2017 Fannie Mae Versus FHA Guidelines On Collections And Charge Offs

2017 Fannie Mae Versus FHA Guidelines On Collections And Charge Offs

2017 Fannie Mae Versus FHA Guidelines On Collections And Charge Offs is quite different:

Here are the differences:

  • Regards of credit
  • Debt to income ratio
  • Non-occupant borrowers
  • Collections
  • Charge offs
  • Waiting Period After Bankruptcy And Foreclosure
  • Mortgage Part Of Bankruptcy

Fannie Mae Guidelines On Collections And Charge Offs

Most borrowers do not even consider conventional loans if they have collection accounts and outstanding charge off accounts. They figure that FHA Loans is the way to go if you have outstanding collections and charge off accounts Can you qualify for conventional loan with collection accounts and charge off accounts with a conventional loan? Home buyers can qualify for home loans with collection and charge off  accounts however, Fannie Mae and Freddie Mac have tougher restrictions than HUD does when it comes to outstanding collections and charge off accounts. Depending on the mortgage program, each program have different mortgage guidelines when it comes to unpaid collection accounts, charge offs, tax liens, late payments, and judgments.

FHA Loans is known for its lenient guidelines on collections and charges offs:

  • With FHA Guidelines On Collections And Charge Offs, collection accounts and outstanding charge off accounts do not have to be paid to qualify for a FHA insured mortgage loan.
  • FHA has different requirements on non-medical collections versus non-medical collections.
  • Medical collections on FHA Guidelines on collection accounts are exempt from debt to income ratio calculations and the balance is immaterial.
  • For example, if you have a total of $2,000 or more in non-medical collections, then HUD requires you to take 5% of the outstanding unpaid non-medical collection balance. You do not have to pay the 5% of the outstanding collection accounts but it is used as a monthly expense.
  • You can qualify for FHA Loans with tax liens, and judgments without having to pay them off completely.
  • However, you need an agreed written payment plan from the Internal Revenue Service or creditor and you need to have made three monthly payments. Three months of payments needs to have been paid and you need to provide three months canceled checks or bank statements and you cannot pre-pay them upfront.
  • 2017 Fannie Mae Mortgage Guidelines on Collections and Charge Offs are much more restrictive than FHA, VA, or USDA.
  • We will do a 2017 Fannie Mae Versus FHA Guidelines and compare and contrast between the two.
  • We will compare 2017 Fannie Mae Versus FHA Guidelines On Collections And Charge Offs and see if you can qualify for both or one or the other.

Fannie Mae Versus FHA Guidelines On Collections And Charge Offs And How It May Affect You

Borrowers can qualify for Conventional Loans with outstanding charge offs and collections. Each mortgage program has their own requirements when it comes to collections and charge off accounts.  FHA Loans has the most lax requirements on mortgage lending guidelines on collections and charge offs. Mortgage Guidelines on Collections and Charge Offs are most strict with Fannie Mae and Freddie Mac.Conventional Loan with Collection Accounts. We do an analysis and contrast on FHA versus Conventional Loan Guidelines on Collections, Charge Offs, and derogatory credit.

Requirements For Fannie Mae And Freddie Mac With Collection Accounts

Conventional lending guidelines are much different than FHA mortgage lending guidelines with regards to unpaid collection accounts, charge offs, tax liens, and judgments.

  • All unpaid collection accounts with balances and charge offs, will need to be paid at or prior to closing the home loan for Conventional Loans whereas it does not need to be paid with FHA Loans.
  • Tax liens and judgments need to be paid at or prior to closing.
  • Collection accounts of $250 or less or total aggregate unpaid balance of $1,000 or less may be exempt upon underwriter’s discretion on conventional loans..

Collection Account Requirements On Conventional Loans

  • Requirements For FHA Loan With Collection Accounts are much stricter than FHA Loans. 
  • FHA mortgage lending guidelines does not require collection accounts to be paid but with non-medical collections, any aggregate balance of over $2,000, 5% of the outstanding balance will be used to calculate debt to income ratios even though the borrower does not have to pay.
  • Medical collection accounts are exempt with having to be paid or using a portion of the outstanding balance to calculate debt to income ratios.
  • For non-medical collection accounts, if the aggregate unpaid balance of collection accounts is greater than $1,000, then 5% of the unpaid collection account balance will be used towards debt to income calculations.
  • For example, if a mortgage loan borrower has $10,000 worth of unpaid collection accounts, then 5% of the unpaid $10,000 total aggregate collection account balance, or $500 will be used to calculate the mortgage loan borrower’s debt to income ratios even though the $500 per month does not have to be paid.
  • If your outstanding collection accounts is of a large amount, HUD will allow a written payment agreement arrangement with creditors where you can make a written payment agreement with the creditor with the collection accounts in lieu of the 5% collection account balance calculation.
  • That new payment agreement that you decide and agree on will be used in lieu of the 5%.
  • If the mortgage loan borrower has a total collection account balance of $20,000 and agrees with the creditor and sets up a written payment agreement with the creditor and/or collection agency for $200 per month, that $200 per month will be used in lieu of the 5% of the $20,000, or $1,000, in the calculation of debt to income ratios.
  • HUD mortgage guidelines are very generous with lending requirements for home buyers and homeowners wanting to refinance their current home loans with judgments, tax liens, and other liens such as mechanics liens.
  • HUD, the parent of the Federal Housing Administration,  allows mortgage loan borrowers who have judgments and tax liens to set up a written payment agreement with the judgment creditor or the Internal Revenue Service.
  • Three months of payments and seasoning is required
  • FHA Loans is the mortgage loan program of choice if you have a lot of collections and charge off accounts.

FHA Versus Fannie Mae Guidelines On Collections And Charge Offs For Conventional Loan With Derogatory Items

Conventional lending guidelines are much different than FHA mortgage lending guidelines with regards to

  • Outstanding collection accounts, charge offs, tax liens, and judgments.
  • All unpaid collection accounts as well as charge offs.
  • Judgments and Tax Liens.
  • Outstanding collection accounts of $250 or less or total aggregate unpaid balance of $1,000 or less may be exempt upon underwriter’s discretion.
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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