HUD FHA 203K Loans Manual Underwriting Guidelines

HUD FHA 203k Loans Manual Underwriting Guidelines

Gustan Cho Associates are mortgage brokers licensed in 48 states

This guide covers HUD FHA 203k loans manual underwriting guidelines on renovation loans. HUD FHA 203k loans manual underwriting guidelines allow manual underwriting on FHA loans. Most lenders do not allow manual underwriting on FHA 203k loans . Lenders can have higher lending requirements above and beyond the minimum agency mortgage guidelines of HUD. Lenders do not have to offer specialty FHA loan programs even though HUD insures the loan program. Many lenders offer FHA 203k loan programs but not through manual underwrite although HUD FHA 203K loans manual underwriting guidelines insures renovation loans through automated underwriting system and manual underwriting.

HUD Manual Underwriting Versus Automated Underwriting System Guidelines on FHA Loans

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There are instances when AUS approved FHA loans need to be downgraded to manual underwriting.  Borrowers in an active current Chapter 13 Bankruptcy repayment plan or borrowers discharged from Chapter 13 Bankruptcy  without a two year seasoning from the discharged date cannot get an approve/eligible. You need a 2-year seasoning from the discharged date to be eligible for an approve/eligible per automated underwriting system.

HUD Chapter 13 Bankruptcy guidelines require 12 months have been completed with timely payments to Trustee to qualify for FHA loans unless the process goes through manual underwriting.

There is no waiting period after Chapter 13 Bankruptcy discharge date to qualify for FHA loans. Anyone who has less than two years seasoning of their Chapter 13 Bankruptcy discharge needs to be manually underwritten. HUD FHA 203K loans manual underwriting guidelines allow for borrowers in a Chapter 13 repayment or with a recent Chapter 13 discharge. To qualify for FHA 203k loans with manual underwriting, make sure to consult with mortgage than one mortgage lender. Not all mortgage lenders offer the rate and terms on FHA 203k loans. Click here to apply for FHA 203k loans

Cases Where Manual Underwriting Is Required

There are many reasons the AUS (Automated Underwriting System) will not give an approve/eligible findings report. Some of the most common reasons are the following:

  • bankruptcy within the past two years
  • late payments on a mortgage account
  • Housing events such as foreclosures, short-sales, or deed-in-lieu on credit
  • decline in income

If borrowers Automated Underwriting System  (AUS) report comes back with refer/eligible findings, FHA loan can still be insured by HUD. We can still close that loan!! However, it must pass manual underwriting guidelines. Manual underwriting guidelines require timely payments of all monthly payments for the past two years.

What Is Manual Underwriting

What items are looked at during manual underwriting? To determine creditworthiness for manual underwriting, underwriters will analyze and go over the following factors:

  • Credit history  of the TRI-MERGE credit report
  • Number of credit tradelines and payment history
  • Liabilities
  • Debts
  • Rental Payments
  • Mortgage Payments
  • Debt-to-income Ratios
  • Credit Score

The underwriter is responsible to manually underwrite in compliance to HUD agency mortgage guidelines. Underwriters must determine the borrower has the ability to repay the new loan and the new mortgage will not cause financial hardship. Layered risk factors is evaluated and compared to the number of compensating factors. Each manual underwriting borrowers is underwritten and reviewed as a separate and unique transaction. No two manual underwritten file is the same.

What Types of Renovations Can Be Done With FHA 203k Loans

As more and more lenders add overlays to their mortgage products, less and fewer companies participate in manual underwriting. The good news is the team at Gustan Cho Associates are experts in manual underwriting.  What are some common renovations?

  • Adding complete additions to your property
  • Upgrading kitchens and bathrooms, or any other room
  • Roofing, gutters, downspouts
  • Redoing Plumbing work
  • Landscaping improvements
  • Accessibility options for the disabled
  • Energy Efficient Improvements

Gustan Cho Associates has the ability to manually underwrite FHA 203k loans. Finding a company who does both automated underwriting approved and manual underwriting FHA 203k loans can be a challenging. Reach out to the Gustan Cho Associates for making the dream home ownership a reality! Gustan Cho Associates has a national reputation for being able to do mortgage loans other lenders cannot do. Click here to apply for FHA 203k loans

Who is Eligible For HUD FHA 203K Loans Manual Underwriting Guidelines

The FHA 203K program allows you to make your new home your DREAM home before you even move it. You have the ability to finance up to six payments into your loan amount if you cannot live in the home while the renovations are being completed. You should see some of the before and after photos of an FHA 203k loan. Borrowers have the ability to do amazing renovations.203k loans in ChicagoOnce the real estate purchase offer is accepted by the seller, the home buyer will reach out to a HUD 203K Consultant. Use this link to find an FHUD Housing Consultant in the area near the proposed home purchase.  Get qualified and pre-approved for an FHA 203k loan with a HUD-approved mortgage lender for either a FHA 203k streamline or Standard Full HUD FHA 203k loan. Homebuyers or homeowners who are planning on renovating their home purchase or existing home with an FHA loan. There are the steps borrowers need to go through on FHA 203k loans. Borrowers need to choose a contractor. Borrowers may want to research more than one reputable contractor.

Once homeowner have selected the contractors they would like to use, they will set up a meeting with HUD 203k consultant and the contractor. They will coordinate each project and finalize the estimate for the renovations.

Complete the first appraisal during the process, there will be one appraisal before the project and another appraisal after the projects and verify completion. Once the lender has received the first appraisal the mortgage process will be very similar to a regular mortgage process. Homeowners will want to keep in contact with their lender, contractor, and HUD 203k consultant. Homeowners would want to confirm all inspections and payments are happening at the appropriate time. After all, projects are completed, the second appraisal will be ordered. Once received, the home is yours and all projects are completed!!! Reach out to the Renovation Pros from the Gustan Cho Associates!

HUD Cash-Out Mortgage Guidelines During and After Chapter 13 Bankruptcy

Homeowners with equity in their homes can do a cash-out refinance a mortgage on FHA manual underwriting refinances during and after Chapter 13 Bankruptcy. However, if borrowers do an FHA cash-out refinance mortgage during a Chapter 13 Bankruptcy repayment plan, the trustee may require that the Chapter 13 bankruptcy debtors be paid with the proceeds. This is not the case with doing an FHA cash-out refinance after Chapter 13 bankruptcy discharge date. Any bankruptcy discharge seasoned less than 2 years need to be manually underwritten. Borrowers can do a cash-out refinance on manually underwritten FHA loan at Gustan Cho Associates.

Choosing FHA 203k Manual Underwriting Lender With No Overlays

Michael Gracz is the author of this blog on HUD FHA 203K loans manual underwriting guidelines. Dale Elenteny is also a contributing editor of Gustan Cho Associates Google Mortgage News. Dale Elenteny has a national reputation of being able to do mortgages other lenders cannot do due to being represented by a national lender with no overlays on government and conventional loans.

Keep in mind and remember the homeowners (the borrower) is in control. Make sure to get multiple quote and take your time on who the best contractor for the job is. Make sure the contractor gets the work done on time.

Dale Elenteny is an expert with HUD FHA 203K loans manual underwriting guidelines and is available 7 days a week, evenings, weekends, and holidays. Dale Elenteny is a senior mortgage loan officer at Gustan Cho Associates and an expert in all government and conventional loan programs.  Please reach out to Dale Elenteny at (800) 900-8569. The Team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays. Click here to apply for FHA loans with no lender overlay

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