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FHA and defaulted student loans

Frequent Contributor

FHA and defaulted student loans

"In order to get an FHA loan, you cannot have any delinquent federal debts, such as a student loan or tax lien. In order to be eligible, you must make sufficient arrangements to pay off the debts and submit the plan in writing." Does anyone have any inside or personal experience? If my loans defaulted in 2006 and were consolidated, no longer show defaulted on National Loan Student Data base, and consolidation trade line in good standing, paid as agreed, am I ok? Or will former Defaults come back to haunt me yet again?

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Message 1 of 6
5 REPLIES
Established Contributor

Re: FHA and defaulted student loans

It's my understanding that if a prior default has been resolved, through rehabilitation, being paid off, consolidation, etc, then it will NOT be a problem for FHA. Since I don't know the exact details of your situation, you will have to ask your lender for their professional opinion, but from what you've described, you shouldn't be automatically denied because of this old federal student loan default.

Mid-2010 Starting Scores: FAKO EQ 476 FAKO EX 506 FICO TU98 575
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Message 2 of 6
Contributor

Re: FHA and defaulted student loans


Student_Loans_Kill wrote:
"In order to get an FHA loan, you cannot have any delinquent federal debts, such as a student loan or tax lien. In order to be eligible, you must make sufficient arrangements to pay off the debts and submit the plan in writing." Does anyone have any inside or personal experience? If my loans defaulted in 2006 and were consolidated, no longer show defaulted on National Loan Student Data base, and consolidation trade line in good standing, paid as agreed, am I ok? Or will former Defaults come back to haunt me yet again?
You need to check with your loan provider to make sure that you are in the clear and if so you should have received something in writing saying that you are in the clear. I defaulted on some of my student loans many years ago and in order to satisfy their requirements, I had to make 6 months of on time payments and I was reinstated but they (student loan company) sent me a letter stating I was no longer in default. Whatever your situation may be, the lender/underwriting will most certainly ask you for proof of being out of default. I would work on that ASAP. Who was your original loan servicer/lender?
Message 3 of 6
Frequent Contributor

Re: FHA and defaulted student loans


creditisbetter2 wrote:

Student_Loans_Kill wrote:
"In order to get an FHA loan, you cannot have any delinquent federal debts, such as a student loan or tax lien. In order to be eligible, you must make sufficient arrangements to pay off the debts and submit the plan in writing." Does anyone have any inside or personal experience? If my loans defaulted in 2006 and were consolidated, no longer show defaulted on National Loan Student Data base, and consolidation trade line in good standing, paid as agreed, am I ok? Or will former Defaults come back to haunt me yet again?
You need to check with your loan provider to make sure that you are in the clear and if so you should have received something in writing saying that you are in the clear. I defaulted on some of my student loans many years ago and in order to satisfy their requirements, I had to make 6 months of on time payments and I was reinstated but they (student loan company) sent me a letter stating I was no longer in default. Whatever your situation may be, the lender/underwriting will most certainly ask you for proof of being out of default. I would work on that ASAP. Who was your original loan servicer/lender?

My loans were paid through William D Ford, and I am making my payments on that.  Your situations doesn't sound like a consolidation but a rehab (much better for your credit, I messed up too bad).  Looking at my tradelines on my credit report will show they are zero balance now, "paid after collection default student loan or my favorite, turned into goverment"

 

But thank you for the advise, I will start that paperwork now


Starting Score: 656
Current Score: 678 TU 08, 665 EQ MyFico, 698 EX PSECU
Goal Score: 7OO needed for Mortgage application


Take the FICO Fitness Challenge
Message 4 of 6
Contributor

Re: FHA and defaulted student loans


Student_Loans_Kill wrote:

creditisbetter2 wrote:

Student_Loans_Kill wrote:
"In order to get an FHA loan, you cannot have any delinquent federal debts, such as a student loan or tax lien. In order to be eligible, you must make sufficient arrangements to pay off the debts and submit the plan in writing." Does anyone have any inside or personal experience? If my loans defaulted in 2006 and were consolidated, no longer show defaulted on National Loan Student Data base, and consolidation trade line in good standing, paid as agreed, am I ok? Or will former Defaults come back to haunt me yet again?
You need to check with your loan provider to make sure that you are in the clear and if so you should have received something in writing saying that you are in the clear. I defaulted on some of my student loans many years ago and in order to satisfy their requirements, I had to make 6 months of on time payments and I was reinstated but they (student loan company) sent me a letter stating I was no longer in default. Whatever your situation may be, the lender/underwriting will most certainly ask you for proof of being out of default. I would work on that ASAP. Who was your original loan servicer/lender?

My loans were paid through William D Ford, and I am making my payments on that.  Your situations doesn't sound like a consolidation but a rehab (much better for your credit, I messed up too bad).  Looking at my tradelines on my credit report will show they are zero balance now, "paid after collection default student loan or my favorite, turned into goverment"

 

But thank you for the advise, I will start that paperwork now


You are correct, mine was a rehab but it was with ford as well. are we dating ourselves??? Smiley Happy But even with your situation, the underwriters will most likely ask for proof that you've satisfied your issue with Ford especially if that comment on the tradelines states that it was in default.
Message 5 of 6
New Member

Re: FHA and defaulted student loans

This is directly from FHA.gov This should help! ........ Is a borrower eligible if they have a delinquent Federal debt but have a clear CAIVRS? If the borrower, as revealed by public records, credit information, or HUD's Credit Alert Interactive Voice Response System (CAIVRS), is presently delinquent on any Federal debt (e.g., VA-guaranteed mortgage, Title I loan, Federal student loan, Small Business Administration loan, delinquent Federal taxes) or has a lien, including taxes, placed against his or her property for a debt owed to the U.S., the borrower is not eligible until the delinquent account is brought current, paid, otherwise satisfied, or a satisfactory repayment plan is made between the borrower and the Federal agency owed and is verified in writing. Tax liens may remain unpaid provided the lien holder subordinates the tax lien to the FHA-insured mortgage. If any regular payments are to be made, they must be included in the qualifying ratios. Although eligibility for an FHA-insured mortgage may be established by performing the actions described above, the overall analysis of the creditworthiness must include consideration of a borrower's previous failure to make payments to the Federal agency in the agreed-to manner and must document its analysis of how the previous failure does not represent a risk of mortgage default. Handbook 4155.1 4.A.7.f REFERENCE Handbook 4155.1 4.A.7.f REFERRAL LOCATION DISCLAIMER DISCLAIMER: All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.
Message 6 of 6