Everything You Need To Know About FHA Loans
This article is about everything you need to know about FHA loans. After reading this article, you will know everything you need to know about FHA loans, its agency guidelines from HUD, what lender overlays are, and why every lender has different requirements on FHA loans. Understanding the minimum HUD agency guidelines is important for borrowers who are getting denied by lenders due to that lender’s overlays. As long as you meet the minimum HUD agency mortgage guidelines on FHA loans, you will qualify for an FHA loan. FHA loans are hands down the most popular loan program for first-time homebuyers, buyers with past bad credit, borrowers with credit scores down to a 500 FICO, borrowers with higher debt to income ratio, borrowers in an active Chapter 13 Bankruptcy repayment plan, and borrowers with late payments. Just because you do not qualify for an FHA loan at one lender does not mean you do not qualify at a different lender with no lender overlays. Every mortgage company can have different lending requirements on credit scores, debt to income ratio, collection accounts, charged-off accounts, having gift funds, or having multiple non-occupant co-borrowers. Gustan Cho Associates has a national reputation for its no lender overlays on government and/or conventional loan business model.
Confusing Why Lending Requirements On FHA Loans Are Not Uniform At All Mortgage Companies
Many of the viewers of our daily blogs often get confused after they hear various different requirements on FHA loans by different lenders. Not all mortgage companies have the same lending requirements on FHA loans. All mortgage companies need to make sure all of their loan applicants qualify for the minimum HUD agency lending guidelines. HUD, the Department of Housing and Urban Development, or HUD is the parent of FHA, the Federal Housing Administration. FHA is not a lender nor does it do anything to originate nor fund FHA loans. FHA does not originate, process, underwrite, fund, or service FHA loans. Private lenders who are HUD-approved and/or correspondent lenders, or mortgage brokers originate and close FHA loans. The role of FHA through HUD is to insure and partially guarantee lenders in the event the borrowers default and/or foreclose on their FHA loan. Due to the government guarantee from FHA, lenders are more than eager and aggressive in promoting FHA loans to borrowers who meet the minimum HUD agency mortgage guidelines.
Everything You Need To Know About FHA Loans: Understanding HUD Agency Lending Guidelines Versus Lender Overlays
Lenders can have higher lending requirements that are above and beyond the minimum agency mortgage agency guidelines. These higher agency mortgage guidelines by individual mortgage lenders are called lender overlays. Most mortgage companies have lender overlays on government and/or conventional loans. Lenders can have lender overlays on just about everything. Examples of lender overlays from mortgage companies include overlays on credit scores, debt to income ratio, collection accounts, charged-off accounts, late payments after bankruptcy and/or foreclosure, gift funds, co-borrowers, type of property, and manual underwriting. We will go over the above lender overlays throughout this blog to explain how lenders implement lender overlays. Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays on government and/or conventional loans.
Understanding Everything You Need To Know About FHA Loans And How Lenders Do Not Always Have The Same Mortgage Guidelines On FHA Loans
The great news is Gustan Cho Associates has no lender overlays on government and/or conventional loans. GCA Mortgage will not have any additional lending requirements except those from HUD, VA, USDA, Fannie Mae, and Freddie Mac. As long as the borrower gets an approve/eligible per automated underwriting system per AUS, that is all GCA Mortgage will go off and have zero lender overlays. Gustan Cho Associates are experts in manual underwriting on FHA and/or VA loans. Not all mortgage companies will do manual underwriting. It is very important borrowers fully understand the minimum HUD agency mortgage guidelines on FHA loans. Just because one lender may deny an FHA loan applicant, another lender may qualify and approve a borrower for an FHA loan if they meet the minimum HUD agency mortgage guidelines. This is why it is important to fully understand the minimum HUD agency mortgage guidelines on FHA loans. We will be covering the minimum HUD agency guidelines on FHA loans in the next paragraph.
Understanding The Minimum HUD Agency Guidelines
We will list the minimum agency HUD mortgage guidelines on FHA loans below in bullet point form to make it easier to understand:
- The minimum credit score required to qualify for a 3.5% down payment home purchase FHA loan is 580 FICO
- Borrowers with under a 580 credit score and down to a 500 FICO can qualify for an FHA loan
- Mortgage borrowers with under a 580 credit score need a 10% versus a 3.5% down payment on FHA loans per HUD agency mortgage guidelines
- Borrowers need to get an approve/eligible per automated underwriting system (AUS)
- The key to getting an approve/eligible per AUS is to have timely payments in the past 12 months with no late payments
- Late payments after bankruptcy and/or foreclosure may be ground for an AUS denial
- Borrowers who cannot get an approve/eligible per AUS and get a refer/eligible per automated underwriting system (AUS) may be eligible for a manual underwrite
- Manual underwriting guidelines require timely payments in the past 24 months with no late payments
- Outstanding collections and/or charged-off accounts do not have to be paid
- Non-occupant co-borrowers are allowed for borrowers with high debt to income ratio
- To be eligible per automated underwriting system with a 3.5% down payment FHA loan with non-occupant co-borrowers, the non-occupant co-borrower needs to be related to the main borrower by law, marriage, or blood
- If the non-occupant co-borrower is not related by blood, law, or marriage, than a 25% down payment is required on FHA loans
- Gifts funds are allowed for the down payment and/or closing costs
- One to four-unit properties eligible
The above list of bullet points is the general HUD agency mortgage guidelines on FHA loans. Mortgage companies are allowed to have additional lending requirements that are above and beyond the above list of agency guidelines from HUD on FHA loans called lender overlays. If you are looking for an FHA loan with a lender with no lender overlays that are licensed in multiple states, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. You can email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.