December 29, 2014
A reader asks, ” I bought a home back in 97 I was in the military at the time and in 1999 it went for a short sale and unfortunately they charged my entitlement to my certificate of eligibility $36,000 I got screwed they said they were saving me from foreclosure but in reality I sold the house for more than what I bought it for but now they say I owe that money to get my COE reinstated.”
“So that’s why I am now considering using a FHA home loan. My question to you is would I be eligible for the 3.5% down payment with a credit score of 650 and a discharge BK over 2 years its actually 2 1/2 years.”
The FICO score portion of this question is simple–FHA standards say that a borrower with a 650 FICO score is technically eligible for maximum financing on an FHA loan. This assumes the borrower is otherwise qualified. The bankruptcy issue complicates things and depending on lender standards, the borrower may or may not need a larger down payment–much depends on the circumstances of the bankruptcy and how the borrower has re-established credit in its wake.
The debt owed to the government is another issue entirely. The reader may find that this debt needs to be addressed before an FHA loan can move forward. This may involve a payment plan or other resolution of the debt to the satisfaction of the government. The debt may not have to be completely paid in full for the loan to move forward, but again, much depends on the circumstances and how the situation is handled.
The best advice in this situation is for the borrower to contact the VA directly to resolve the debt issue mentioned in the question–doing this BEFORE applying for the FHA loan is the best course of action.
Do you have questions about FHA home loans? Ask us in the comments section. All questions and comments are held for moderation and may not appear until they have been reviewed.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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