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FHA Underwriting Guidelines on Home Mortgages

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FHA Underwriting Guidelines on Home Mortgages

 BLOG update: November 8th. 2017

FHA Mortgage Underwriting Guidelines on Home Mortgage and FHA Requirements

 

The Most popular, out all the home loan options that U.S. Citizens can choose, are still FHA Mortgages.

HUD is also known as The United States Department of Housing and Urban Development and are the insuring party of FHA Loans.

 

When Are you going to apply for FHA loan?  Here are some FHA Mortgage Facts

 

  • One of the easier and to get qualified Mortgage Home loan.
  • The Federal Housing Administration (FHA) is not a lender, but an agency of the US Government.
  • The role of the FHA is role is to guarantee FHA Lenders who originate and fund FHA Loans. If the FHA Loan goes into default or foreclosure.
  • With this government guarantee, banks and qualified lenders can offer FHA Loans with as low as, 3.5% down payment and interest rates that are potentially lower on an FHA loan vs conventional loan

 

FHA Mortgage Underwriting Guidelines: Loan Credit Scores and FHA Loan Income Requirements

Credit score requirements to qualify for FHA Loans and FHA Loan Income Requirements

  • If your middle credit score, out of the 3 credit bureaus, (Equifax, Transunion and Experian), is a 580 or higher, you can qualify for FHA Loans with 3.5% down payment on the mortgage loan.
  • Borrowers with credit scores lower than 579, but higher than 500 can as qualify for and FHA Loans, the only caveat is that type of FHA will require, 10% down or more down payment on the total loan.
  • Your Income requirements is based on the last two years of consistent income and your Debt to Income ratio (DTI) ratio vs your income during that time.

 

Mortgage Underwriting Guidelines for an FHA Loan: Debt to Income Ratios when you apply for FHA loan

Out of all the Mortgage loan programs that are available, FHA has best comparable debt to income ratio and helps who can qualify for an FHA loan.

Here is the debt to income ratio requirements for FHA lenders

  • If the borrowers middle credit scores of 620 or higher, the Automated Underwriting System will make an approval available if they are having a Debt to Income Ration (DTI) of 46.9% on the lower category of approval or lower than a 56.9% debt to income ration the second higher category and still meet the FHA loan income requirements.
  • FHA Lenders can approve on a debt to income ratios that is topped at 43% DTI if they have a middle credit scores under 620
  • Also, FHA Loan requirements state that Mortgage rates are also determined by the type of property when you apply for FHA loan.

 

FHA Mortgage Underwriting Guidelines on Past Charge Offs and Current Collections Accounts

Borrowers do not have to pay all past charge offs and current collection accounts to qualify for FHA Loans. But, here are some simple rules that FHA Mortgage Underwiring guidelines must surpass on collections and charge off accounts to qualify for an FHA Loan:

  • Any outstanding collections that is non-medical with a current outstanding balance of greater than $2000 calculate 5% of the amount as a monthly debt figure and use that amount in when calculating the total DTI ratio. If ‘you have any questions, just ask an experience loan officer.
  • In calculating non-medical collection, a borrower can arrange for a written payment agreement with creditor and/or collection agency.
  • That amount on the written payment agreement could be used as the monthly payment figure that gets calculated on the readjusted outstanding collection account as is typically calculated as 5% on that outstanding balance in the DTI ratio. This is where proper paperwork needs to be recorded, so again, if you have any questions, just ask your friendly experienced loan officer. He or she knows the FHA Guidelines very well and can help you all the steps needs.
  • Any charged off accounts or any other type of accounts that are labeled and reported as profit and loss on credit report and are reported correctly are handled differently. They can be exempt from calculating into the DTI Calculations and can make the difference between an FHA Loan vs Conventional Loan
  • Typically, Medical collection account balances are exempt from the 5% rule, but they must be proven as medical. Most people today have medical bills and we all know how much the outstanding balance can be.  Again, always check with your experienced loan officer.  They know all the inside details of FHA Mortgage underwriting guidelines on these types of charges offs and collections.

 

FHA Mortgage Underwriting Guidelines Relating to Credit Disputes

Credit Disputes are not allowed during the mortgage process, but there are a few exceptions:

  • Any Medical Disputes, Actual Medical disputes are allowed, but they must be proven as medical.
  • Zero balances on any Non-Medical Disputes are acceptable and taken into consideration.
  • Non-Medical disputes that are less than $1,000 in total outstanding balances are exempt for the FHA Guidelines, but still must be paid off.
  • Current charge off accounts or late payment disputes on your present credit history are not acceptable during this time frame.

 

FHA Mortgage Underwriting Guidelines on Bankruptcy and Foreclosure:  FHA loan requirements 2017

To qualify for an FHA Loan, you must wait he minimum waiting period requirement after Bankruptcy and Foreclosure to qualifying.

