FHA Loans In Chicago With Bad Credit And No Overlays

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This BLOG On FHA Loans In Chicago With Bad Credit And No Overlays Was UPDATED And PUBLISHED On February 8th, 2020

What are the significance of Chicago FHA loans with bad credit and no overlays

Many borrowers have a hard time finding a lender who specializes in FHA Loans In Chicago With No Lender Overlays.

  • Borrowers with over 740 FICO Credit Scores, low debt to income ratio, long term on the same job, no outstanding collection accounts, no outstanding charge off accounts, no judgments, and no tax liens with a perfect credit payment history can get qualified and approved at any mortgage company
  • However, life does not work that way
  • Gustan Cho Associates Mortgage Group are experts in closing FHA Loans In Chicago With No Lender Overlays

In this article, we will discuss and cover qualifying for an FHA loan with bad credit in Chicago.

FHA Loans In Chicago With Bad Credit

Many hard-working families with the best of intentions have gone through financial hardship through one or more of the types of extenuating circumstances below:

  • Fell victim of the Major Recession of 2008
  • Lost their business
  • Lost their jobs
  • Lost their homes and had a foreclosure, deed in lieu of foreclosure, short sale
  • Had to file Chapter 7 or Chapter 13 Bankruptcy
  • Have current employment where they are overqualified for the position they are working
  • Had to go through a divorce
  • Had medical issues or a member of their family had medical issues
  • Lost their savings and investments due to the economy

Reasons Why Consumers Have Bad Credit

There are many instances where consumers end up with bad credit.

  • This is because of unseen circumstances and not because they are financially responsible
  • These borrowers need lenders who specialize in FHA Loans In Chicago With No Lender Overlays when it comes to qualifying for a home loan in Chicago or its suburbs
  • Eventually, hard-working Americans do not give up and recover

How Lenders View Borrowers With Bad Credit

How Lenders View Borrowers With Bad Credit

The great part of FHA Loans is that HUD, the parent of FHA,  understands that people do go through hard times:

  • Lenders understand consumers recover
  • Consumers do deserve a second chance in life and deserve an opportunity to become homeowners
  • Chicago, Illinois and the Chicago Suburbs of Illinois was one of the greatest hit areas due to the 2008 Great Recession
  • Many Chicagoans have still not recovered from the longest-lasting recession in the history of the United States
  • To make matters worse for Chicago and its surrounding suburbs, home prices have been skyrocketing
  • Chicago and its surrounding Counties is considered a high-cost area
  • The United States Department of Housing and Urban Development, HUD, which is the parent of the Federal Housing Administration, FHA classifies all counties in Chicagoland Area as high-cost areas
  • Chicago Borrowers who have had prior credit issues or have a higher debt to income ratios needs to consult with Chicago FHA Lenders who specialize in FHA Loans In Chicago With No Lender Overlays

Gustan Cho Associates are experts in FHA Loans In Chicago With No Lender Overlays.

What Are FHA Lender Overlays

The mortgage business is a private industry.

  • Lenders do not have to adhere to the minimum HUD Guidelines
  • Lenders do have to follow the minimum FHA Guidelines set by HUD
  • They can have higher Lending Standards that surpass the minimum Guidelines set by the Federal Housing Administration or FHA

Gustan Cho Associates are experts in originating and closing FHA Loans In Chicago With No Lender Overlays.

Basic HUD Guidelines To Qualify For FHA Loans

Here are the basic HUD Guidelines to qualify for FHA Loans:

MINIMUM DOWN PAYMENT GUIDELINES:

  • 3.5% minimum down payment

LENDERS WITH OVERLAYS:  

  • Many lenders will require 5% down payment on a home purchase with lower than 620 credit scores

DOWN PAYMENT VERSUS CREDIT SCORES GUIDELINES:  

  • To qualify for an FHA loan with a 3.5% down payment, the borrower needs at least a 580 Credit Score

LENDERS WITH OVERLAYS: 

  • Most lenders have minimum credit score requirements of 640 Credit Scores or 620 Credit Score Requirements

HUD GUIDELINES:

  • Borrowers can qualify for an FHA Loan with credit scores between 500 and 579 FICO BUT need to put a 10% down payment

LENDERS WITH OVERLAYS: 

  • Most lenders will not touch any borrowers with under 580 Credit Scores

FHA GUIDELINES:  

  • Maximum debt to income ratio is capped at 43% if your credit scores are under 620 Credit Score

LENDERS WITH OVERLAYS: 

