May 6, 2014
This reader comment raises some very important issues potential FHA borrowers should keep in mind when it’s time to apply for a new home loan, no matter whether applying in the wake of a bankruptcy or not. The reader says:
“I was in Chapter 7 on 8/2011 and Discharged 2.5 years ago. I just applied for a loan and when my credit was pulled they found the loan of the home I own as a open account. This loan was closed for several years and it was just put back on in 2/2014 for no reason, which I have proof since I keep all my reports. I disputed it and it was taken off right away.”
“Meanwhile it cleared up that problem showing the account closed but it left late charges on the loan of 12 late charges up to 4/2014. Because of this the Lender turned me down verbally telling FHA do not except any late payments according to the Lender per FHA guide lines must be zero late payments. I can’t find this any where in the guidelines.He advise me his under writer would not be able to give me a loan…”
“According to FHA excepts Chapter 7 after 2 years but find this late payment should be put behind especially I can not find it anywhere. But because the late payments shows it as recent I was turned down, meanwhile there were much more harasser credit issue’s that were closed then late payments. I have a 700 credit score from FICO and one credit card showing on time payments. All indicators on my 3 credit bureaus places me by my history as very good risk for loans but may pay a bit higher rates, that’s ok with me. But being turned down for 12 late payments seems to me to be extreme to reject a person from a mortgage. I feel this is the lender who is deciding the decision of the outcome.”
This was a lengthy comment, it’s true, but it raises several important points. First–borrowers should know that in cases where there is a dispute on a credit report or with an individual creditor, it’s very important to give yourself enough time to clear up the dispute before applying for a loan. These issues take time to correct and have the correct information put “on the record” for your lender to see.
And that leads to another important point–borrowers who don’t look at their credit reports before applying can find nasty surprises waiting for them if there is outdated, erroneous, or inaccurate information on the report. Pull your credit reports early and make sure you know what they say before you apply for a loan. This can save a great deal of time.
Finally, FHA minimum standards for credit and related issues are only minimums–yes, the lender is free to set a higher standard. The reader is correct that it was the lender’s call not to approve the loan, not necessarily what was in the FHA loan rulebook.
Do you have questions about FHA home loans? Ask us in the comments section. You can get information about applying or getting pre-approved for an FHA loan at FHA.com, a private company and not a government website.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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