Updated 2016 FHA Underwriting Guidelines
What Are 2016 FHA Underwriting Guidelines
FHA Underwriting Guidelines are rules and regulations FHA approved mortgage lenders need to follow on every FHA mortgage loan applications in order for that FHA Loan to be insured in the event if the FHA Borrower were to default on the FHA Loan. HUD 4000.1 FHA Handbook is the handbook that states all of the newest FHA Underwriting Guidelines and FHA Requirements. HUD, the United States Department of Housing and Urban Development, is the parent of the Federal Housing Administration and it is the entity that creates and implements FHA Underwriting Guidelines where all FHA mortgage lenders need to abide by. FHA Underwriting Guidelines are FHA Requirements that all FHA mortgage lenders need to follow and go by, however, FHA mortgage lenders can have additional mortgage lending guidelines, called mortgage lender overlays, that are additional mortgage lending guidelines that are on additional to the minimum FHA Underwriting Guidelines. FHA mortgage lenders do not just have to go with the minimum FHA Underwriting Guidelines. Most FHA mortgage lenders will have much tougher lending requirements that those of FHA. For example, FHA only requires a minimum credit score of 580 for a home buyer to qualify for a FHA Loan with a 3.5% down payment. However, most mortgage lenders will have higher credit score requirements for home buyers. Many will have a 640 FICO credit score requirement while others may require a credit score of 620 FICO. There are other FHA mortgage lenders that will require a 600 FICO credit score. All of these higher credit score minimum requirements that are higher than those required by FHA is called FHA mortgage lender overlays on credit scores. It is the same with debt to income ratios. FHA mortgage lenders can have mortgage lender overlays on debt to income ratios, collection accounts, charge off accounts, rental verification, credit tradelines, and waiting periods after bankruptcies.
FHA Underwriting Guidelines On Credit Scores
To be eligible for a 3.5% down payment FHA home purchase mortgage loan, FHA requires that a home buyer have a 580 FICO credit score. Many home buyers may go to their local bank or a mortgage lender who their realtor may recommend and may be told that they do not qualify for a FHA Loan because their credit scores are too low even though they meet the minimum 580 FICO credit score. Just because you do not qualify with one FHA approved mortgage lender does not mean that you will not qualify with another FHA approved mortgage lender. Unfortunately, many mortgage lenders will not tell you that just because you do not qualify with them to go to a different FHA approved mortgage lender where they have no lender overlays on credit scores. If you do have at least a 580 FICO credit score and are told that you do not qualify for a FHA Loan because you do not meet that mortgage lender’s credit score requirements, please contact me at 262-716-8151 or email me at email@example.com and I will be able to help you. A large percentage of my FHA borrowers have credit scores under 600 FICO.
FHA Underwriting Guidelines On Debt To Income Ratios
FHA Underwriting Guidelines on debt to income ratios allow a maximum debt to income ratio cap of 56.9% DTI on FHA Borrowers with credit scores of 620 FICO credit scores or higher. FHA Borrowers who have credit scores of at least 620 FICO or higher, the maximum front end debt to income ratio allowed is 46.9% DTI and the maximum back end debt to income ratio allowed is 56.9% DTI. If your credit scores are lower than 620 FICO credit scores, then your debt to income ratios will get reduced to 43% DTI. For FHA Borrowers who have lower than 620 FICO credit scores but have higher debt to income ratios, then I can help you boost your credit scores to over 620 FICO credit scores so you can qualify for a FHA Loan with high debt to income ratios.
Again, many FHA mortgage lenders will have mortgage lender overlays on debt to income ratios where they can cap the debt to income ratios to 45% DTI, 50% DTI, 55% DTI. If you are told that you do not qualify for a FHA Loan due to high debt to income ratios, please contact me at 262-716-8151 or email me at firstname.lastname@example.org and I will be able to help you since I am a FHA mortgage lender with no mortgage lender overlays.
FHA Underwriting Guidelines: Collection Accounts And Charge Offs
Most banks and many mortgage companies will not accept you if you have outstanding collection accounts and charge off accounts unless you have paid them off. FHA does not require that outstanding collection accounts and/or charge off accounts to be paid off with a zero balance in order for you to qualify for a FHA Loan. You can have outstanding collection accounts and charge off accounts with unpaid balances and still qualify for a FHA Loan without having to pay it off. However, FHA does classify collection accounts into two categories. Medical collection accounts and non-medical collection accounts. Charge off accounts and medical collection accounts are ignored when it comes to debt to income ratio calculations of their outstanding unpaid collection account balances. However, with non-medical collection accounts that the total unpaid outstanding collection account balance is greater than $2,000, 5% of the outstanding unpaid collection account balance will be used to calculate the FHA Borrower’s debt to income ratios. That figure will be used as a monthly debt payment even though the borrower does not have to pay. This can create a problem if the borrower has a large outstanding collection account balance. If this is the case, the borrower can make a written payment agreement with the creditor and/or collection agency and whatever the amount of monthly payment agreement is stated on the written payment agreement, that figure will be used as the monthly debt and used in the calculation of the borrower’s monthly debt to income ratio calculations. There is no minimum seasoning requirements and the date that the written payment agreement is executed, that will be the date that the agreement will be in force and effective.
FHA Underwriting Guidelines: Waiting Period After Chapter 13 Bankruptcy Discharge Date
There is a two year waiting period to qualify for a FHA Loan After Chapter 7 Bankruptcy discharged date and three year mandatory waiting period to qualify for a FHA Loan after a foreclosure, deed in lieu of foreclosure, and short sale. However, FHA Underwriting Guidelines state that there is no waiting period to qualify for a FHA Loan after a Chapter 13 Bankruptcy discharged date but needs to be a manual underwrite if the borrower Chapter 13 Bankruptcy discharge has not been seasoned for less than two years. Most FHA mortgage lenders will have overlays on borrowers who just had a Chapter 13 Bankruptcy discharge and many will require a one year or two year waiting period after a Chapter 13 Bankruptcy discharged date. This is a FHA mortgage lender overlay and if you are told that you need to wait one year or two year after a Chapter 13 Bankruptcy discharged date, please contact me at 262-716-8151 or email me at email@example.com. I have no lender overlays on FHA Loans After Chapter 13 Bankruptcy discharged date and can get you a FHA mortgage loan approval.