Life happens when you are making other plans. No one plans to have negative life situations that can keep them from qualifying for an FHA Loan. Life situations such as loss of employment, loss of business, divorce, medical issues and many other personal extenuating circumstances that will affect incomes and impact a person’s credit due to their temporary situation. Temporary is a word but when an individual is struggling through these unpleasant situations for weeks or months it probably does not feel like temporary and seems like another slap in the face when that temporary situation have made a negative impact on your credit and keeps them from qualifying for a FHA Loan. A late payment on a debt obligation will affect a borrowers consumer credit because the creditor will report it to the credit bureaus. There are three primary credit reporting agencies in America, they are Experian, Equifax, and Transunion. If you are home shopping and decide to apply for a mortgage, the lender will pull your personal credit from these three credit bureaus and look at the FICO credit scores. In addition they will give attention in the review of your overall credit payment history and payment patterns. Life situations that have impacted your pay history reflecting poor credit history on your report does not disqualify you for an FHA Loan. The most popular loan programs in America is FHA Loans. FHA primary role is to encourage home ownership by acting as a government mortgage insurance entity to insure FHA Loans that are originated and funded by private banks and mortgage lenders who are HUD approved lenders and follow all of the FHA mortgage Guidelines. In the unfortunate circumstance a borrow defaults on their FHA Loan the HUD approved lender through FHA is protected from some of their loss through the required mortgage insurance. FHA borrowers are offered very low interest rates with as little as 3.5% down of the purchase price of a home. As mentioned earlier there is required mortgage insurance with a one-time upfront FHA mortgage insurance premium UFMIP, and a lifetime annual FHA mortgage insurance premium of 0.85 % for the lifetime of a the 30 year fixed rate mortgage loan.
Regarding Poor credit and qualifying for an FHA mortgage, there are mortgage lenders such as my Team that specialize in originating and funding bad credit mortgage loans. The definition of poor credit can vary from one lender to another but understandably there are borrowers that life situations have dealed a blow and went through periods of bad and poor credit due to extenuating circumstances, such as Divorce, loss of employment, loss of business, medical issues and others. Therefore just meeting the minimum credit score requirements does not automatically qualify a borrower for an FHA Loan. People may have periods of poor pay history (late payments) but mortgage lenders want to see re-established credit after periods of bad credit and more importantly the majority of FHA lenders want to see timely payment history on all debt payments for up to 12 months.
After a bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale is in the past and a continued history of late payments is considered EXTREMELY bad and majority of lenders will not approve a mortgage and keep a borrower from qualifying for a FHA loan, However, for a borrower who has had late payments after a bankruptcy, foreclosure, deed in lieu of foreclosure, and a short sale there are a select few lenders such as my Team that specialize in difficult cases. For instance files with late payments after bankruptcy and foreclosure can get an approve/eligible per Automated Underwriting system or with a manual underwrite, a good letter of explanation for why the borrower had a late payment after bankruptcy and or foreclosure. Late payments after bankruptcy and or foreclosure is not a complete STOP but it is viewed as a second offender and does not look good for the borrower. These are not quick easy application processes and take time, however good documentation is helpful and a new FHA mortgage is possible. The Larry Stepp Team at Gustan Cho Associates is available 7 days a week, holidays and weekends for additional information.
Larry Stepp 407-922-4755 LarryS.HomesNetwork@gmail.com