Posted on: 29th Sep, 2012 03:01 am
I am planning to apply for FHA loan to buy a home in the next two months. I have some negative items on my credit report. Will that create a problem in qualifying for the FHA loan?
It will be better if you could remove the negative items from your credit report and then apply for the FHA loan. If there are any delinquent accounts, then it will be better if you could pay it off.
Yes, of course , It will matter in FHA approval. You must have to remove those negative thing from your credit report in order to get approved for FHA ( Federal Housing Administration).
Having negative items on your credit report may create a problem for you to qualify for a FHA loan. As such, it will be better to remove the negative items from your credit report.
FHA rule is if your outstanding collections are greater then $1,000 then you must pay them off or be on a payment plan to pay off these accounts. Just having slow payments will not necessarily deny you a FHA loan. You dont want public records or liens that have balances or collections with balances. If you have paid liens or paid collections, it would be at the Underwriters Discretion if they approve your loan or not. Good Luck
Thanks Chris and all the other members of MortgageFit!! Your answers were helpful!! :)
Even after all these financial loose ends, if your credit score is more than 620, you may be approved for a mmrtgage loan. Anyways, you have to take steps to remove the negative items from your report.
The down payment required to get approved for an FHA loan is 3.5% of the purchase price of the house. Again, the credit score required is 620. If you fulfill these criteria, you may be approved the loan.
chris-gummerson wrote: "FHA rule is if your outstanding collections are greater then $1,000 then you must pay them off or be on a payment plan to pay off these accounts."
This is innaccurate. Collections do not have to be paid or be in a payment plan.
The FHA rule regarding collections greater than $1000 was rescinded before it ever went into effect. The guidance on collection accounts remains as it was for some time as currently outlined in HUD Handbook 4155.1 4.C.2.e:
FHA does not require that collection accounts be paid off as a condition of mortgage approval. However, court-ordered judgments must be paid off before the mortgage loan is eligible for FHA insurance endorsement.
Exception: An exception to the payoff of a court-ordered judgment may be made if the borrower has an agreement with the creditor to make regular and timely payments, and provided documentation indicating that payments have been made according to the agreement.
This is innaccurate. Collections do not have to be paid or be in a payment plan.
The FHA rule regarding collections greater than $1000 was rescinded before it ever went into effect. The guidance on collection accounts remains as it was for some time as currently outlined in HUD Handbook 4155.1 4.C.2.e:
FHA does not require that collection accounts be paid off as a condition of mortgage approval. However, court-ordered judgments must be paid off before the mortgage loan is eligible for FHA insurance endorsement.
Exception: An exception to the payoff of a court-ordered judgment may be made if the borrower has an agreement with the creditor to make regular and timely payments, and provided documentation indicating that payments have been made according to the agreement.