Last Thursday FHA announced revised guidelines for Collection Accounts and Disputed Accounts. The new guidelines may make it difficult for some Ohio FHA homebuyers and homeowners that are looking to get an FHA mortgage. The main impact will be on debt-to-income ratio. Ohio mortgage seekers that have a higher than ideal debt to income ratio could be affected by the updated rules from FHA.
Mortgagee Letter 13-24 and Mortgagee Letter 13-25 are effective for all Ohio FHA Case Numbers assigned on or after October 15, 2013.
Here is a brief overview of the new rules for both Collection and Disputed accounts.
Ohio FHA – Updated Collection Account Guidelines
Balance of ALL collection accounts – less than $2,000 – lender does not have to consider the collection accounts
Balance of ALL collection account – greater than $2,000 – lender has to include a monthly payment for each collection, unless the account will be paid before closing.
Medical collections are not included.
The monthly payment that will be used will either be:
- Payment Arrangement – if the borrower sets up a payment arrangement with the creditor, a letter from the creditor verifying the monthly payment will be used
- No Payment Arrangement – lender will use 5% of the outstanding balance
Ohio FHA – Updated Disputed Account Guidelines
Balance of ALL disputed derogatory credit accounts – less than $1,000 – lender can base decision off the FHA Automated Approval
Balance of ALL disputed derogatory credit accounts – greater than $1,000 – lender has to downgrade the FHA Automated Approval to a manual underwrite
Medical and non-derogatory disputed accounts are not included.
Keep in mind, FHA sets the minimum guidelines. Many lenders impose stricter guidelines. Click to get today’s Ohio FHA Mortgage Rates.
