HUD Derogatory Credit Mortgage Guidelines On FHA Mortgages

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HUD Derogatory Credit Mortgage Guidelines On FHA Mortgages

This ARTICLE On HUD Derogatory Credit Mortgage Guidelines On FHA Mortgages Was PUBLISHED On November 12th, 2019

HUD Derogatory Credit Mortgage Guidelines
Gustan Cho Associates

Over 75% of our borrowers at Gustan Cho Associates are folks who got turned down at other lenders.

  • Not all lenders have the same FHA Lending Requirements
  • All mortgage companies need to meet HUD Agency Mortgage Guidelines
  • However, lenders are allowed to have higher lending standards on FHA Loans that surpass the minimum HUD 4000.1 FHA Guidelines
  • The higher lending requirements imposed by mortgage companies are called lender overlays
  • Just because a borrower does not qualify with one lender does not mean they cannot qualify with a lender with no overlays like Gustan Cho Associates
  • Gustan Cho Associates Mortgage Group is one of the very few national lenders with no overlays on FHA Loans

In this article, we will cover and discuss HUD Derogatory Credit Mortgage Guidelines On FHA Mortgages.

HUD Derogatory Credit Mortgage Guidelines Versus Lender Overlays

What are HUD Derogatory Credit Mortgage Guidelines Versus Lender Overlays

In the above paragraph, we explained what lender overlays are. Not all lenders have the same overlays. A lender needs to meet the minimum HUD Guidelines for FHA Loans. However, the mortgage company can set any lender overlays they want.

Typical Overlays On FHA Loans By Mortgage Companies

What is Typical Overlays On FHA Loans By Mortgage Companies

Below are the minimum HUD Agency Guidelines versus typical lender overlays imposed by lenders on FHA Loans:

The minimum credit score requirement on a 3.5% down payment FHA Home Purchase Loan is 580 FICO:

  • However, many lenders will have lender overlays on credit scores where they require a 620 to 640 credit scores

Borrowers with under 580 and down to 500 FICO are eligible to qualify for FHA Loans with 10% down payment:

  • Most lenders will not take on borrowers with under 580 credit scores
  • Gustan Cho Associates are one of the very few lenders that will accept borrowers down to 500 FICO

Outstanding collections and charged-off accounts do not have to be paid:

  • Many lenders will require borrowers to pay outstanding collections and charged-off accounts even though HUD Guidelines does not require it

Borrowers can qualify for FHA Loans during Chapter 13 repayment with Trustee Approval:

  • Many lenders will not accept borrowers during Chapter 13 repayment and will require a discharge

There is no waiting period after Chapter 13 Bankruptcy discharged date to qualify for FHA loans:

  • Lenders can require a one to two-year waiting period after Chapter 13 Bankruptcy discharged date

Manual Underwriting is allowed on FHA and VA Loans:

  • Not all lenders entertain manual underwriting on VA and/or FHA Loans

Late payments in the past 12 months are not deal killers if the borrower can get an approve/eligible per automated underwriting system (AUS).

HUD Derogatory Credit Mortgage Guidelines On Judgments And Tax-Liens

What are HUD Derogatory Credit Mortgage Guidelines On Judgments And Tax-Liens

Borrowers with judgments and tax-liens do not have to pay the derogatory items to qualify for FHA Loans.

  • Borrowers with judgments and tax-liens can get a written payment agreement with the judgment creditor and/or IRS and set up a minimum monthly payment plan
  • Three months of payments need to be made
  • After the borrower can provide three months canceled checks and/or bank statements, the borrower can qualify for an FHA loan
  • Borrowers can also negotiate with the judgment and/or Internal Revenue Service for a lesser amount than the face value of the judgment and/or tax-lien
  • It needs to be on paper
  • Once payment is made on the negotiated settlement, they can qualify for an FHA loan
  • The negotiated payment on the judgment and/or IRS tax lien can be paid at closing to the title agent

For more information on this article and/or other mortgage-related topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@loancabin.com.

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