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Valued Member
rinkgirl2
Posts: 31
Registered: ‎05-14-2012
0

Anything to worry about for FHA?

My husband and I are looking to purchase a home next Spring and are hoping to qualify for FHA.  Our scores according to MyFico are 645 and 660, but I am wondering if there is anything we need to clear up on our reports that might keep us from qualifying.  Here is what we have:

 

Chapter 7 BK Discharged 07/2010

Post-BK:

State Tax Lien - PIF 08/2011

Collection for unpaid timeshare - $6,900 balance, have been making on-time payments since 03/2012

Collection for a medical bill - $615 PIF 10/2011, trying to GW

Collection for a medical bill - $132 Not paid, trying to PFD

Collection for a medical bill - $76 Not paid, trying to PFD

 

We each have 3 credit cardsand two auto loans along with student loans all being reported on time. 

 

Is there anything we should be worried about when we're going through UW for FHA? 

Valued Contributor
sccredit
Posts: 1,116
Registered: ‎09-14-2012
0

Re: Anything to worry about for FHA?


rinkgirl2 wrote:

My husband and I are looking to purchase a home next Spring and are hoping to qualify for FHA.  Our scores according to MyFico are 645 and 660, but I am wondering if there is anything we need to clear up on our reports that might keep us from qualifying.  Here is what we have:

 

Chapter 7 BK Discharged 07/2010

Post-BK:

State Tax Lien - PIF 08/2011

Collection for unpaid timeshare - $6,900 balance, have been making on-time payments since 03/2012

Collection for a medical bill - $615 PIF 10/2011, trying to GW

Collection for a medical bill - $132 Not paid, trying to PFD

Collection for a medical bill - $76 Not paid, trying to PFD

 

We each have 3 credit cardsand two auto loans along with student loans all being reported on time. 

 

Is there anything we should be worried about when we're going through UW for FHA? 


I was under the impression you had to be 3 years out from a BK discharge for an FHA loan, 2 years for VA.  You'll have to pay the smaller collections if you have disputed them on your CR in the last 2 years.  Not sure how the $6,900 collection will be handled, you'll probably have to show 6-12 months of payment history and it will probably be taken into account in your DTI calculation.

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Contributor
Elcid89
Posts: 567
Registered: ‎10-04-2012
0

Re: Anything to worry about for FHA?


sccredit wrote:

rinkgirl2 wrote:

My husband and I are looking to purchase a home next Spring and are hoping to qualify for FHA.  Our scores according to MyFico are 645 and 660, but I am wondering if there is anything we need to clear up on our reports that might keep us from qualifying.  Here is what we have:

 

Chapter 7 BK Discharged 07/2010

Post-BK:

State Tax Lien - PIF 08/2011

Collection for unpaid timeshare - $6,900 balance, have been making on-time payments since 03/2012

Collection for a medical bill - $615 PIF 10/2011, trying to GW

Collection for a medical bill - $132 Not paid, trying to PFD

Collection for a medical bill - $76 Not paid, trying to PFD

 

We each have 3 credit cardsand two auto loans along with student loans all being reported on time. 

 

Is there anything we should be worried about when we're going through UW for FHA? 


I was under the impression you had to be 3 years out from a BK discharge for an FHA loan, 2 years for VA.  You'll have to pay the smaller collections if you have disputed them on your CR in the last 2 years.  Not sure how the $6,900 collection will be handled, you'll probably have to show 6-12 months of payment history and it will probably be taken into account in your DTI calculation.


+1 FHA won't underwrite with a previous BK that is less than 3 years old, so the earliest you can close is July 2013.

 

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Contributor
Elcid89
Posts: 567
Registered: ‎10-04-2012
0

Re: Anything to worry about for FHA?

I'd also opine that the two smaller collections will be essentially meaningless from an underwriting standpoint whether they are deleted or not. The amounts are just too small to care about. Just pay them off.

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Valued Member
rinkgirl2
Posts: 31
Registered: ‎05-14-2012
0

Re: Anything to worry about for FHA?

Oh.  :smileysad:   For some reason I thought I read it was 2 years on a BK for FHA.  Maybe it's just the lenders that want to see 3 years?  Thanks for all of the advice.  I'm really just hoping the bigger collection isn't an issue since we're making payments on it.

Contributor
Elcid89
Posts: 567
Registered: ‎10-04-2012
0

Re: Anything to worry about for FHA?


rinkgirl2 wrote:

Oh.  :smileysad:   For some reason I thought I read it was 2 years on a BK for FHA.  Maybe it's just the lenders that want to see 3 years?  Thanks for all of the advice.  I'm really just hoping the bigger collection isn't an issue since we're making payments on it.


