The Revised HUD 4000.1 FHA Handbook
What Is The HUD 4000.1 FHA Handbook?
FHA mortgage lending guidelines are set and implemented by the United States Department of Housing and Urban Development or HUD. HUD is the parent of the Federal Housing Administration, commonly known by many as FHA.
- FHA borrowers who need FHA Loan Approvals need to meet the minimum FHA Guidelines which is set by the HUD 4000.1 FHA Handbook.
- The HUD 4000.1 FHA Handbook consists of over 800 pages of FHA mortgage lending guidelines which consists from minimum credit score requirements to FHA debt to income ratio requirements to FHA Guidelines On Collections Accounts And Charge Offs to FHA Guidelines On Co-Borrowers to every other possible case scenario you can think of.
- HUD FHA Handbook changes periodically with new FHA Guidelines.
- How often? Nobody knows.
HUD 4000.1 FHA Handbook: Changes In Student Loans
The revised HUD 4000.1 FHA Handbook implemented major changes in FHA Guidelines on deferred student loans.
- The old HUD FHA Handbook allowed deferred student loan payments that have been deferred for at least 12 months from the date of the mortgage loan closing to be excluded from the borrower’s debt to income ratio calculations .
- Under the new HUD 4000.1 FHA Handbook on deferred student loans, FHA underwriters need to include monthly student loan payments even if the student loan payments have been deferred for more than 12 months.
- The student loan borrower can negotiate with the student loan provider and have their student loan payments restructured to an income based payment plan which can be substantially less than the scheduled student loan payment if you do not make a lot of money.
HUD 4000.1 FHA Handbook: Changes To Installment Payments Which Are 10 Months Or Less
Under the old HUD FHA Handbook. debts that had 10 months or less in monthly debt payments left could have been excluded from debt to income ratio calculations and was up to mortgage underwriter’s discretion.
- Under the revised HUD 4000.1 FHA Handbook, installment debt payments that have 10 months or less in monthly payment left can only be omitted from debt to income ratio calculations if if the total monthly payments left is equal or less than 5% of the mortgage loan borrower’s gross monthly income.
- The mortgage loan borrower cannot pre-pay the existing debt balance to accomplish this rule.
HUD 4000.1 FHA Handbook: Changes In FHA Streamline Refinances
Under the old HUD FHA Handbook, the rule to be able to do a FHA Streamline Refinance Mortgage, the homeowner was required to save at least 5% of the principal, interest, and FHA mortgage insurance premium payment.
- Under the Revised New HUD 4000.1 FHA Handbook, homeowners need to have a savings of at least half of one percent, 0.50%, off their current mortgage interest rate and FHA mortgage insurance premium.
HUD 4000.1 FHA Handbook: Changes With FHA Borrowers With More Than On FHA Loan
FHA allows FHA borrowers to have more than one FHA Loan if they get a job transfer where the commuting distance is too far from their home.
- Under the old FHA Handbook, a home buyer can have two FHA Loans if they were to relocate due to their jobs and the commuting distance was beyond a reasonable distance.
- Under the Revised HUD 4000.1 FHA Handbook, a FHA borrower can have two FHA Loans if and only if the relocation of employment is more than 100 miles commuting distance from their original main residence to their job relocation.
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HUD 4000.1 FHA Handbook: Social Security And Pension Income
Social security income and pension income counts as qualified income for FHA Loans.
- Under the old FHA Handbook, non-taxable income such as social security income and pension income could have been grossed up by 0.25% if the mortgage loan borrower did not file a tax return.
- Under the new revised HUD 4000.1 FHA Handbook, the FHA borrower can gross up their social security or pension income using the greater of 15% and/or the FHA borrower’s actual income tax rate. In the event if the FHA mortgage loan borrower did not file an income tax return, then mortgage underwriters will utilize the income tax rate of 15%.
HUD 4000.1 FHA Handbook: Manual Underwriting
Under the old FHA Handbook, all manual underwriting was up to underwriter’s discretion as long as the borrower had compensating factors.
- Under the revised new HUD 4000.1 FHA Handbook, all manual underwriting FHA Loans require verification of rent, which is to provide 12 months canceled checks and/or 12 months online bank statements showing that they have made timely monthly rental payments to their landlord.
- If the FHA borrower has had a mortgage, then no more than two 30 day late payments are allowed in the past 24 months.
- Mortgage underwriters who are doing a manual underwrite may approve a FHA borrowers who has an acceptable payment history as long as the FHA mortgage loan borrower has not had any major late payment and/or derogatory credit payment history on their credit accounts, especially revolving credit accounts for the past 12 months.
- Major derogatory credit is defined as any revolving credit accounts are credit payments that are more than 90 days or more past due after the initial payment due there and/or three or more credit accounts that are 60 days or more late from the initial due date.