October 2, 2012
FHA home loans are designed to help eligible borrowers get into affordable mortgages. The general credit qualifying criteria and loan terms can be far more lenient than some conventional mortgages, and the FHA loan program has helped many who could not qualify for conventional loans because of large down payment requirements or other terms.
But is there a time when a potential FHA loan applicant is automatically ineligible for an FHA mortgage?
According to the FHA, the answer is yes. For the purposes of this blog post, we aren’t talking about those who have experienced a foreclosure or who have filed bankruptcy; after all, there is only a mandatory waiting period–the seasoning period–that must be waited out until such borrowers are eligible to apply again. They haven’t been forbidden from using the FHA loan program, just required to wait a minimum time.
The FHA official site says some borrowers are not allowed to have FHA loans; they are described in HUD 4155.1 Chapter Four under the section titled, “Mandatory Rejection of a Borrower”, which states;
“A borrower is not eligible to participate in FHA-insured mortgage transactions if he/she is suspended, debarred, or otherwise excluded from participating in HUD programs. ”
FHA loan rules also say a borrower must be denied an FHA home loan if he or she is listed on any one of the following:
“HUD Limited Denial of Participation (LDP) list
U.S. General Services Administration (GSA) List of Parties Excluded from Federal Procurement or Non-procurement Programs, and/or
HUD?s Credit Alert Interactive Voice Response System (CAIVRS), unless an exception exists as noted in HUD 4155.1 4.A.7.e. ”
Borrowers must be denied an FHA home loan if they are “presently delinquent on any Federal debt or has a lien placed against his/her property for a debt owed to the United States Government.”
Naturally these circumstances won’t apply to a large number of FHA loan applicants, but it’s good to know what constitutes an automatic rejection for an FHA mortgage. Some of these circumstances may not be permanent–for example, the loan applicant turned down for an FHA loan today for unpaid federal debts could apply once more once those debts have been settled to the satisfaction of the government.
Do you have questions about FHA home loans? Ask us in the comments section.
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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