Advice On Qualifying For FHA Loans With Not Paying Off Collections

This Article On Qualifying For FHA Loans With Not Paying Off Collections Was UPDATED On December 3rd, 2017

I met Gustan Cho when I was working with another mortgage lender as a licensed mortgage loan originator.

  • I was seeking out some information concerning a loan that I was working on at my mortgage company
  • I needed a second opinion in qualifying for FHA Loans With Not Paying Off Collection Accounts
  • While researching about the 5% rule for outstanding unpaid non-medical collections, it led me to his great website, Gustan Cho Associates Mortgage Resource Center 
  • Here is the rule in qualifying for FHA Loans with outstanding collection accounts
  • If you have a total aggregate balance of unpaid non-medical collections that is greater than $2,000, then 5% of the unpaid outstanding collection account balance will be taken into calculating your debt to income ratios
  • Those collections will not have to be paid off and you do not have to make any payments but the 5% rule only applies just in calculating your debt to income ratios

Meeting Gustan Cho For The Very First Time To Find About More About FHA Loans With Not Paying Off Collections

After further reading some of the requirements for his company, it wowed me to call him to find more about FHA Loans With Not Paying Off Collections:

  • Gus answered the telephone with such excitement in his voice, it literally gave me energy
  • As him and I chalked it up about the company that I was working for, something dawned on us
  • The mortgage lender I was working with has stricter overlays than Gus’s company and FHA Loans With Not Paying Off Collections was a part of their overlays
  • FNMA, Freddie Mac, FHA, and VA have basic guidelines that lenders adhere to
  • Lenders in turn can add extra requirements on top of those guidelines which are called mortgage lender overlay
  • I did know that most mortgage companies did have many lender overlays and I was excited to find a company such as The Gustan Cho Team at USA Mortgage where they have very little to no lender overlays on all of their government and conforming mortgage products

How I Met Gustan Cho

After our conversation, Gus realized how talented I was and the years of experienced I had in the mortgage industry as a licensed mortgage loan originator so he offered me a position to open a branch in N.C.

  • How does all of this affect borrowers in Illinois?
  • This means more people will be able to get loans. Gustan Cho is the leader of The Gustan Cho Team At USA Mortgage and is in charge of expanding his team nationwide
  • Most licensed mortgage loan officers do not realize that mortgage lenders like USA Mortgage, a division of DAS Acquisition Company LLC exists where there are no overlays or at worst, very minimal lender overlays on FHA Loans, VA Loans, USDA Loans, and Conventional Loans
  • I did not realize that over 70% of borrower of The Gustan Cho Team at USA Mortgage are borrowers who were either denied or could not qualify at another mortgage lender
  • Most of the borrowers were out of options that they gave a final chance in by searching the internet and finding Gustan Cho Associates Mortgage Resource Center and contacting The Gustan Cho Team at USA Mortgage

The Difference At The Gustan Cho Team At USA Mortgage

First, our credit scores start at 580 FICO to qualify for a 3.5% down payment FHA home purchase mortgage loan.

  • Most banks, mortgage brokers, or lenders require the minimum credit score at 620 and 640
  • Even though it is not a FHA requirement and FHA only requires a 580 FICO credit score, banks and most other mortgage lenders will require a higher credit score than the 580 FICO credit score required by FHA. Second, our debt to ratios can also go higher-up to 56.9% DTI depending on your credit score
  • FHA allows the front end debt to income ratios to be as high as 46.9% DTI and the back end DTI to be as high as 56.9% DTI if the borrower has at least a 620 FICO credit score
  • If your credit score is lower than 620 FICO, the debt to income is capped at 43 percent DTI
  • Also, you may not need a verification of rent depending on your credit score
  • You can rest assured if your credit scores are higher than 620 FICO, the Automated Underwriting System will not ask you for rental verification 
  • This helps those who pay to private landlords, not a management company, and cannot prove it by providing 12 months of cancelled checks or copies of money orders
  • If your credit scores are below 580 FICO, the Automated Underwriting System, or AUS, may get you an approve/eligible per DU FINDINGS but may require verification of rent
  • If you cannot provide a VOR, then your loan officer can help you get your credit scores to at least 620 FICO by using some simple tricks of the trade
  • When it comes to judgments and tax liens, borrowers think they cannot qualify for a loan
  • We still may be able to approve your loan if you have a payment plan set up and are making payments on time for at least three months
  • A written payment agreement is required and at least three months worth of canceled checks will be required
  • This will be added to your debt-ratio, of course. A lot of borrowers don’t think they qualify for many reasons

About The Author Of Qualifying For FHA Loans With Not Paying Off Collections

Bill Burg is a writer for Gustan Cho Associates for Gustan Cho Associates Mortgage Resource Center and a mortgage loan officer. Bill is also a loan officer for The Gustan Cho Team at USA Mortgage.

  • Bill Burg’s passion to make the dream of home ownership a reality for renters and those who have had trouble qualifying for home loans due to prior bad credit or due to extenuating circumstances that they had at one time of their lives but have recovered and cannot qualify at their local banks or at mortgage companies due to their lender overlays
  • Bill Burg is now a full member of the Gustan Cho Associates Mortgage Resource Center
  • We are proud that Bill Burg will be one of us and be writing informational blogs to our readers and members of our newsletter

Bill Burg is an expert in all areas of mortgage lending and FHA, VA, USDA, FANNIE/FREDDIE MAC FINANCING. If you have any topics that you would like Bill Burg to write about, contact Bob Vogel at

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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