It seems every time we turn around, FHA has a new change and/or tweak to their guidelines. Just when we think we know what is coming, FHA moves the ball on us again. Most of the time the changes involve mortgage insurance, but not this time.
As of July 1st, all FHA loans will have new guidelines regarding how borrowers are qualified for a loan. The new change specifically relates to disputed/collection accounts on one’s credit report. If the total amount of collection/disputed accounts is less than $1,000, then nothing has changed. However, if the sum total of all accounts out for collections is $1,000 or more:
- the borrower must pay off all of the items in full OR
- the borrower must make payment arrangements with the creditor. Before being able to close, 3 months of payments made according to the terms of the agreement must be verified
- court ordered judgements (regardless of the amount) must be paid off in full prior to closing
In the past, as long as automated underwriting gave a potential borrower approval, collection/disputed accounts could be ignored. That is no longer the case if the total of all the combined accounts is more than $1,000.
FHA does make allowances for disputed accounts resulting from identity theft, credit card theft, or unauthorized use. Documentation is required, so don’t view this as a quick solution to the change.
As you can read, the more things change, the more things change 
… as I’ve said many, many times, planning ahead is key. If you are looking to buy or refinance a home and you know this could affect you, talking to someone now rather than later will help ensure a smooth loan process. If the home is in the state of Georgia, I’d be more than happy to help you get started!
