Understanding HUD Guidelines And FHA Loans


This ARTICLE On Understanding HUD Guidelines And FHA Mortgage Loans Was PUBLISHED On October 12th, 2020

How Understanding HUD Guidelines And FHA Mortgage Loans

Borrowers who are planning on qualifying for FHA Loans should not stress during the mortgage process by studying and Understanding HUD Guidelines.

  • HUD, the parent of FHA, is the federal government agency that sets HUD Guidelines on FHA Loans
  • FHA Loans are one of the most popular loan programs in the United States
  • The role of HUD is to promote homeownership to first time home buyers and borrowers with less than perfect credit by insuring home loans to lenders
  • Lenders aggressively originate and fund FHA Loans due to the government guarantee
  • In the event homeowners default and foreclose on their FHA Loans, HUD will partially insure lenders against the loss
  • Due to this guarantee by FHA, lenders can offer FHA Loans with 3.5% down payment at very low mortgage rates

In this article, we will cover and discuss Understanding HUD Guidelines and qualifying for FHA Loans.

Understanding HUD Guidelines Versus Lender Overlays

Understanding HUD Guidelines is very important for borrowers with bad credit.

  • Over 75% of our borrowers at Gustan Cho Associates are folks who could not qualify at other lenders due to their lender overlays
  • Many folks qualify for FHA Loans and meet the HUD Guidelines
  • However, not all lenders have the same FHA Guidelines
  • All lenders need to meet the minimum HUD Agency Mortgage Guidelines
  • However, a lender can have their own guidelines on FHA Loans that are above and beyond the minimum FHA Agency Guidelines
  • For example, the minimum FHA Guidelines on credit scores is 580 FICO
  • However, a lender can have overlays on credit scores where they will require a 620

Some lenders, especially most banks, will require a 640 credit score.

Qualifying For FHA Loans With A Direct Lender With No Lender Overlays

How Qualifying For FHA Loans With A Direct Lender With No Lender Overlays

Understanding HUD Guidelines is important for borrowers who have bad credit and lower credit scores.

  • Just because one lender says no does not mean another will say yes
  • Gustan Cho Associates has no lender overlays on FHA Loans

As long as borrowers meet the minimum guidelines listed on the FHA Handbook. 4000.1 and can get an approve/eligible per AUS, Gustan Cho Associates can not only close your loan but will close it on time.

Type Of Borrowers Who Benefit With FHA Loans

The following types of borrowers will benefit from FHA versus Conventional Loans:

  • There is no waiting period requirement after a timeshare foreclosure
  • One or two late payments in the past 12 months are acceptable with AUS Approval
  • Gift funds are acceptable and allowed
  • There are Down Payment Assistance Programs (DPA) available at Gustan Cho Associates Mortgage Group

Manual Underwriting is allowed on FHA and VA Loans.

HUD Guidelines On Tax-Liens And Judgments

What are HUD Guidelines On Tax-Liens And Judgments

Borrowers can qualify for FHA Loans with outstanding tax liens and/or judgments without having it paid in full under the following conditions:

  • Have a written payment agreement by the IRS, state, or judgment creditor
  • Make three timely payments
  • Provide proof of payments via canceled checks and/or bank statements

 CAIVRS, or another equivalent system, the status of the delinquency are verified when lenders do a national third-party public records search.

Borrowers With No Credit History And Non-Traditional Credit

There are certain folks who have no credit and/or traditional credit tradelines. Borrowers with no credit can qualify for FHA Loans using non-traditional credit tradelines. Non-Traditional Credit Tradelines are creditors that do not report on credit reports.

Examples of non-traditional credit are the following:

  • Verification of rent payments to the landlord
  • Utilities such as home phone, cable, internet, water, gas, electricity, cable
  • Insurance
  • Cell phone

A minimum of three non-traditional credit tradelines seasoned for the past 12 months is required when using non-traditional credit versus traditional credit with borrowers with no credit scores.

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