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FHA Loan with Bad Credit Case Scenario
Hello,
I have a case scenario with qualifying for an FHA loan with bad credit and late payments.
I’m a first-time homebuyer in Mississippi, and I’m looking for an FHA lender who is experienced with borrowers who have a lower mortgage score and some complicated credit history.
My current middle mortgage score is approximately 602. I have stable employment and qualifying income, and I currently have over $40,000 in verified liquid assets between my savings and money-market accounts. I also have documented SSI and child-support income that I would like to have considered if eligible.
My main concern is my past credit history. I have some significant late-payment history involving Credit Acceptance and Capital One. I recently spoke with another lender who declined to work with me because they considered the history a pattern of major delinquencies and rolling late payments.
The Credit Acceptance account is particularly complicated because it involves a vehicle that is legally my former spouse’s responsibility under our divorce decree/court order. The vehicle debt is still in my name, but the court order assigns responsibility for the debt to my former spouse, and there is documentation regarding his responsibility for the payments. Another lender I am currently working with believes they can exclude or otherwise negate the Credit Acceptance obligation when underwriting my mortgage.
I’m interested in an FHA mortgage and would like to know:
1. Whether you work with FHA borrowers with a 602 middle mortgage score and this type of credit history.
2. Whether you can run my file through FHA automated underwriting and determine the AUS finding.
3. If the AUS result is a Refer, whether you allow FHA manual underwriting.
4. How your underwriting guidelines treat multiple historical late payments, particularly on the Credit Acceptance account.
5. Whether the Credit Acceptance debt can potentially be excluded or treated as a contingent liability because my divorce decree assigns responsibility for the debt to my former spouse.
6. Whether my substantial verified liquid reserves can be considered as a compensating factor if manual underwriting is necessary.
7. Whether you have any lender overlays that would prevent you from considering an FHA borrower with a 602 middle score.
I’m not looking for a lender who will overlook the credit history. I’m looking for someone who can review the entire file and determine whether there is a legitimate FHA path forward based on the circumstances and documentation.
If this sounds like a file your team may be able to work with, I would be happy to provide the documentation you need for an initial review.
Thank you for your time. I look forward to hearing from you.
Best,
Tina
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