  • Common Overlays include front end debt to income ratio requirements of 31% DTI
  • 3 credit tradelines that have been seasoned for at least 12 to 24 months with no late payments
  • There are some Lenders, normally smaller lenders that will classify under 620 Credit Score Borrowers as Low FICO Borrowers
  • May even include the spouse’s debt as well as require verification of rent
  • If lenders tell you they require a lot of additional conditions just because of having under 620 FICO Scores, contact us at Gustan Cho Associates at 262-716-8151 or text for faster response
  • Or email us at gcho@gustancho.com

HUD GUIDELINES:  

  • Maximum back end debt to income ratio is capped at 56.9%
  • Front end debt to income ratio is capped at 46.9% if the borrower has at least a 620 credit score to get an approve/eligible per Automated Underwriting System

LENDERS WITH OVERLAYS: 

  • Common overlays imposed by lenders include capping debt to income ratios at 45% to 50% DTI

HUD GUIDELINES:

  • Do not have to pay off an outstanding collection or charge off accounts to qualify for an FHA Loan

LENDERS WITH OVERLAYS: 

  • Common overlays are that lenders will require you to pay off outstanding collection accounts and/or charge off accounts
  • Some lenders may have maximum caps on collections and charge offs

HUD GUIDELINES:  

  • You can qualify for FHA Loans after bankruptcy and foreclosure
  • There is a two-year waiting period to qualify for an FHA Loan after a Chapter 7 Bankruptcy discharged date

LENDERS WITH OVERLAYS: 

  • Common overlays include having no late payments after bankruptcy
  • Minimum of 3 credit tradelines that have been seasoned for 12 to 36 months

HUD GUIDELINES: 

  • You can qualify for an FHA insured mortgage loan one year into a Chapter 13 Bankruptcy Repayment Plan with the approval of the Bankruptcy Trustee via a manual underwrite

LENDERS WITH OVERLAYS: 

  • Common Overlays on the above guideline is many lenders do not do manual underwriting
  • Will not accept borrowers who are either in Chapter 13 Bankruptcy Repayment Plan or borrowers who do not have at least a two-year seasoning after the discharged date of the Chapter 13 Bankruptcy
  • Gustan Cho Associates has no Overlays
  • We can qualify borrowers during and after a Chapter 13 Bankruptcy discharged date with no waiting period

HUD GUIDELINES:  

  • Can qualify for an FHA loan with no waiting period after a Chapter 13 Bankruptcy discharged date

LENDERS WITH OVERLAYS: 

  • Common Overlays is lender may require one year to a two year waiting period after a Chapter 13 Bankruptcy discharged date

HUD GUIDELINES:

  • Can qualify for an FHA Loan after a foreclosure, deed in lieu of foreclosure, or short sale after three years of the recorded date of the deed in lieu and/or foreclosure or the recorded date of the short sale

LENDERS WITH OVERLAYS: 

  • Common Lender Overlays includes were no late payments after a significant housing event
  • Minimum 3 to 5 credit tradelines that have been seasoned for 12 to 36 months 

HUD GUIDELINES:

  • Can qualify for an FHA Loan 12 months after a Loan Modification

LENDERS WITH OVERLAYS:  

  • Common Overlays includes a two to four-year waiting period after a loan modification

HUD GUIDELINES:

  • Can qualify for an FHA Loan After A Timeshare Foreclosure with no waiting period. FHA does not consider timeshares as real estate and considers timeshare as a consumer loan

LENDERS WITH OVERLAYS:  

  • Common overlays are that even though HUD does not consider timeshare foreclosures a real estate foreclosure, either some lenders do not know the guidelines
  • Or do not want to deal with any borrowers with timeshare foreclosures

How Do I Find A Lender That Specializes In FHA Loans In Chicago With No Lender Overlays

How Do I Find A Lender That Specializes In FHA Loans In Chicago With No Lender Overlays

Gustan Cho Associates Mortgage Group are experts in originating and closing FHA Loans In Chicago With No Lender Overlays in 30 days or less. Homebuyers and/or homeowners looking for a 5-star mortgage team who can not just help you with FHA Loans In Chicago With No Lender Overlays but who are able to close your FHA Loans In Chicago With No Lender Overlays on time, please contact us at Gustan Cho Associates:

Gustan Cho NMLS 873293

Email: gcho@gustancho.com

Cell: 262-716-8151 Please Text For Faster Response With Contact Information Including Email Address. 

Available 7 days a week, evenings, weekends, and holidays to take calls from 50 states

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