A reaffirmation is an official way to “reobligate” yourself on the loan. This involves the lender sending us a reaffirmation contract to be signed by you.
FHA Mortgage Loan Requirements
You can get an FHA mortgage with a credit score of 500 and with a foreclosure or bankruptcy on your credit report. Here are some of the most important requirements:
1. Consistent employment – You must have been employed for the past 2 years or at least had consistent income for the past 2 years.
2. Debt to Income Ratio – There are 2 ratios that have to be met. First, the Mortgage Payment Expense to Effective Income Ratio requires that the total monthly home mortgage payments (principal, interest, taxes, mortgage insurance, hazard insurance, HOA fees, etc.) when divided by your gross monthly income cannot be more than 31%. Second, the Total Fixed Payment to Effective Income Ratio requires that the total monthly home mortgage payments (same number as under the first ratio) plus the total recurring monthly revolving and installment debt payments(auto loans, personal loans, student loans, credit cards, etc.). when divided by your gross monthly income cannot be more than 43%.
3. Credit History – You must have at least two previous lines of credit in order to qualify. However, exceptions can be made to this requirement. You can qualify with a credit score between 500 and 579, but you will need to put a 10% down payment on the home. If you have a credit score over 580, the down payment can be as low as 3.5% of the purchase price. A borrower who is still paying on a Chapter 13 Bankruptcy can qualify if the Chapter 13 payments have been paid for a period of one year. You can qualify if at least 2 years have elapsed since the discharge date of the your and / or spouse’s Chapter 7 Bankruptcy. For foreclosures or deeds-in-lieu of foreclosure, at least 3 years must have past. However, if the foreclosure of the borrower’s main residence was the result of extenuating circumstances, an exception may be granted if they have since established good credit. Additionally, if the foreclosure was followed by a Chapter 7 Bankruptcy, the requirement is just that 2 years have elapsed since the Chapter 7 Bankruptcy discharge. A minor collection account does not necessarily need to be paid in order to qualify, but any judgments must be paid prior to FHA mortgage approval. Overall, the underwriters are looking for consistent overall payments on credit accounts.
4. Mortgage Insurance – Because you pay a lower down payment with FHA mortgages than with conventional mortgages (which require down payments of 20%) lenders require borrowers get private mortgage insurance (“PMI”), including an up front premium (approx. 1.75%) plus an annual premium. This PMI is paid as part of the monthly mortgage payment. After you have paid down the mortgage and your loan amount is 80% or less than the value of your home, you may be able to refinance and reduce or even eliminate your PMI and save as much as hundreds of dollars each month.
5. Lending Limits Vary by State – There is a maximum amount you can borrow for the home purchase. At the time of this post, in MN, the maximums for non-metro single family homes was $271,050, for metro single family homes is $322,000. Maximums for four-plexs can go as high as $619,250.
Even with credit issues you can qualify for an FHA mortgage. If you have judgments or other burdensome debts and are hoping to purchase a home, call us for a free consultation and we can chart a path to resolving your debt issues and workout a plan to build your credit in order to qualify for an FHA mortgage in just 2 years. Contact Atlas Law Firm in MN today for a Free Initial Consultation at or visit our offices located in Anoka, MN, Bloomington, MN, Minneapolis, MN, St. Louis Park, MN, Edina, MN and Minnetonka, MN.
Chapter 13 is essentially a payment plan that you organize through the court system. Think of it as a consolidation loan with teeth.
There are 2 things you must do after your case is filed: (1) attend the meeting of creditors (aka the 341 hearing); and (2) complete a debtor’s education course via phone within 75 days from the date your case was filed. The 341 hearing is sometimes referred to as the meeting of creditors because your creditors can attend the meeting and ask you questions about the information contained in your petition.