Sorry, you are correct. 4551.1 allows for FHA 2 years post Chapter 7. These are the relevant sections of 4551.1

 

4551.1 4.C.2.g

 

A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from
obtaining an FHA-insured mortgage if at least two years have elapsed since
the date of the discharge of the bankruptcy. During this time, the borrower
must have


· re-established good credit, or
· chosen not to incur new credit obligations.


An elapsed period of less than two years, but not less than 12 months, may be
acceptable for an FHA-insured mortgage, if the borrower


· can show that the bankruptcy was caused by extenuating circumstances
beyond his/her control, and
· has since exhibited a documented ability to manage his/her financial affairs
in a responsible manner.


Note: The lender must document that the borrower’s current situation
indicates that the events which led to the bankruptcy are not likely to recur.

 

4551.1 4.C.2.h

 

A Chapter 13 bankruptcy does not disqualify a borrower from obtaining an
FHA-insured mortgage, provided that the lender documents that


· one year of the pay-out period under the bankruptcy has elapsed
· the borrower’s payment performance has been satisfactory and all required
payments have been made on time, and
· the borrower has received written permission from bankruptcy court to enter
into the mortgage transaction.


TOTAL Scorecard Accept/Approve Recommendation


Lender documentation must show two years from the discharge date of a
Chapter 13 bankruptcy. If the Chapter 13 bankruptcy has not been discharged
for a minimum period of two years, the loan must be downgraded to a Refer
and evaluated by a Direct Endorsement (DE) underwriter.

 

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Contributor
Elcid89
Posts: 567
Registered: ‎10-04-2012
0

Re: Anything to worry about for FHA?

Note that those are HUD guidelines. Lenders can, and do, impose overlays which may still make it impossible.

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Valued Member
rinkgirl2
Posts: 31
Registered: ‎05-14-2012
0

Re: Anything to worry about for FHA?

So with lending guidelines being more strict and us not having perfect credit since filing, does it seem like we'd be more  likely to qualify if we wait 3 years?

Contributor
Elcid89
Posts: 567
Registered: ‎10-04-2012
0

Re: Anything to worry about for FHA?


rinkgirl2 wrote:

So with lending guidelines being more strict and us not having perfect credit since filing, does it seem like we'd be more  likely to qualify if we wait 3 years?


It will depend on the lender. All you can really do is roll the dice and see what lenders come back with.

 

Mortgage inquiries within any 45 day period count as a single inquiry for score calcuations, so best advice is to shop your package to several lenders at the same time and see what they can do for you. Worst case you're told no and you have to wait a little longer.

 

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Moderator Emeritus
webhopper
Posts: 7,225
Registered: ‎09-16-2011
0

Re: Anything to worry about for FHA?


Elcid89 wrote:

rinkgirl2 wrote:

Oh.  :smileysad:   For some reason I thought I read it was 2 years on a BK for FHA.  Maybe it's just the lenders that want to see 3 years?  Thanks for all of the advice.  I'm really just hoping the bigger collection isn't an issue since we're making payments on it.


Sorry, you are correct. 4551.1 allows for FHA 2 years post Chapter 7. These are the relevant sections of 4551.1

 

4551.1 4.C.2.g

 

A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from
obtaining an FHA-insured mortgage if at least two years have elapsed since
the date of the discharge of the bankruptcy. During this time, the borrower
must have


· re-established good credit, or
· chosen not to incur new credit obligations.


An elapsed period of less than two years, but not less than 12 months, may be
acceptable for an FHA-insured mortgage, if the borrower


· can show that the bankruptcy was caused by extenuating circumstances
beyond his/her control, and
· has since exhibited a documented ability to manage his/her financial affairs
in a responsible manner.


Note: The lender must document that the borrower’s current situation
indicates that the events which led to the bankruptcy are not likely to recur.

 

4551.1 4.C.2.h

 

A Chapter 13 bankruptcy does not disqualify a borrower from obtaining an
FHA-insured mortgage, provided that the lender documents that


· one year of the pay-out period under the bankruptcy has elapsed
· the borrower’s payment performance has been satisfactory and all required
payments have been made on time, and
· the borrower has received written permission from bankruptcy court to enter
into the mortgage transaction.


TOTAL Scorecard Accept/Approve Recommendation


Lender documentation must show two years from the discharge date of a
Chapter 13 bankruptcy. If the Chapter 13 bankruptcy has not been discharged
for a minimum period of two years, the loan must be downgraded to a Refer
and evaluated by a Direct Endorsement (DE) underwriter.

 


 

According to this... you incurred new debt post BK that was then sent to collections. I don't think this will be viewed positively by the lender as in meeting the above requirements :smileysad:

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