Qualifying For Mortgage: Mortgage Loan Borrowers

There are many mortgage loan programs available today for mortgage loan borrowers. FHA Loans, Conventional Loans, USDA Loans, VA Loans, and Jumbo Mortgages. The whole mortgage industry went through a major overhaul after the 2008 Real Estate and Mortgage Meltdown and many mortgage loan borrowers are not aware of new mortgage lending guidelines today. Qualifying for mortgage loans today is way different than it was qualifying for mortgages prior to the 2008 Real Estate and Mortgage Meltdown. Mortgage loan products such as no docs and/or state income mortgage loans no longer exist. Documented income is an absolute requirement to qualify for any mortgage loan programs. Many self employed mortgage loan borrowers have difficult time qualifying for mortgage loans because they deduct many expenses on their income tax returns which needs to be deducted from their gross income. There are mandatory credit requirements and debt to income ratio requirements to qualify for mortgage loans for all mortgage loan programs.. The easiest and most lenient and most popular mortgage loan program today are FHA Loans.

FHA Loans

FHA Loans are the most popular mortgage loan program today due to their lenient credit and debt to income ratio requirements. The Federal Housing Administration, FHA, is a subsidiary of the United States Department of Housing and Urban Development ( HUD ), and is in charge of FHA Loans. FHA is not a mortgage lender and does not originate nor fund FHA Loans. FHA insures residential mortgage loans against default from FHA insured mortgage loan borrowers to private mortgage lenders such as banks and mortgage companies as long as they are FHA Approved and follow FHA mortgage lending guidelines. FHA sets their minimum mortgage lending guidelines with regards to minimum credit scores required, maximum debt to income ratios permitted, collection accounts and prior bad credit, mandatory waiting period and foreclosure, and other credit and income lending guidelines.

Minimum FHA Mortgage Lending Guidelines

Minimum mortgage lending guidelines set by the Federal Housing Administration are the following:

1. Minimum credit score to qualify for FHA Loan is 580 FICO for a 3.5% down payment home purchase FHA Loan.

2. For mortgage loan borrowers with under 620 FICO credit scores, the maximum debt to income ratios allowed is no greater than 43% debt to income ratio. For mortgage loan borrowers who have credit scores greater than 620 FICO, the back end debt to income ratios is capped at 56.9% and the maximum front end debt to income ratio is capped at 46.9%. The front end debt to income ratio is the monthly principal, interest, taxes, and insurance ┬áPITI) divided by the borrower’s monthly gross income. The back end debt to income ratios is the PITI plus all of the monthly minimum credit payments of the borrower divided by the borrower’s monthly gross income.

3. Bankruptcy and Foreclosure: Mortgage loan borrowers can qualify for FHA Loans two years after a Chapter 7 Bankruptcy discharged date and one year into a Chapter 13 Bankruptcy repayment program with the Bankruptcy Trustee’s approval and having made timely payments in the past 12 months with all of their creditors. Borrowers can also qualify for FHA Loans three years after the recorded date of a foreclosure and/or deed in lieu of foreclosure and three years after the date of a short sale.

4. Collection Accounts: FHA does not require mortgage loan borrowers to pay off an outstanding collection account to qualify for FHA Loans. You do not have to pay off old collection accounts with balances. Medical collection accounts and charge offs are exempt. If you have more than $2,000 of unpaid non-medical collection accounts, then 5% of the unpaid collection balance is used as a monthly debt payment obligation, even though you do not have to pay, in calculating your debt to income ratios. For those with high unpaid balances, they can make a written payment agreement with the collection agency and/or creditor and agree on a monthly payment plan and that payment plan can be used to calculate the monthly payment in lieu of the 5%.

5. Judgments and Tax Liens: Mortgage borrowers can qualify for judgments and tax liens without having to pay off the judgments and tax liens as long as they have a written repayment agreement and three months of payments have been made.

Discouraged Mortgage Loan Borrowers Due To Mortgage Denial

Many mortgage loan borrowers who meet the minimum FHA guidelines still get denied or cannot qualified for a FHA Loan by FHA approved mortgage lenders. These FHA mortgage loan applicants get discouraged and give up in their dreams of buying a home. Just because you get denied or do not qualify by one FHA lender does not mean you cannot qualify for a FHA Loan with another FHA lender. How can this be? Many FHA mortgage lenders have mortgage lender overlays which are mortgage lending guidelines that exceed the minimum FHA mortgage lending guidelines. For example, FHA guidelines on minimum credit scores to qualify for a 3.5% down payment home loan is 580 FICO. However, even though FHA guidelines are 580 FICO, many FHA mortgage lenders have their own lending standards where they set their minimum credit scores of 640 FICO and refuse everyone with credit scores under 640 FICO. This is totally legal and are called mortgage lender overlays. Discouraged mortgage loan borrowers who got denied or could not qualify for a FHA Loan due to their mortgage lender overlays, contact me at 262-716-8151 or email me at gcho@gustancho.com. I have no mortgage lender overlays and over half of my borrowers are mortgage loan borrowers who were told they do not qualify for FHA Loan due to the mortgage lender overlays. I am available 7 days a week, including holidays, and late evenings.

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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