Qualifying For FHA Loans With Credit Issues

FHA Loans is hands down the most popular mortgage loan program in the United States.  FHA Loans is not just for home buyers with bad credit but is also beneficial for mortgage loan borrowers with stellar credit but may not qualify for conventional loans due to needing a non-occupant co-borrower, having a higher debt to income ratio, needing to exclude student loans that is in deferment, and many other reasons.  Just because you have excellent credit scores and high income does not mean that a mortgage loan borrower can qualify for a FHA Loan.  Someone one year out of bankruptcy and/or foreclosure can have credit scores over 700 FICO.  I get many calls and inquiries everyday from mortgage loan borrowers who were told different things from the mortgage lenders they applied to.  I specialize in FHA Loans with credit issues and many of my viewers of my blog call or inquire every day on case scenarios.  The top topic my readers have on FHA Loans With Credit Issues is about FHA Guidelines on credit disputes,  qualifying for a mortgage after loan modification, qualifying for FHA Loans with charge offs and unpaid collections.

Questions And Answers On FHA Loans With Credit Issues

1. Is is okay to have credit disputes under $1,000 for conventional loans? 
Conventional loans – if disputed message appears on your AUS, regardless of the amount, the dispute message must be removed and a new credit report obtained and/or the disputed account must be paid/closed.

2. Do mortgage lenders have any overlays for qualifying for mortgage after loan modification.

Mortgage lending guidelines require timely payment after a mortgage loan modification of at least 12 months.  You can qualify for a mortgage loan one year after a mortgage loan modification.  Many mortgage loan borrowers who had a mortgage loan modification on their primary residence and want to purchase a second home, needs to meet conventional lending guidelines because you cannot purchase a second home with a FHA Loan.  FHA Loans is for owner occupant primary residences only and not second home financing nor investment home financing.
We do not have overlays. Must follow Investor guidelines, i.e. satisfactory payment history for the past 12 months.  12 months payment history needs to be verified with 12 months canceled checks, or 12 months bank statements, and a verification of mortgage.

 3. Charge off posted on credit report in past 12 months.  Is it okay to assume that this is okay for mortgage lenders with no mortgage lender overlays?
Past-Due, Collection, and Charge-Off of Non-Mortgage Accounts
Accounts that are reported as past due (not reported as collection accounts) must be brought
current.  For example, if you are three months late on your automobile payment and are not current, you need to have that auto payment current in order for you to qualify for a FHA Loan.  Any other credit accounts that has been delinquent needs to be current.

• For mortgage loan borrowers who are applying for a one-unit, principal residence properties, borrowers are not required to pay off outstanding collections or non-mortgage charge-offs—regardless of the amount.

Note: If the lender marks the collection account Paid By Close in the online loan
application, DU will issue a message in the DU Underwriting Findings report stating
that the collection must be paid.

• For mortgage loan borrowers who are applying for a two- to four-unit owner-occupied and second home properties, collections and non-mortgage charge-offs totaling more than $5,000 must be paid in full prior to or at closing.

• For mortgage loan borrowers who are applying for investment properties, individual collection and non-mortgage charge-off accounts equal
to or greater than $250 and accounts that total more than $1,000 must be paid in full prior to or
at closing .

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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