12-Month Mortgage History
FHA requires a minimum 12-month mortgage history of on time payments to qualify for a cash-out refinance. FHA allows you to refinance cash-out up to 80% of the value of the property with a minimum credit score of 500.
Bankruptcy Chapter 7 & 13
At least two years must have elapsed since the discharge date of the Chapter 7 Bankruptcy, according to FHA guidelines.
FHA will approve a borrower who is paying on a Chapter 13 Bankruptcy if those payments have been made on time for a period of one year.
Foreclosure & Short Sale
A borrower whose previous residence or other real property was foreclosed on or has given a deed-in-lieu of foreclosure within the previous three years is generally not eligible.
FHA guidelines lets you qualify after three years from a short sale. FHA guidelines requires three-year past from the date of the short sale. If your mortgage payments were not late at the time of short sale you do not have to wait to qualify for an FHA loan.
Charge Off Accounts & Collection Accounts
A charged off account is a debt that has become seriously delinquent, and the lender has given up on being paid. FHA does not require charge off accounts to be paid. If you have a charge off on your credit report, you do not have to do anything to qualify for an FHA loan approval.
A collection is minor in nature usually does not need to be paid off as a condition for loan approval. Medical collections do not need to be paid off.
- If evidence of a payment arrangement is not available, the lender must calculate the monthly payment using 5% of the outstanding balance of each collection and include the monthly payment in the borrower’s debt-to-income ratio.
Taxes & Judgements
FHA allows borrowers to obtain an FHA loan if they owe Federal income taxes. The borrower needs to set up a payment plan with the IRS and does not have to have make any payment if there is no tax lien. If there is a federal tax lien on your home, you must satisfy the lien at closing.
FHA requires judgments to be paid off before or at closing. An exception to the payoff of a court ordered judgment may be made if the borrower has a payment agreement and has made timely payments.
Disputed Accounts
FHA requires loans of borrowers with derogatory disputed accounts of $1,000 or more (excluding medical) to be manually underwritten.
