FHA Guidelines on Collections
However, there are specific rules: Non-Medical Collections: If the total of your non-medical collections is over $2,000, lenders need to include the payments in your debt-to-income (DTI) ratio calculations or provide proof that they've been paid off.
The borrower makes payment arrangements with the creditor. 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.
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.
FHA and VA mortgage guidelines will allow a borrower to pay down their credit card balances to $0 and the underwriter will only count a $10/month minimum payment towards the borrower's debt to income (DTI) ratio. The credit card account do not need to be paid. This is definitely good news for FHA and VA loans.
Ignoring or avoiding a debt collector is unlikely to make the debt collector stop contacting you. If you believe you do not owe the debt, you should tell the debt collector. If the debt is yours and you can't afford to pay it, you may be able to decide with the debt collector.
FHA First Mortgage
Borrower must have owned property for 12 months AND if encumbered by a mortgage made payments for the last 12 months within the month due. Otherwise limited to 85% LTV. Standard 31/43 ratios, may be exceeded with compensating factor(s).
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.
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.
The 7-in-7 rule, established by the Consumer Financial Protection Bureau (CFPB) in 2021, limits how often debt collectors can contact you by phone. Specifically, the rule states that a debt collector cannot: Make more than seven calls within a seven-day period to a consumer regarding a specific debt.
"Closed-end debts do not have to be included if they will be paid off within 10 months and the cumulative payments of all such debts are less than or equal to 5 percent of the Borrower's gross monthly income. The Borrower may not pay down the balance in order to meet the 10-month requirement."
Once your debts are settled, you might need a few years to recover and become eligible for a conventional (meaning not government backed) mortgage. On the other hand, paying off an old collection debt might not delay your timeline to buy a home at all, and can even make you more attractive to some lenders.
FHA down payment: At least 3.5 percent down if your credit score is at least 580, or at least 10 percent down if your credit score is between 500 and 579. FHA debt-to-income (DTI) ratio: At most 43 percent (up to 50 percent in some cases) FHA occupancy rules: Primary residences between one and four units.
Can You Get an FHA Loan With a Car Repossession? Yes, it is possible to obtain an FHA loan even if you have experienced a car repossession. However, certain conditions must be met, and approval will depend on various factors, including the circumstances surrounding the repossession and your overall creditworthiness.
Debt Ratios For Residential Lending
Lenders use a ratio called "debt to income" to determine the most you can pay monthly after your other monthly debts are paid. For the most part, underwriting for conventional loans needs a qualifying ratio of 33/45. FHA loans are less strict, requiring a 31/43 ratio.
To use rental income from your current home to qualify for another FHA loan, your new home must be at least 100 miles away. This rule ensures FHA loans are used for homes you live in, not for creating rental properties nearby.
FHA's self-sufficiency test requires that the rental income from a 3-4 unit covers the property's expenses, including the housing payment. This test ensures that the property generates enough rent to be a sound investment and that you can make the mortgage payments and other obligations.
You'll need to prove you have at least 25% equity to get a second loan for an increase in your family size. That could mean paying the mortgage balance down to 75% of your home's value, or choosing a different loan type, like a conventional loan.
FHA Loan: Cons
Here are some FHA home loan disadvantages: An extra cost – an upfront mortgage insurance premium (MIP) of 2.25% of the loan's value. The MIP must either be paid in cash when you get the loan or rolled into the life of the loan. Home price qualifying maximums are set by FHA.
If a property is re-sold 90 days or fewer following the date of acquisition by the seller, the property is not eligible for a mortgage insured by FHA. FHA defines the seller's date of acquisition as the date of settlement on the seller's purchase of that property.
You may be denied for an FHA loan if you have declared bankruptcy but you have not had the bankruptcy discharged. You may be denied if you are delinquent on federal taxes or otherwise owe money to the federal government but without an approved payment plan.
The phrase in question is: “Please cease and desist all calls and contact with me, immediately.” These 11 words, when used correctly, can provide significant protection against aggressive debt collection practices.
Debt collectors are not permitted to try to publicly shame you into paying money that you may or may not owe. In fact, they're not even allowed to contact you by postcard. They cannot publish the names of people who owe money. They can't even discuss the matter with anyone other than you, your spouse, or your attorney.