Key Summary Points: If a collection or charge off account is disputed, it is counted in the cumulative $1,000. It does not matter how old the collection or charge off account is. If the credit report shows disputed derogatory accounts that exceed $1,000, the case must be manually downgraded.
Gross Rents
If you're currently in the market looking to buy a triplex or fourplex with FHA financing, you need to see if the property's rents pass the Self-Sufficiency Test. To be “self-sufficient” means that 75% of the property's rents need to cover the monthly payments.
Also, "FHA does not require that collection accounts be paid off as a condition of mortgage approval.
Request a reconsideration of value: If the appraisal's value is lower than expected, the borrower can provide additional supporting documentation, such as recent comparable sales or information on property improvements, to the lender and request a reconsideration of the appraised value.
If you decide you want to dispute the appraisal, work with your real estate agent to reconsider the value. You'll typically need to back up your request with comparable evidence, such as comparable properties or records indicating that the initial appraisal used incorrect or incomplete information.
An FHA appraisal may fail due to safety issues, structural defects, or health hazards like mold or lead paint. Additionally, discrepancies in property value compared to loan amount or location-related issues can also cause an FHA appraisal to fail.
Most mortgage loan programs allow at least some dispute wording to remain. For FHA loans, accounts with zero balances and medical accounts do not have to have dispute wording removed.
If the payment amount is not available calculate the monthly payment using 5% of the outstanding balance and include in the borrower's DTI calculation • Collection accounts with an outstanding cumulative balance < $2,000 no action required. NOTE: Accounts cannot be paid down to < $2,000.
If there are errors regarding collections accounts on your credit report, you have the legal right to dispute them and have them removed. This shouldn't cost you anything. You can also write a goodwill letter to ask the creditor or collection agency to remove the collections account from your report.
FHA-specifics
If you can show proof that you have now been employed for at least a six-month period before requesting a FHA loan, AND that before any employment gap you worked for two-years straight or longer, you have the potential to get approved.
FHA appraisal and inspection checklist
Must have an undamaged exterior, foundation and roof. Must have safe and reasonable property access. Must not contain loose wiring and exposed electrical systems. Must have all relevant utilities, including gas, electricity, water and sewage functioning properly.
FHA Loan Down Payments
The minimum down payment you're required to make on an FHA loan is directly linked to your credit score. Your credit score is a number ranging from 300 – 850 that's used to indicate your creditworthiness. An FHA loan requires a minimum 3.5% down payment for credit scores of 580 and higher.
Disputed debt appears on credit reports. However, a credit bureau generally will not use it to calculate credit scores until the investigation is completed. For this reason, some lenders may not extend credit during the investigation period.
FHA guidelines generally do not require borrowers to pay off charge-offs to qualify for a loan. This is because a charge-off on your credit report indicates that the creditor has given up on trying to collect the debt.
Can Home Sellers Refuse Offers Backed By An FHA Loan? Unfortunately, yes, they can. In a competitive seller's market, a home's seller might have their pick of many offers. They may even be able to choose an all-cash offer and avoid dealing with the mortgage process altogether.
Exceptions to the Rule: When You Can Have Multiple FHA Loans
The FHA recognizes that life circumstances can necessitate having more than one FHA loan. To be eligible for a second FHA loan, you must have at least 25% equity in your home or have paid down the FHA loan balance to 75% in certain circumstances.
If you have unpaid collections that are not medical-related, it's possible that your FHA loan eligibility may be impacted. The FHA does not require collections to be paid off entirely in order for a borrower to be approved.
Consumers are well-protected when it comes to debt collection. One of the most rigorous rules in their favor is the 7-in-7 rule. This rule states that a creditor must not contact the person who owes them money more than seven times within a 7-day period.
In this case, you'll need to call the creditor and especially ask for their 'credit bureau department. ' If they don't have one then ask for a manager. Let them know you are no longer disputing the item and you want them to make a notation of that and they should remove the dispute comment from the credit bureaus.
For Loans manually underwritten, closed-end debts do not have to be included in the qualifying ratio, if they will be paid off within 10 months from the date of closing and the cumulative payments of all such debts are Page 4 FHA Underwriting Guide FHA Underwriting Guide CORR Page 4 of 16 Published 04.01.2024 Updates ...
Disputing a charge on your credit does not directly impact your credit score. However, if your credit report changes due to the dispute, your score may change accordingly. For example, resolving an inaccurate credit utilization error might increase your score.
The seller is responsible for making repairs after an FHA appraisal. However, buyers with FHA loans can exercise a few options. One solution is to switch from a standard FHA loan to an FHA 203(k) loan. This common strategy folds repair costs into the loan.
The property needs to be free of known hazards that affect health and safety, the home's use, or may affect the structural soundness of the house and its marketability. These include, but are not limited to: Toxic chemicals. Radioactive materials.