FHA CREDIT.. BK & Foreclosures OK After Short Waiting Periods

FHA CREDIT

FHA may be the answer for buyers with serious credit issues in their past for loans up to $729,750 is some California Counties.  I recently closed a $850,000 purchase with a $697,500 FHA loan (maximum for San Diego County).

Most lenders bump their prices for low credit scores but if the buyer has reestablished their scores after a bankruptcy or foreclosure there is not a price penalty.

Credit scores must meet FHA and Lender guidelines for all FHA mortgages except for a shrinking number of lenders that do not require any credit check on streamline refinances.

Each lender has individual guidelines based on their investor requirements

Generally, credit scores will be in the following ranges:

500 - 579  FHA requires a 10% down payment and absolutely no derogatory credit for the past twelve months on scores below 579.  There are very few lenders that will accept scores in this range.  I know of only one.

580 - 619  Recently several lenders have added this range to their rate sheets.  Those lenders require there be NO derogatory credit for the previous twelve months.  Some require a 5% down payment.  

620 - 639 A shrinking list of lenders is available for borrowers in this credit range.  Generally, there can be no derogatory credit in past twelve months.

640 +     640 is becoming the minimum for a growing list of lenders.

When credit score falls below 640 borrowers should start rebuilding their credit history with a reputable credit repair company.  When looking for a credit repair company be very careful and check references.

BANKRUPTCY

• Chapter 7 Requires a minimum two-year period since discharge date; minimum one-year lapse period may be acceptable if bankruptcy was caused by extenuating circumstances that are not likely to recur the reason can not be debt caused by uneducated choices. Only extenuating circumstances will be considered and only after one year has passed. In all cases the borrower must have re-established credit and must demonstrate the ability to manage their financial affairs.
• Chapter 13 is permitted after twelve months and a credit performance has been satisfactory. The borrower must receive court approval to enter into the mortgage transaction

 

FORECLOSURES:

Require a minimum of three years since the completion of the action (sale date) and the borrower must have re-established good credit.

 

Non-Traditional Credit:

Non-Traditional Credit is acceptable to some lenders if the borrower does not have any prior credit history or if that length of credit history is too short to qualify.  Borrowers must have three credit sources with at least a twelve month credit history of rent, utilities, local store accounts that do not report credit, cell phone accounts, and/or any other acceptable sources. 

 

Judgments:

Court ordered judgments must be paid completely, unless the borrower has been making regular and timely payments and the creditor is willing to subordinate that judgment to the new insured mortgage. The borrower must provide a satisfactory written explanation. For specific lender requirements check with the Lender's AE.

 

Collections:

Lenders handle Collections on a case by case basis but generally, collections exceeding $1,000 must be paid or have payment plans.  It is a good idea to work with a credit consultant when paying collections because paying them off can sometimes actually hurt the borrower's credit score.

 

Delinquency or Default on Federal Debt:

If the borrower is presently delinquent on any federal debt or is obligated on any type of federal lien, he or she is not eligible for an FHA loan until the delinquent account is brought current, paid, or otherwise satisfied, or a satisfactory repayment plan is made between the borrower and the federal agency owed and is verified in writing.

 

Education is Consumer's Only Real Protection. 

• FHA 203k Renovation Mortgage - All You Need To Know Video
• Energy Efficient Mortgages - All You Need To Know Video
• What You Should Know About APR
• How To Shop for Mortgage Rates.
• Beware of Misleading Lender Advertising
• Education is the best consumer protection
• Rates and Point Relationship Explained

Bill Ladewig

800.664.7283 (SAVE)

Bill@YourFhaGuru.com

Website

 

 

 

Bill Ladewig is a Mortgage Broker Licensed by the California Department of Real Estate 00968137

NMLS #291249

 

 

 

 

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