2016 FHA Manual Underwriting Guidelines

2016 FHA Manual Underwriting Guidelines Explained

There are no dead set in stone requirements with 2016 FHA Manual Underwriting Guidelines. Manual Underwriting is when a mortgage loan applicant cannot get an approve/eligible per Automated Underwriting System and the Automated Underwriting System yields a referred/eligible per Automated Findings . Referred means that the automated system cannot issue an automated approval with the information and the data entered in the automated approval system. Eligible means that the mortgage loan application is eligible for a mortgage loan approval if it is manually underwritten. Manual Underwriting means that the mortgage file is assigned to a mortgage loan underwriter and has to be manually underwritten. The mortgage underwriter will review the whole mortgage loan application and look for derogatory credit information and analyze the credit risk surround the derogatory credit items and look for compensating factors which are positive factors such as reserves, verification of rent, longevity in job, larger down payment, additional income not used as qualified income, and other positive factors that show strength of the mortgage loan borrower. Mortgage lenders view lower credit score mortgage loan borrower’s as higher risk so under 620 credit 2016 FHA manual underwriting guidelines state that the mortgage loan underwriter has discretion in assessing the risk of the mortgage loan borrower when deriving to decision on whether to issue a mortgage loan approval or not.

Requirements With 2016 FHA Manual Underwriting Guidelines

There are no specific requirements with 2016 FHA Manual Underwriting Guidelines and a lot of deciding factors relies with mortgage underwriter discretion. One of the most important factors most mortgage underwriters require is rental verification . Rental verification is only valid if the renter can provide 12 month’s canceled checks where he or she has paid their rental payments with a bank check. Renter can also provide 12 month’s bank statements if they have paid it online. If the renter has leased their apartment or home from a registered property management company, then a verification of rent form provided by the mortgage lender to the property management company can be used in lieu of canceled checks and/or bank statements. All rental payments in the past 12 months needs to have been on time and no 30 day late payments on their monthly rents are allowed.

FHA Manual Underwriting Guidelines On Credit Scores And DTI

The lowest credit scores allowed to qualify for a 3.5% down payment home purchase FHA Loan is 580 FICO credit scores. Mortgage lenders like myself have no FHA mortgage lender overlays and can do manual underwriting mortgage loans with credit scores as low as 580 FICO credit scores. However, most mortgage lenders do have mortgage lender overlays on credit scores with manual underwriting loans where they want a minimum credit score of at least 640 FICO credit scores.

Same with debt to income ratios. Most mortgage lenders will cap the debt to income ratios on manual underwrites at 43% DTI.  FHA Manual Underwriting Guidelines on manual underwriting has no maximum debt to income ratio caps. I have done and closed on manual underwriting mortgage loan files with debt to income ratios higher than 50% DTI. However, manual underwriters will look for strong compensating factors when underwriting a manual underwrite.

If you are in need of a FHA mortgage lender with no FHA Lender Overlays specializing in manual underwriting, please contact me at 262-716-8151 or email me at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays to take your calls and answer all of your questions.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.


  1. barbra caranza says:

    Fantastic suggestions . For my two cents if people want a LCPIA Verification of Rental History Form , We found a blank document here http://www.lendingnetwork.org.

    Greg Kewin
    National Director Of Operations
    Gustan Cho Associates
    The Gustan Cho Team