Qualifying for a FHA-insured mortgage with outstanding judgments on credit report
Are you worried that you may not qualify for a FHA home due to outstanding judgments in your credit history? Read on:
One of the major concerns for new FHA loan applicants is their past credit history. Even with a good credit score, past adverse, negative credit items can impede your eligibility for a home loan under FHA credit guidelines.
If you have outstanding judgments, there are two important factors that need to be considered in such a situation. The first factor is the FHA program’s rules and regulations, and the second factor is the underwriting standards followed by the FHA approved lender processing your loan application.
All the lenders participating in the FHA-insured programs must ensure that the loans they underwrite meet the standards required by FHA. The FHA approval requirements set the minimum standards regarding the underlying property, borrower’s credit history, employment, assets and also the documentation verification processes.
In addition to the FHA standards, a participating FHA lender may require higher standards to the borrowers they underwrite. The only consideration in this aspect is that the addition requirements are applied uniformly and that they meet the Federal Fair Housing Laws.
While the actual credit underwriting requirements might vary from one FHA lender to another, the following are the actual FHA rules printed in HUD 4155.1:
A borrower’s past credit history should serve as a guide to:
- determine the borrower’s attitude regarding meeting their debt obligations, and
- predict the borrower’s future actions related to debt repayments
The past credit history plays an important role in the approval of FHA loan. Borrowers that have a history of making timely payments on their previous and current debt obligation pose lesser risk than those borrowers who have a history of delinquent accounts, outstanding judgments, and late payments.
If your credit history contains any of the above mentioned blemishes, a significant amount of compensating factors must be demonstrated to the FHA lender underwriting your loan. In such a situation, you may be required put a larger down payment, show additional cash reserves, or any other supporting factors that may work in your favor to secure a FHA loan approval.
If you are currently contesting an outstanding judgment, the need for additional compensating factors may be relaxed. The best way to ensure that you meet a lender’s credit underwriting standards regarding outstanding judgments is to speak with the loan officer handling your loan application. It’s better to discuss the matter in detail and pursue a course of action suggested by the loan office to secure a successful FHA loan approval.
Interested in speaking with a loan officer about your outstanding judgements and whether or not you can get an FHA loan? Get started here today – it is free and easy to start the process.Click to See the Latest Mortgage Rates»