2016 Major Changes In FHA Guidelines Under Revised HUD 4000.1 Handbook

Major Changes In FHA Guidelines For 2016:

Major Changes In FHA Guidelines were implemented on September 14, 2015 under the revised HUD 4000.1 Handbook which may and can affect home buyers and homeowners refinancing their home loans to a FHA insured mortgage loan. This mortgage blog article will be helpful for those thinking about getting into the housing market, especially first time home buyers.  FHA, under the umbrella of the United States Department of Housing and Urban Development ( HUD ) has created a new revised set of FHA Guidelines under the revised HUD 4000.1 FHA Handbook. One of the major changes in FHA Guidelines under HUD 4000.1 are the changes of deferred student loans and documentation of gifted funds by family members and/or relatives for the main borrower to use for down payment on home purchase and closing costs for home purchase .

Major Changes In FHA Guidelines For 2016 On Deferred Student Loans

The Federal Housing Administration has released the new HUD 4000.1 Handbook on September 14, 2015 which will replace all other HUD FHA Handbooks. Some guidelines will remain the same while other will have major changes in FHA Guidelines. One of the most significant changes in FHA Guidelines will be the changes in deferred student loans which will definitely affect and hurt home buyers who have larger student loan balances. Home buyers with student loans prior to this new FHA Guideline changes could have their student loan payments exempted from debt to income ratio calculations as long as their student loans were deferred for at least 12 months. Now that is not the case. Whether the student loans are deferred for longer than 12 months or if the mortgage loan borrower has zero payments on student loans due to an income base repayment plan , also referred to as IBR, there will always be an amount that is included in the borrower’s debt to income ratios. In the event if the monthly student loan payments cannot be documented by the borrower and/or student loan provider due to the student loan being in deferment, or the payment is really $0 per month because the mortgage loan borrower is on an income based repayment plan, IBR, then the mortgage loan underwriter will use 2.0% of the balance of the student loan as a monthly debt expense and put this figure in to calculate the borrower’s debt to income ratios.

Other Major Changes In FHA Guidelines Under HUD 4000.1 Handbook

There are other major changes in FHA Guidelines that can affect FHA mortgage loan borrowers. Borrowers who are self employed need to still provide two years income tax returns. However, with self employed borrowers who have a 20% or more in declining income from one year to the next year, this needs to be downgraded to manual underwriting . The self employed borrower mortgage loan application cannot be based on Automated Underwriting System findings with cases where self employment income has been decreasing by more than 20% from one year to another year.

There are changes in waiting periods after bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale to qualify for FHA Loans. The waiting period will be determined by the ordering of the FHA case number assignment date instead of the application date. This change in FHA guidelines is a benefit and will speed up mortgage loan applications.

On FHA refinance mortgage loans on land contract refinances, the deed of the land contract needs to be recorded in order for the refinance mortgage to proceed.

Major Changes In FHA Guidelines With Gift Funds

Home buyers getting gift funds for their down payment needs to have the gift fund donor to provide 30 days of bank statements and the bank statement needs to show proof of the gift funds leaving the donor’s bank account and into the home buyers bank account if it is from a bank wire transfer or provide a canceled check to show documentation. A gift letter that is provided by the mortgage lender stating that the gift funds is solely a gift and is not a loan and will not be paid back needs to be signed by the gift fund donor. The gift fund letter needs to be fully legible and cannot have white outs or cross outs on the bank account balances and/or any numbers. Any irregular and large deposits of the donor’s bank accounts will be carefully reviewed and questioned.

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.

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