Can You Get an FHA Loan If You are Late on a Student Loan?
The Federal Housing Administration (FHA) offers assistance on home loans to qualified borrowers. FHA loans can reduce the cost of a mortgage and make it easier to buy a home with less money down. In exchange for these benefits, you must qualify based on a number of factors. If you have delinquent debts to the federal government, you may not qualify for an FHA loan. This includes student debts.
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Definitions
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Many people think the FHA issues loans. This is not entirely true; the FHA issues loan guarantees. Loan guarantees are a type of insurance on the debt. When a private lender issues the loan, the FHA promises to repay the debt if the borrower cannot do so. Because the FHA is taking on a great risk, it requires the borrower to be in good financial standing.
Process
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To obtain an FHA loan, a borrower applies for both a conventional mortgage and a separate FHA guarantee. It is possible to do both at once through a streamlined application process with a qualified lender. At the time of application, the borrower will be expected to produce verification of his ability to repay the loan. This will include a credit report, a down payment, verification of income and personal information.
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Requirements
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A list of requirements for an FHA loan includes good credit, an acceptable amount of total debt and an income high enough to afford the payments. Generally speaking, to qualify based on credit, you must have an established credit history, not be in bankruptcy, have a good history of making payments on all debts on time, not have a foreclosure on your record and, most importantly, be in good standing on any federal debts.
Alternatives
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If you are late on a student loan payment, you can still obtain an FHA loan. One option is to wait to apply for your FHA loan until you have returned your student debt to good standing for six months to a year. If you are in a hurry to obtain a mortgage, you may consider taking a conventional loan without an FHA guarantee. Since you are late on a debt, you may face a higher interest rate on that loan.
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References
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