Can I Qualify For FHA Loan With Unpaid Collections Florida

This BLOG On FHA Loan With Unpaid Collections Florida Was UPDATED On June 18, 2017

  • Home Buyers with bad credit and lower credit scores can qualify for FHA Loan With Unpaid Collections.
  • Borrowers of FHA Loans do not have to pay outstanding collection accounts and charge off accounts as long as the lender they consult with has no FHA Lender Overlays.
  • Many people who have unpaid collections accounts just assume that they do not qualify for FHA Loan With Unpaid Collections until the outstanding collection accounts have been paid and recorded on their credit report.
  • The Gustan Cho Team does not have any lender overlays.
  • HUD Guidelines does not require borrowers to pay outstanding collections and charge off accounts to qualify for FHA Loans.
  • Most FHA Lenders do have lender overlays and do require FHA Borrowers to pay all unpaid collections. 
  • The above are not FHA Guidelines On Collection Accounts but rather Lender Overlays.
  • Other Lenders may a written payment agreement from the creditor and/or collection agency and require a 3 month to 6 month timely payment history on the outstanding collections and/or charge off accounts. 
  • Again, the above are not FHA Guidelines but rather mortgage companies having their own lending requirements on FHA Loan With Unpaid Collection.
  • Lenders with no overlays on FHA Loans will not require paying outstanding unpaid collection accounts.  

What Are FHA Loans?

FHA Loans are the most sought after loan in the nation. FHA Loans are government loans because they are insured by the federal government.

Here are the basics of FHA Loans:

  • HUD is the parent of FHA.
  • FHA is not a lender but a government agency under the U.S. Housing and Urban Development and its role is to insure and guarantee private residential one to four unit housing home loans originated and funded by banks and private lenders in the event homeowners default on their FHA Loans. 
  • FHA insures the bank and/or lender that funded the FHA Loan against loss if the FHA Borrower were to default on their home loan.
  • In order for FHA to insure and guarantee FHA Loans, the lender needs to follow FHA Guidelines and make sure borrowers meet every checkpoint stated on HUD 4000.1 FHA Handbook .
  • FHA Loans are for one to four unit owner occupant residential homes only.
  • Second homes and investment properties do not qualify for FHA Loans.

FHA Loan With Unpaid Collections & Bad Credit

  • Mortgage Borrowers can qualify for FHA Loan With Unpaid Collections, Charge Off Accounts, bad credit, had a prior bankruptcy, had a previous foreclosure, have unpaid collection accounts, have an active tax lien, and have unsatisfied judgments.

Stress During Mortgage Process

Over 75% of our borrowers are folks who either got denied by another lender or are going through stress in the mortgage process.

  • There is no reason why a home loan borrower should get a mortgage loan denial.
  • The only reason for mortgage denials or major stress during mortgage process is because they were not properly qualified.
  • The qualification and pre-approval stage of the mortgage process is the most important step of the overall mortgage application and approval process.
  • Not all FHA Lenders have the same lending requirements on FHA Loans.
  • As stated earlier, most lenders do have FHA Lender Overlays and set higher FHA Mortgage Requirements than the basic FHA Guidelines set by HUD.

How Can I Qualify For FHA Loan With Unpaid Collections?

The Gustan Cho Team has no lender overlays and can help borrowers who have unpaid collections accounts get FHA Loan With Unpaid Collections and Charge Offs.

  • As long as they qualify with credit scores, have enough down payment, have two year work history, and had no late payments in the past six months, the chances are good that I can help you get approved for a FHA insured mortgage loan. 
  • Do not pay an old collection account because that will reactivate the account and lower your credit score. 
  • Minimum Credit Scores Required to Qualify for FHA Loans is 580 with 3.5% down payment. 
  • Home Buyers with credit scores between 500 FICO and 570 FICO can qualify for FHA Home Loan with 10% down payment.

How Lenders Need To Underwrite FHA With Unpaid Collections

HUD Guidelines On Collections need to be analyzed as follows:

  • Medical Collections are exempt from debt to income ratio calculations
  • Charge Offs are exempt from DTI income calculations
  • Non-Medical Collections with zero balance are exempt from debt to income ratio calculations
  • Borrowers with total non-medical collection accounts with outstanding unpaid balances greater than $2,000, 5% of the unpaid balances need to calculated as monthly debt
  • This theoretical monthly debt of 5% of outstanding collection account balance needs to be calculated in debt to income calculations.
  • In lieu of 5% of outstanding collection balance, borrower can get a written payment agreement with creditor/collection agency and the amount agreed can be used in lieu of the 5%.

Are FHA Loans For Borrowers With Bad Credit?

I work with people with bad credit all the time.

  • FHA Home Loans are not just for borrowers with bad credit.
  • FHA Loans has the highest debt to income ratio cap (46.9% front end and 56.9% back end) out of any other loan program with the exception of VA Loans
  • FHA Loans permits non-occupant co-borrowers to be added

It is true that FHA Home Loans has much more lenient requirements when it comes to the following:

  • Collections
  • Charge Offs
  • Late Payments
  • Judgments
  • Tax Liens
  • Late Payment After Bankruptcy And Foreclosure with approve/eligible per Automated Underwriting System
  • Front End DTI can be as high as 46.9% to get an automated approval
  • Back End Debt To Income Ratio can be as high as 56.9% to get approve/eligible per Automated Underwriting System approval
  • Collections and Charge Offs with outstanding balance does not need to be paid off
  • Unsatisfied judgments and tax liens no problem as long as borrower has written payment agreement and proof of three months of timely payments
  • Prior bankruptcies, previous foreclosures, short sales no problem as long as borrower met waiting period requirements 

To learn more about qualifying for FHA Loan with collections, please contact us at 1-800-900-8569 or email us at gcho@gustancho.com.

Related> Collection accounts lending guidelines

Related> FHA guidelines on unpaid collection accounts

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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