Getting a mortgage backed by the Federal Housing Administration is about to get a lot tougher for those with $1,000 or more in debt in collection.
Under a rule taking effect July 1, borrowers in this situation must start paying off their debt before they can qualify for a loan. They can either pay the amount in full or enroll in a payment plan and make three monthly payments.
This includes credit-card and medical debt. Different rules apply to debt from another mortgage. If you've had a foreclosure, you'll have to wait three years to qualify for an FHA-insured mortgage.
FHA loans are typically used by first-time homeowners and require a minimum 3.5% down payment, lower than Fannie Mae and Freddie Mac's current requirements.
Source: The Wall Street Journal
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