This Article On FHA Loan With Unpaid Collections Florida
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
- Gustan Cho Associates does not have any lender overlays
In this article, we will discuss and cover Can I Qualify For FHA Loan With Unpaid Collections Florida.
HUD Does Not Require Outstanding Collections And Charged-Off Accounts To Be Paid
HUD Guidelines do 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
- FHA is a government agency under the U.S. Housing and Urban Development
- The role of FHA is to insure and partially guarantee 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 HUD Guidelines
- Lenders need to 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 Bad Credit. Borrowers 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 all can qualify for an FHA loan.
Stress During The 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 the 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 a 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 an 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 a 3.5% down payment.
Home Buyers with credit scores between 500 FICO and 570 FICO can qualify for FHA Home Loan with a 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, the borrower can get a written payment agreement with creditor/collection agency and the amount agreed can be used in lieu of 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 the 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 Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.
