First-time homebuyers may be pleasantly surprised get to know the many advantages of the FHA Loan. However, a few specifics of this mortgage program can be a tad more complex.
As a borrower, you need to know which factors affect your FHA loan approval:
- Charge Offs
A charge-off loan is the amount for are obligated to pay your creditor for a previous loan. Though the FHA conventionally ignores mortgage charge-off accounts, you may need to pass a three-year waiting period after a mortgage charge off account before you can qualify for your FHA Loan.Credit Disputes On Charge-Off Accounts: Any credit disputes on a charge-off account need to be retracted. The FHA loan application may be rejected in case of any disputed accounts, since retracting credit disputes can the credit score to drop substantially, jeopardizing the borrower’s capabilities for meeting the lender’s minimum credit score requirements.
Not uncommon in today’s tough economy, a bankruptcy can become a leading factor for any delays in a borrower’s ability to get a home loan. Though it is possible for you to get the FHA loan after bankruptcy, the process requires a waiting period as per FHA rules.In the case of a Chapter 7 Bankruptcy (NOT Chapter 13 bankruptcy), the FHA requires the borrower to serve a two-year waiting period (also called the “seasoning period”), plus any additional time a lender specifies, till they can qualify for an FHA loan.
Note that the waiting time starts after the bankruptcy is discharged, not after it is filed.
Another reason that makes the FHA loan more attractive than conventional loan options is the program’s leniency in case of foreclosure. The FHA requires borrowers to serve a three-year waiting period after a foreclosure, after which they can become eligible for the loan.However, under certain circumstances, such as a medical emergency or the death of a spouse, the waiting period may be shortened to one year.
- Short Sale
The FHA allows a loan for a short sale on if the seller is facing certain hardships. Since most short sales have government and legal involvements, the FHA loan approval process for such a property may be complicated.
- Gift Funds
Gift funds, or gift money, can be used by a borrower to make all or part of their mortgage down payment. However, the source from which this gifted sum comes from is inspected and approved as per FHA guidelines.Acceptable donors for a gift fund include the borrower’s relative, such as a spouse, fiancé/fiancée, child, or any other independent individual related to the borrower by blood, adoption, legal guardianship or marriage.
Learn more about the FHA loan process by reaching out to the experts at Mortgage Scenarios. We provide services to homebuyers for streamlining various FHA loan terms.