The Federal Housing Administration (FHA) has decided to withdraw the tough new rules that were going to take effect from July 1st, 2012. If the new rules have had come into effect, then it would have affected a huge number of borrowers who had one or more collection accounts or disputed bill accounts mentioned in their credit files wherein the aggregate amounts were $1,000 or greater. Experts opine that if the new rules would have gone into effect, and then 1 out of every 3 FHA loan applicants would have faced difficulty in getting a loan approval.
If you want to apply for an FHA loan now and you think you have collections or disputes on file, then you don't have to worry much. It is no more mandatory to pay off or resolve the accounts before your FHA loan closing. However, it is true that the loan officer will definitely give a hard look to all the negative items in your credit report and may slow down the approval process. It should also be kept in mind that lenders' can overlay practices. They may turn down your loan application even if FHA's more generous rules say you are acceptable.