  • After the Chapter 7 Bankruptcy discharged date, you wait a minimum of 2 years. Please take note that the day you went Bankrupt and date that it was finally discharged and finalized are usually two different dates.  It can sometimes take many months to completely discharge an is finalized.
  • If you are in an active Chapter 13 Bankruptcy repayment plan and apply for FHA loan, you must typically wait one year after establishing the Chapter 13 repayment and has been approved by the trustee in the case. You typically do not need to stress about getting the approval by the trustee in the case.  It is usually the case, that most Trustees will give you an approval after one year into a Chapter 13 Bankruptcy Repayment Period.  This can be tricky, if you have any question, please see your experience FHA Lender or contact us at mortgagelendingplace.com
  • In some cases, there is no waiting period on some programs after Chapter 13, again give us a shout at mortgagelendingplace.com
  • How it works in both FHA Loan programs during and after Chapter 13, Bankruptcy discharge, during the first two years, after discharge, either of those types can be manually underwritten and the requirements can be satisfied.
  • After any short sale on a previous residency, FHA requires a standard three year waiting period.
  • After and recorded date of foreclosure or sale at the sheriff’s office of a previously owned residency, the FHA also requires three year waiting period.

 

After Bankruptcy and Foreclosure what are the FHA Mortgage Underwriting Guidelines on Late Payments

MOST and the key here is MOST, FHA mortgage lenders will NOT approve borrowers with current late payments after the following: so, avoid late payments after these 6 things.

  • After any type of loan Modification.
  • Any your discharge on a Chapter 7 shows as discharged.
  • After a residential Foreclosure
  • After a Deed In Lieu Of Foreclosure
  • After Short Sale on a previous residency.
  • During or after a chapter 13 Bankruptcy.

 

One important note: some of these factors such as a short sale history, late payments after bankruptcy, foreclosure, deed in lieu of foreclosure are NOT a HUD Guideline.

If the lender can get an approve/eligible via the Automated Underwriting System, a borrower can get an approval for an FHA Loan.   Mortgagelendingplace.com can advise you on the nuances of what can get accomplished and Bill Burg at USA Mortgage can approve and help you get am FHA Loan or a loan that best suit your individual situation.  We have no lender overlays on government and conventional loans and are direct lenders licensed in multiple states. The best thing to do at this stage is determine what is best for your situation, review your case and give you a little advice.  It is also important, that when you are ready to buy a home, work with a lender that will negotiate for you on the best loan product for you.

 

Property Flipping and how FHA Mortgage Underwriting Guidelines and Facts you need to know.

You have all seen these late-night shows about making money and property flipping.  Can it be done on an FHA Mortgage and what are the underwriting guidelines.  What happen usually is when you recently acquired a property and in short period of time it is resold to a new buyer for hopefully a profit.

If it is fully disclosed, these transactions are allowed by FHA Mortgage underwriting guidelines.  Some important notes:  You cannot in any ware misrepresent the property. You cannot artificially inflate the value of the property and again misrepresent the home.

Some new FHA Mortgage underwriting guidelines that have been put into place to protect a home buyer from fraud and any potential illegal transaction. These FHA Mortgage underwriting guidelines are to help protect all parties from and potentially avoid illegal property flipping, protecting the home buyer and seller.

The FHA has implemented and launched new FHA Mortgage Underwriting Guidelines, to avoid illegal property flipping and are have not instilled new basic HUD Guidelines.

Here are just the basics on HUD Guidelines regarding Property Flipping:

  • FHA Mortgage underwriting guidelines requires that only recorded owners can sell a home that can be financed in requires to a FHA Loans.
  • A re-sale of a property cannot occur within 90 days of the last sale of any property to be classified as eligible for any FHA financing.

Any property sales that occurs after 90 days but before 180 days, if price of the property increases the last sales price by an amount at or exceeding 100%, HUD Guidelines mandates additional paperwork to justify the increase in price. 

  • Must provide a property report with all history of all owners.
  • The seller must provide a recorded deed.
  • Any other documentation that is related to the property transactions such as any property tax, title documents that shows sellers proof of ownership with the date it was purchased.

 

One Other important type of FHA Loan that We Specialize in is 203K Construction Loan

FHA 203k Loans is specific in its function as a construction loan.  We at offered by Mortgagelendingplace.com specialize and offer 203K Loans and can explain the requirements and FHA Underwriting guidelines.

 

There are no additional requirements in qualifying for FHA 203k Loans versus standard FHA Loans.

  • There are typically no differences in requirements for a FHA 203K, but I always recommend you go to your experienced FHA Loan
  • You will need at least a minimum 580 middle credit Score
  • 5% down payment on the after all improvements are completed is required
  • A total of 6% in seller concessions are to cover your allowed to cover your overall closing costs

 

We a Mortgagelendingplace.com are here to advise you on even the simplest questions on how to get qualified for an FHA loan and what the FHA Mortgage underwriting guideless are.  We are an ultimately your best possible negotiator and direct lender.  We have access to lending products with no lender overlays on government and/or conventional loans.  This makes it easier for you to get qualified and with the best possible FHA loan product and with no typical bank overlays, we make it more economical for you to get the best possible home loan for your family.

If you have any questions, please contact Bill Burg or any staff member at Mortgagelendingplace.com.  We are affiliated with USA Mortgage, operated in most states and can be reached at 877-300-6257 or at contact@mortgagelendingplace.com. We are typical available 7 days a week, evenings and weekends and specialize in many other great mortgage lending products to best help you with your needs

Bill Burg is 3-time Author in teaching others about the Financial and Real Estate Business.  He is an experienced Senior Mortgage Loan Officer with USA MORTGAGE, that is one of the few banks with no bank overlays.  Overall, he has spent the last 13 years helping hundreds of families and investors to achieve the dream of home ownership.

Bill Burg at Mortgagelendingplace.com and USA Mortgage NMLS # 1647508

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