Loan Modification

Much has been said about Loan Modifications. While there is plenty of talk about them, most people have difficulty obtaining one.  According to the Florida Office of Financial Regulation, it is important to be informed early in the process.  They recommend:

FHA Requirements: Credit Guidelines

According to the FHA, there are certain things FHA Lenders Want to See When They Review Your Credit

Before approving a loan, the lender analyzes the integrity of the borrower's past credit performance. Based on FHA requirements, those who have a good credit history demonstrated by a solid record of accomplishment of timely payments will likely be eligible for a loan. A potential borrower whose credit history is marred by slow payments, poor financial judgment and delinquent accounts is not a good candidate for loan approval.

The following is a list of items that concern lenders when reviewing the borrower's credit:

NO CREDIT HISTORY

Two lines of credit are necessary to apply for an FHA loan. However, in the event a borrower does not have sufficient credit on their credit report the FHA will allow substitute forms. Acceptable forms listing are located here.

LATE PAYMENTS

The underwriter analysis of borrower credit reviews the overall pattern of credit behavior rather than isolated cases of slow payments. If a borrower maintains good payment pattern, regardless of a specific period of financial difficulty preceded it, the borrower may escape disqualification.

CHAPTER 13 BANKRUPTCY

FHA will consider approving a borrower who is still paying on a Chapter 13 Bankruptcy if the borrower is compliant after a year. The borrower needs the court trustee's written approval in order to proceed with the loan. The borrower will have to give a full explanation of the bankruptcy with the loan application and must also have re-established good credit, qualify financially and have good job stability.

CHAPTER 7 BANKRUPTCY

At least two years must have elapsed since the discharge date of the borrower and / or spouse's Chapter 7 Bankruptcy, according to FHA guidelines. This is not to be confused with the bankruptcy filing date. A full explanation will be required with the loan application. In order to qualify for an FHA loan, the borrower must qualify financially, have re-established good credit and have a stable job.

FORECLOSURE

FHA insured mortgages are generally not available to borrowers with foreclosed property or given a deed-in-lieu of foreclosure within the previous three years. However, if the foreclosure of the borrower's main residence was the result of extenuating circumstances, lenders may grant exceptions if they have since established good credit. This does not include the inability to sell a home when transferring from one area to another.

COLLECTIONS, JUDGEMENTS AND FEDERAL DEBTS

According to FHA guidelines, a collection is minor in nature usually does not need to be paid off as a condition for loan approval. Any judgments will have to be paid in full prior to closing. Borrowers who are delinquent on any federal debt, such as tax liens, student loans, etc., are not eligible.