Does FHA Mandate Current Status for Past Due Accounts- A Comprehensive Guide
Does FHA Require Past Due Accounts to Be Brought Current?
The Federal Housing Administration (FHA) plays a crucial role in the mortgage industry by insuring loans for borrowers who may not qualify for conventional mortgages. One common question among potential borrowers is whether the FHA requires past due accounts to be brought current before approving a loan. In this article, we will delve into this topic and provide you with a comprehensive understanding of the FHA’s stance on past due accounts.
Understanding the FHA’s Requirements
The FHA has specific guidelines that lenders must follow when evaluating a borrower’s eligibility for an FHA-insured loan. One of these guidelines pertains to the borrower’s credit history, including any past due accounts. While the FHA does not explicitly require past due accounts to be brought current, it does place certain limitations on the number and severity of delinquent accounts.
What Counts as a Past Due Account?
A past due account refers to any debt that has not been paid within the agreed-upon timeframe. This can include credit card balances, medical bills, and other types of loans. The FHA considers accounts that are 30 days past due or more as delinquent.
Limitations on Past Due Accounts
The FHA has a cap on the number of past due accounts a borrower can have. For borrowers with a credit score of 580 or higher, the limit is one account that is 30 days past due. However, if the borrower’s credit score is below 580, the limit is two accounts that are 30 days past due.
It’s important to note that the FHA also considers the severity of the past due accounts. If a borrower has a past due account that is more than 90 days late, the FHA may require additional documentation to assess the borrower’s ability to repay the loan.
Bringing Past Due Accounts Current
While the FHA does not require past due accounts to be brought current, it is often in the borrower’s best interest to do so. Bringing past due accounts current can improve the borrower’s credit score and demonstrate their commitment to financial responsibility. This can make the borrower more attractive to lenders and increase their chances of loan approval.
Conclusion
In conclusion, the FHA does not require past due accounts to be brought current before approving an FHA-insured loan. However, borrowers with past due accounts should be aware of the limitations and consider bringing these accounts current to improve their chances of loan approval. It’s always a good idea to consult with a lender or a mortgage broker to understand the specific requirements and guidelines for your situation.
