Can I Qualify For FHA Loan With Charge Offs, Collections, Disputes

FHA Guidelines On Charge Offs

Gustan Cho Associates

FHA Guidelines allows home mortgage loan borrowers with charge offs, collections, and disputes to qualify for FHA loans.  There are two sets of mortgage lending guidelines: The first set of guidelines are directly from FHA, the Federal Housing Administration and the second set of guidelines are individual mortgage lender overlays.  Mortgage lender overlays are mortgage lending guidelines that a particular mortgage lender will impose in addition to those set by the Federal Housing Administration, FHA.  For example, FHA may allow a mortgage loan applicant with unpaid collection accounts to qualify for a FHA insured mortgage loan without having to pay it off.  However, a particular mortgage lender may require all collection accounts to be paid off even though FHA does not require it.  This is called mortgage lender overlays.  Same with credit scores.  FHA requires a minimum credit score of 580 FICO from any mortgage loan applicant for them to qualify for a 3.5% down payment home purchase FHA insured mortgage loan.  Many, if not most, set their own standards with regards to minimum credit scores.  Most mortgage companies do have mortgage lender overlays on minimum credit scores.  Most require 620 FICO credit scores and a large percentage of mortgage lenders such as banks, credit unions, require 640 FICO credit scores or higher.  There are mortgage lenders, such as myself, that do not have any mortgage lender overlays and will just go off the minimum FHA mortgage lending guidelines.  As long as you meet the minimum FHA guidelines, no overlays.  To get a pre-approval now, please click on APPLY NOW FOR PRE-APPROVAL and get your pre-approval in minutes.

FHA Guidelines On Unpaid Collection Accounts

FHA Guidelines does not require for you to pay off existing unpaid collection accounts.  However, FHA Guidelines does classify collection accounts into two separate categories: Non-medical collection accounts and medical collection accounts.

Any non-medical collection account with a total aggregate unpaid balance of $1,000 is ignored by FHA  Guidelines unless the particular mortgage lender may have their own mortgage lender overlays on paying unpaid non-medical collection accounts.  If the unpaid non-medical collection accounts are greater than $1,000, then FHA requires mortgage lenders to take 5% of the unpaid collection balance and calculate it on the calculations of the debt to income ratios.  If the 5% calculations is too much and will not qualify the mortgage loan applicant, then the mortgage loan applicant can make a written payment agreement with the collection agency and the amount agreed upon as the monthly payment will be used to calculate the debt to income ratios.

For medical collections, there is no restrictions on unpaid collection account balances and is often ignored unless the particular mortgage lender may have their own overlays.  If you encounter mortgage companies with FHA mortgage lending overlays, please contact me at or call me at 262-716-8151 because I do not have any mortgage lender overlays and just go off FHA minimum lending guidelines.

Can I Qualify For FHA Loan With Charge Offs?

Old collection accounts who the creditor deems uncollectible are charged off.  A charge off is when a creditor writes the debt off as uncollectible.  Many consumers may have unpaid collection accounts that reports as charge offs on their credit reports.  Charge offs do not count and FHA does not require any charge offs to be paid off since it has been written off.  Also, those with charge offs will find it next to impossible to pay the charge offs because nobody can technically take their payments since it has been written off their books.

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