FHA Mortgage Loan Programs With No Lender Overlays
This BLOG On FHA Mortgage Loan Programs With No Lender Overlays Was UPDATED On December 18th, 2018
FHA Mortgage Loan Programs are the most popular mortgages in the U.S. today.
- HUD, the parent of FHA, sets FHA Guidelines via HUD 4000.1 FHA Handbook
- The Federal Housing Administration (FHA) is not a lender
- It is a government agency that insures FHA Loans originated and funded by banks and private lenders in the event Borrowers defaults on their FHA Loans and the lender sustains a loss due to foreclosure
- However, in order for HUD to insure FHA Loans, all Lenders need to follow HUD Mortgage Guidelines
In this article, we will cover and discuss FHA Loans and common Lender Overlays.
FHA Loans With Bad Credit
There are various FHA loan programs that cater to first time home buyers and borrowers with lower credit scores.
- FHA mortgage loan programs have a generous debt to income limits
- Front end DTI is 46.9% and back end DTI is 56.9% to get an approve/eligible per AUS FINDINGS
- FHA mortgage loan programs also allow for up to a 6% seller’s concession towards closing costs
- All closing costs including prepaid escrows can be paid with sellers concessions and/or lender credit
- The buyer does not have to come up with any closing costs if they have enough in sellers concessions
- Sellers concessions can only be used for closing costs and no down payment
- FHA mortgage loan programs also allow for the buyers to have a non-occupant co-borrower to qualify if they have a higher debt to income ratio
FHA mortgage loan programs also allow the borrower’s down payment to be gifted if they do not have enough down payment on a home purchase.
FHA Mortgage Loan Programs For Buyers With Unpaid Collection & Charge Offs Accounts
FHA mortgage loan programs allow buyers with the open collection and charge off accounts to get mortgage loan approvals without having them to pay them off.
- There are restrictions with FHA mortgage loan programs such waiting period restrictions for prior bankruptcy and foreclosure
- There is a mandatory waiting period of 2 years from the date of the Chapter 7 bankruptcy discharge for a home buyer to qualify for an FHA loan
- There is a 3 year mandatory waiting period from the date of the recorded date of foreclosure, deed in lieu of foreclosure, and/or short sale for a home buyer to qualify for a mortgage loan
- However, just passing the waiting period does not guarantee a mortgage loan approval
- Lenders want to see re-established credit and no late payments after a bankruptcy and/or foreclosure
- Home Buyers can qualify for FHA mortgage loan programs with a credit score down to 500 FICO
- For those that have credit scores between 500 FICO and 579 FICO, the minimum down payment required is 10%
- For those who have credit scores between 580 FICO and 619 can qualify for a 3.5% down payment FHA mortgage loan:
- But the debt to income ratio limits are set at 43% DTI
For credit scores of greater than 620 FICO, the debt to income ratio limits are 46.9% front end and 56.9% back end to get an approve/eligible per Automated Underwriting System.
How Mortgage Underwriters View Overdrafts
Overdrafts and bounced checks are a definite red flag if you intend on applying for FHA mortgage loan programs.
- FHA mortgage lenders do not want to see any bank overdrafts in the past 12 months by borrowers
- Even a $5.00 overdraft will raise a red flag
- Mortgage Loan Applicants with bank overdrafts should not submit those bank statements
- To avoid the underwriter not using the bank overdrafts borrowers need to go to the bank and get a 60-day printout of bank statements, signed, dated, and stamped by the bank teller
- There is no year to date overdraft fee history on bank statement printouts
- However, supplying 60 days actual bank statements, the year to date overdraft fees will show up on bank statements
- All that is required is 60 days of bank statements and the printouts should be sufficient
- Loan Officer should screen and scrutinize your bank statements before he submits it to underwriting and his job is to catch this prior to landing on the underwriter’s desk
Gustan Cho Associates has no overlays on government and conventional loans. Borrowers who need to qualify for FHA Loans with a lender with no lender overlays should contact us at 1-262-716-8151 or text us for faster response. Or email us at email@example.com. We are available 7 days a week, evenings, weekends, and holidays.