Do I have a chance at FHA automatic underwriting approval?

Question

Here's my situation:  Long but please read and help :-) I recently sold my home in GA and relocated back to CA.  I had my current mortgage for only 18 months before relocation and have had zero missed payments.  When I called my current morgage broker and let them know of my relocation I was instantly given preapproval upon supplying them with my W2's, income/bonus info and so on.  We found a home in CA and had been in escrow for about a month (45 day escrow).  We had everything set up to actually close a few days early when all of a sudden I was told that they couldn't do the loan. He never mentioned any problems with my credit score and I hadn't been looking into myself.  Basically it was a mess.  I've had recent lates on two installment accounts (both auto) with the most recent showing at 3/2015.  I also had a credit card we had cancelled last year but didn't actually cancel hit me with a 30, 60 & 90 day late (12/14, 1/15, 2/15) and another credit card hit me with a 30 day late 1/2015.  I also was pretty maxed out on my credit card which I had known about but had also recently paid all off upon receiving the equity from sale of home...just hadn't posted to CRs yet. I believe when they finally told me they couldn't do the loan, my middle score was a 566 (I was putting down 13% on an FHA) so they told me that's the reason for my pre-approval. In the past couple weeks I was able to get all of the recent late payments from my credit cards removed and am now showing zero balance on all credit cards except $17 on one for Equifax and Trans Union & Experian still have one account that is showing $1900 but should refresh any day now. I just purchased the 3 bureau CR from myfico.com and my current (mortgage) credit scores are EQ: 636, TU: 661, EF: 655.  I think the TU & EF will get a small additional bump once the last CC shows zero balance next week. My question: is there a chance that I could receive an automated underwriting approval even though I have recent installment lates on 2 different auto loans?  Still planning on putting 13% down on FHA and have about $26K in 401K.  Debt to income with loan approx 41%.

Answer 1

martinbowling wrote:
FWIW, I am going through the process of an FHA Loan right now. My mid score was 616, I have 3.5% down & 3 months PITI in cash reserves. I had a 30 day late in Oct 2014 on a Credit One account and a 30 Day late in Nov 2014 on a First Premier card for the monthly fee (I thought the card was closed). I was approved by DU as approved/eligible. got 3.75% interest rate. Last week the loan was finally assigned a loan processor (after a long wait for the appraisal report) and I should be headed to underwriting this week. My understanding is that the 12 months of no lates on credit cards / installment loans is a lender overlay. That FHA only requires no lates on mortgages or federal loans (someone please correct me if that's wrong). Obviously YMMV but the best of luck to you! There ARE lenders who will finance you with lates with a letter of explaniation.  ...that is wrong ...read the OPs post ...multiple installation loan lates as recently as March 2015 FHA Single Family Housing Policy
Handbook, issued on March 18, 2015Handbook 4000.1 204
II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
A. Title II Insured Housing Programs Forward Mortgages
5. Manual Underwriting of the Borrower
a. General Requirements
iii. Evaliuating Credit History (Manual)
(1) Satisfactory Credit
The underwriter may consider a Borrower to have an acceptable payment history
if the Borrower has made all housing and installment debt payments on time for
the previous 12 months and has no more than two 30-Day late Mortgage
Payments or installment payments in the previous 24 months.
The underwriter may approve the Borrower with an acceptable payment history if
the Borrower has no major derogatory credit on revolving accounts in the
previous 12 months.
Major derogatory credit on revolving accounts must include any payments made
more than 90 Days after the due date, or three or more payments more than 60
Days after the due date.
(2) Payment History Requiring Additional Analysis
If a Borrower’s credit history does not reflect satisfactory credit as stated above,
the Borrower’s payment history requires additional analysis.
The Mortgagee must analyze the Borrower’s delinquent accounts to determine
whether late payments were based on a disregard for financial obligations, an
inability to manage debt, or extenuating circumstances. The Mortgagee must
document this analysis in the mortgage file. Any explanation or documentation of
delinquent accounts must be consistent with other information in the file.
The underwriter may only approve a Borrower with a credit history not meeting
the satisfactory credit history above if the underwriter has documented the
delinquency was related to extenuating circumstances. ...sorry op ...I wish the pps were correct but afaik my original answer stands ...unless you can document Underwriter acceptable extenuating circumstances which your original post did not reflect, you may be stuck ...the 12 months late rule has nothing to do with lender overlays ...its a published HUD guideline that all FHA mortgage lenders must follow ...and its why your original lender was cornered when he finally woke up ...hth ...note to self ...put this in a damn macro so you don't have to look it up again and again and again and again