Is a borrower eligible for an FHA loan if the borrower has participated in consumer credit counseling?

Participating in a consumer credit counseling program does not disqualify a Borrower from obtaining an FHA-insured mortgage. 

For manually underwritten loans the lender must document that: 
•     one year of the pay-out period has elapsed under the plan; 
•     the Borrower’s payment performance has been satisfactory and all required payments have been made on time; and 
•     the Borrower has received written permission from the counseling agency to enter into the mortgage transaction.  

When processing an application through TOTAL Scorecard, participation in a consumer credit counseling program does not require a downgrade to manual underwriting, and no explanation or other documentation is needed. 

For additional information see Handbook 4000.1 II.A.4.b.iii(J); II.A.5.a.iii(K) at

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

Topic Number: KA-04875