2016 Updated FHA Loan Requirements:

Updated FHA Loan Requirements Effective Immediately:

On this blog, we will cover Updated FHA Loan Requirements. FHA Loan Programs have traditionally been one of the most easiest mortgage loans for home buyers to qualify for due to the lax and lenient FHA mortgage lending guidelines and FHA understanding that just because consumers had periods of bad credit does not mean that they should be excluded from home ownership. FHA Loan Programs are great for first time home buyers, home buyers needing non-occupant co-borrowers to qualify due to little or no income documentation, home buyers with prior bad credit, home buyers with prior bankruptcy and foreclosure, and home buyers with high debt to income ratios . FHA Loans only require credit scores of 580 FICO and only require 3.5% down payment on a home purchase FHA Loan. Updated FHA Loan Requirements went into effect on September 2015 and more changes and updated FHA Loan Requirements will be expected into 2016.

Updated FHA Loan Requirements That Went Into Effect On September 14, 2015

Updated FHA Loan Requirements include FHA Home Appraisals. The FHA Home Appraiser needs to document a three year chain of title on all home appraisals and needs to refer 2 sources from the multiple listing service, also referred to as MLS, and/or public records. The FHA Home Appraiser needs to check all appliances in the subject property the appraiser is inspecting and make sure that it is operational which means that utilities needs to be on. Appliances such as dishwashers, refrigerators, and stoves needs to be tested for proper operations so the home needs to have live electricity, running hot water, and gas.

The FHA Home Appraiser also needs to review the home ownership record and evaluate when the property was sold in the past 12 months and check for undisclosed identity of interest property transactions.

Updated FHA Loan Requirements On Deferred Student Loans

Updated FHA Loan Requirements On Deferred Student Loans will affect many home buyers with large student loans that are deferred. In the past, any deferred student loans that is deferred for at least 12 months can be excluded from debt to income calculations. With updated FHA Loan Requirements, this will no longer be the case and all student loans, deferred or not, a monthly payment will be taken into effect. The actual student loan monthly debt obligation is to be used in calculating the borrower’s debt to income ratios. In the event if the monthly student payment debt is zero or the monthly payment is not available, then the monthly payment used for student loan calculation will be 2.0% of the outstanding student loan balance.

Credit cards that are due within 30 days such as American Express credit card accounts will have updated FHA Loan Requirement changes as well. These types of credit accounts can be excluded from debt to income ratio calculations if mortgage lenders can verify that mortgage loan borrowers have paid the outstanding credit card balance in full each and every month for the past 12 months. In the event if the mortgage loan borrower has had any late payments in the past 12 months on any revolving accounts, then 5% of the credit accounts outstanding balance needs to be used for debt to income ratio calculations. All authorized credit card user accounts will count towards the authorized users debt to income ratios unless the authorized credit card user can prove that the main user has paid the whole monthly minimum payments in the past 12 months and show proof of 12 months canceled checks and/or bank statements of the main card user.

Updated FHA Loan Requirements On Installment Debts Less Than 10 Months

The old rule with installment debts less than 10 months was that these debts can be excluded from debt to income calculations. However, updated FHA Loan Requirements on installment debt less than 10 months may be excluded from debt to income ratio calculations only and only if they have cumulative payment of less than or equal to 5% of the mortgage loan borrower’s gross monthly income and the borrower is forbidden from paying down this balance to reach this required percentage.

Updated FHA Loan Requirements On Employment

Updated FHA Loan Requirements On Employment require if the mortgage loan borrower has changed employers more than 3 times in the past 12 months, the mortgage lenders is required to take measures and steps to verify that the mortgage loan borrower has stable employment and the income is likely to continue for the next three years.

The old FHA Loan Requirements on part time employment was that the mortgage underwriter had full underwriter’s discretion when the mortgage loan borrower has been employed part time for less than two years but is most likely to continue.  The updated FHA Loan Requirements On Part Time Income is mandatory two years uninterrupted employment of part time income if part time income will be used.

With regards to gaps in employment , for borrowers who had gaps in employment for greater than six months, then six months on their new job is required to qualify for FHA Loan. Taking time off to raise a family will no longer be considered an acceptable reason for gaps in employment.

Updated FHA Loan Requirements On Gift Funds

Gift Funds are allowed with FHA Loans. If the down payment gift funds is given to the home buyer, the mortgage lender needs to verify the gift funds and make sure that the donor gift funds have been seasoned in their bank account for at least 30 days and need to source any large or irregular deposits of the donor’s bank statements.

Real Estate Commissions can be used as a source of down payment as a gift by family member who is a licensed real estate agent. Mortgage lender needs to verify and get proof when real estate commission income is used as funds to close via real estate commission and/or gift that either the borrower and/or family member and/or relative legitimately holds a real estate agents or real estate brokers license and that they are entitled to the commission.

Updated FHA Loan Requirements On Rental Income On Retained Primary Home

The old FHA Loan Requirements on this subject matter was that rental income can be used when the home buyer relocates outside of reasonable commuting distance due to job and the mortgage loan borrower has at least 25% equity in their home. The new updated FHA Loan Requirements on rental income on retained primary home is that rental income can be counted due to relocation and the new home purchase is at least 100 miles from the home buyer’s previous residence. In the event if the new home buyer had no history of rental income on his or her income tax returns, then the mortgage loan borrower needs to have at least 25% equity on retained primary property.

Updated FHA Loan Requirements On Non-Taxable Income

The old FHA Loan Requirements on social security income and/or non-taxable income was if the mortgage loan borrower did not file an income tax return, then they can use the tax rate of 25% to gross it up. The updated FHA Loan Requirements on non-taxable income is using the greater of 15% and/or actual tax rate of the mortgage loan borrower. If the mortgage loan borrower did not file an income tax return, then the mortgage lender will need to use the income tax rate of 15%.

With regards to multiple FHA Loans, a home buyer can have multiple FHA Loans if they are relocating to another jurisdiction due to a job transfer and/or new job that is at least 100 miles from their departing home with the first FHA Loan.

 

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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