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FHA Loan Manual Underwriting Case Scenario
Hi Gustan,
Email works best for me. I’m in Michigan, looking for a pre-approval, and I need one answer before I send any information or authorize a credit pull. My mortgage score is 592, my wife’s is 653. Up front: I have two 90-day late payments from 2025 (May and July) — one account settled and closed, the other a $420 charge-off that’s still unpaid.
Nothing has been late in the last 12 months, and my current mortgage shows never late.One lender’s own overlay blocks manual underwriting with any 90-day late payment in 24 months. A no-overlay lender has already told me yes — I’m lining up one more shop that works the same way before I apply.
Your zero-overlay policy is why I’m writing: do you follow FHA’s guidelines and the automated findings as they come back, and are you licensed in Michigan? If my file has a real shot, I’ll apply. If not, a straight no saves us both time. No specific home picked out — open to FHA, USDA, or anything else I qualify for.
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1 Reply
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You’re asking exactly the right question. The good news is your file stands a strong chance, and those 90-day late payments probably aren’t the real hurdle here.
Let me walk you through why that’s the case, and then I’ll tackle your specific questions one by one.
Your direct questions
- Do we follow FHA guidelines and the automated results as they come back? Yes, that’s exactly what “zero-overlay” means. If the AUS (TOTAL Scorecard for FHA, GUS for USDA) says Approve/Eligible, we go with it. We don’t add extra lender rules that would block files FHA itself would approve.
- Licensed in Michigan? Yes.
Why your file is in good shape
FHA’s rules say your situation is okay: no missed housing or installment payments in the last 12 months, and no more than two missed payments (no more than 30 days late) in the last two years. You have 12 clean months, and your current mortgage has never been late. The late payments in May and July 2025 are outside the 12-month window. Ninety-day late payments on non-housing accounts are usually only a problem if they were on credit cards and there were more than three over 60 days late. You have two, and one is already paid off and closed.
The unpaid $420 charge-off is actually more important than the late payment. It won’t block you outright, but the lender will want to see it paid or at least on a clear payment plan. This is standard FHA practice, not an extra hurdle. Your spotless 12-month history proves you’ve rebounded, and the impact of late payments fades as time passes.
Here’s something key: a 592 score sits just below the FHA’s comfort zone of 580 and well under the 620 needed for conventional loans, so FHA is your best bet—which you already figured out. Even more important, the lender won’t use the 592 you see. Mortgage lenders pull from older FICO models (FICO 2, 4, and 5), which can be higher or lower than what Credit Karma or your bank app shows. You’ll only know your true mortgage score once your credit is checked. If your middle score lands above 580, FHA is in play. Bringing your wife’s 653 as a co-borrower can help, as long as her income and debt-to-income ratio fit the guidelines.
What would sink this
- DTI is the real make-or-break factor here. Your credit scores aren’t the main obstacle; it’s likely your debt-to-income ratio. FHA prefers 43% or less, though a strong application can sometimes stretch to 50% with other positives. If your DTI is on the high side, a score of 592 makes things trickier.
- The $420 remains unpaid, with no plan.
- The 90-day late payment is on a housing obligation. They’re not on housing — good.
A no-overlay lender that sticks to AUS results is a great fit for your file—and you already have one approval in hand. A history of 90-day late payments, 12 clean months, and a mortgage that’s always been on time is a profile FHA often approves. The charge-off is the one piece that needs to be addressed. Pay it off or set up a payment plan before you apply.
Keep in mind, with scores in this range, the first lender who checks your credit might see a different middle score than you expect. If you’re considering a second no-overlay lender, ask each one if they’ll quote you based on the AUS result before you commit. Also, make sure they’ll pull your credit again on the same day, so the inquiries don’t stack up against you.
Is your DTI the tight part, or is that comfortable?
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