. FHA Allows you to qualify for FHA Loan with Tax Lien and Judgments as long as you have a written payment agreement with the IRS and/or judgment creditor or collection agency. You can qualify for a FHA Loan With Tax Lien and Judgments without having to pay them off in full as long as you have a written payment agreement with the Internal Revenue Service and/or Judgment Creditor as long as you have made three consecutive payments to them and you can provide three month’s canceled checks. You cannot pre pay the monthly payments in advance to the IRS or Judgment Creditor and need to make sure that three months seasoning has passed.