This will help you understand FHA mortgage underwriting guidelines and it will also help you determine if an FHA mortgage
loan is right for your situation. FHA loans have always been a good opportunity for home buyers, but there are some
things you should consider before you decide.
First, we need to understand what an fha mortgage is and is not. The Federal Housing Administration (FHA) does not lend
money, plan, or build housing. It is a division of the Department of Housing and Urban Development. The Federal Housing
Administration sets standards for underwriting and construction, but its main purpose is to insure residential mortgage
loans made by individual/private lenders. The basic intent was to provide FHA-insured loans to borrowers for their primary
residence.
FHA loans have always been a great alternative for people who don't quite qualify for Conventional financing. The
guidelines are more forgiving allowing for smaller down payments, higher debt to income ratios, some credit issues, and
more sources for the down payment. The great thing is that the interest rate is only slightly higher than a conventional
loan. Sometimes the interest rate is actually lower. Remember this! IF you go to a Mortgage Broker or a Bank and the rate
quoted is exceptionally higher, they are charging you too much. Call around for quotes. You will usually get a better rate
from a broker.
Advantages:
FHA is not as strict on credit scoring.
High debt to income ratios: 31% / 43%
100% of down payment can be a gift from: relative, close friend, or employer.
Seller, builder, or Realtor can pay up to 6% of the sales price towards the buyers closing costs, discount points, prepaids,
and up front mortgage insurance premium.
Buyer can finance closing costs into the loan, except for prepaids and discount points.
Credit criteria is not as strict as a Conventional loan. In fact, you might qualify if you have filed a chapter 13 bankruptcy
and have been in it for at least one year.
Disadvantages:
FHA mortgage insurance may be more expensive than Conventional mortgage insurance.
Maximum loan amounts are lower than conventional loans and they are determined by area.
This web site has a ton of information that will help you better understand FHA loans. The guidelines are very complicated
in some areas so I could never include them all on this site. If there is information you think should be added to this web
site please send us an email or If there is an area you have a question about just send me an email and I'll do my best to
answer it for you.
Guidelines for Conventional loans.
FHA Secure Refinance:
The FHA Secure program can help home owners who are behind on their home mortgage and facing foreclosure. This
program allows the delinquent home owners to refinance their ARMS (adjustable rate mortgages).
A home owner with a late mortgage payment would normally not qualify for an FHA mortgage refinance but under the new
FHA Secure, home owners would be eligible for an FHA refinance if they can prove the late mortgage payments were
directly caused by an adjusting mortgage rate, one that has increased from the standard introductory rate.
Standard FHA underwriting guidelines will apply to the FHA Secure program and a new FHA approved appraisal will be
ordered for the property. Borrowers will be eligible to refinance up to 97.75% of the appraised value of their home. Using
the FHA Secure program with standard FHA underwriting guidelines FHA will be able to help troubled home owners.
This program will not help home owners who have properties that have depreciated in value and are now
worth less then the current mortgage balance.
The FHA guidelines on this site are intended for the professional in the mortgage industry: mortgage underwriters,
mortgage processors, and loan officers. This site is intended as a guide only. Please use caution as every lender has the
authority to make determinations as to what is or is not acceptable in the grey areas or in the strength of the borrower, for
their company. Hey, it is their portfolio and their investors that take precedence.
In addition to the prerogative of each investor, HUD makes changes to the guidelines often. We try to keep up to date with
HUD but if you have concerns please visit the hud.gov web site as they are the one, the only, and the final authority. We
can offer no guarantee to the accuracy of the information contained here. All of this information is available in the HUD
4155.1 Rev 5 handbook and is available on their web site.
Borrower Eligibility:
Primary Borrowers:
Borrower must have a Social Security Number be able to document a satisfactory 2 (two) year history of credit, income and
assets.
Permanent resident aliens are eligible under the same terms as United States Citizens. The borrower must show evidence
of Green Card information.
Non-permanent resident aliens may be eligible if satisfactory evidence of legal residency and ability to work in the United
States is documented.
Borrower must be the primary resident only.
Borrower must have a social security number and a satisfactory 2-year credit profile, income, assets, and credit.
Occupying Co-Borrowers:
Co-Borrower must take title to the property and sign the note and mortgage documents.
Co-Borrower must complete a loan application and a complete underwriting of income, credit and assets is required. The
co-borrower will be qualified the same as the primary borrower.
The co-borrower cannot be a person who is a third party to the purchase transaction: seller, realtor, builder, or appraiser.
Non-Occupying Co-Borrowers:
A co-borrower who will not occupy the property, but is being added to the loan application to strengthen the profile is
permitted. Maximum financing is available under the following:
The Co-Borrower must be a close family member or demonstrate a long-standing family relationship with the primary
Borrower. If no such relationship can be verified, the LTV cannot exceed 75%.
The subject property is a single family detached, PUD, or an approved condo unit.
Co-Borrower must have a pimary residence in the United States of America.
A complete credit underwriting analysis will be performed for the non-occupant co-borrower. The income, assets and debt
will be included in the loan information and will be weighed equally with the borrower.