Does Participating In Consumer Credit Counseling Disqualify A Borrower For A Mortgage?
Here is a helpful post with a question clients may ask you:
Does Participating In Consumer Credit Counseling Disqualify A Borrower For A Mortgage?
As he noted, FHA says OK, FNMA says nothing.
Importantly, people need to realize that a Consumer Credit Counseling Service many times will not make payments to Creditors on time in hopes of negotiating the balance down.
Be sure to find out whether this applies to you or someone you care about.
I often am asked Does Participating In Consumer Credit Counseling Disqualify A Borrower For A Mortgage? The answer is NO, just participating in Consumer Credit Counseling does not disqualify a borrower for a mortgage. FHA is very clear about this, but Fannie Mae is not, in fact I could not find anything in the Fannie Mae Guidelines addressing Consumer Credit Counseling.
The problem with using the services of a Consumer Credit Counseling Service is that they many time will not make payments to Creditors on time so that they can leverage their position in trying to get the Creditor to accept less than the full amount owed. While it is good that they are many times successful in getting Creditor to accept less than owed, it is bad for the credit of the consumer who owes the money. By going late it creates a bad payment history, and the consumers credit scores go down. The late payments and the low credit scores are what end up disqualifying the consumer for a mortgage, not the use of a Consumer Credit Counseling Service.
FHA does have some stipulations if a Borrower is using a Consumer Credit Counseling Service. FHA will require the Lender that the Borrower is applying for a Mortgage with, to document that:
- One year of the pay-out period has passed under the plan.
- All payments to Creditors have been made on time during the one year period.
- The Borrower has obtained written permission from the Consumer Credit Counseling Service to enter into a Mortgage transaction.
While the answer to the question Does Participating In Consumer Credit Counseling Disqualify A Borrower For A Mortgage? Is a simple NO, the reality maybe that the Borrower will not be able to meet the three stipulations above.
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Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
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