New FHA Rules May Affect Borrowers

By Jon Prior

• March 26, 2012 • 2:16pm

Beginning April 1, potential borrowers with ongoing credit disputes totaling more than $1,000 will not be able to get a mortgage insured by the Federal Housing Administration.

The rule marks a significant belt-tightening at the FHA whereas the adminstration earlier held no such requirement that disputed credit accounts needed to be paid off. Before this rule, a direct endorsement underwriter could determine if any of the borrower’s outstanding debts should impact the approval of the FHA-backed mortgage.

After April 1, the borrower must either pay off the outstanding balance on these collections accounts or document a payment arrangement that the lender must then submit to the FHA before closing. The payment arrangement will be counted into the debt-to-income ratio for the new home loan.

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