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FHA Updates Credit Qualifying Guidelines

FHA Updates Credit Qualifying Guidelines.

 

FHA (Federal Housing Administration) mortgages are known for the easier and flexible credit qualifying guidelines that are offered to borrowers. It is for this reason that so many people choose FHA mortgages for their financing. Recently, FHA has updated the credit qualifying guidelines for disputed accounts and collections that becomes effective April 1st.

When the borrower has one or several disputed credit accounts and/or collections with a total balance that is equal to or above $1,000, the accounts must be resolved by payment arrangement or paid in full prior to or at closing. If not paid in full, these payments will be included in the debt to income ratios. If payment arrangements have been made, there must be at least three months of verified payments as per the agreement made with the creditor. Any disputed account or collections that are the result of credit card theft, identity theft or unauthorized use are excluded from the $1,000 calculation. There must be related and appropriate documentation, such as a police report, to substantiate this claim.

When the total amount due on outstanding credit and/or collection accounts is below $1,000 the borrower does not have to pay off the accounts in order to receive approval. It is not considered an acceptable resolution according to FHA to pay down balances on any of these accounts in order to bring the balance below $1,000. FHA requires that court ordered judgments be paid in full prior to FHA mortgage approval. In the case of a court ordered judgment in which the borrower has an agreement to make regular payments and can show the documentation that at least three months of payments have been made, a borrower can continue to pay off the judgment and the payments will be included in the debt to income ratios.

Acceptable documentation to support any resolutions to credit or collection accounts include a letter from the creditor which outlines the terms of the payment arrangements or verifies the payoff of debt, canceled checks or a credit report supplement that verifies the payoff or payment arrangements. It is likely that more borrowers will be cleaning up their credit prior to making an FHA mortgage application once these FHA updates for credit qualifying go into effect.

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Changes to FHA Mortgage Insurance Announced

Changes to FHA Mortgage Insurance Announced.

 

The changes that were initially announced to be effective for cases assigned on and after April and June 1st are now effective for cases assigned on and after April 9, 2012 and on and after June 11, 2012 for loan amounts that exceed $625,500. Additional information was also added regarding reduced up-front and annual premiums for certain FHA streamline refinances and applies for cases assigned on and after June 11, 2012.

Warning to all- HUD couldn’t have made it any more confusing for us. We will all be challenged in the coming months with making sure we have communications and systems in place to assure we are using the correct MI premiums as determined by case assignment date, loan term, loan type, loan amount and LTV. Below I have attempted to lay it out in as organized a fashion as I’ve been able to determine after uncrossing my eyes which crossed while reading through the Mortgagee Letter.

Up-Front MIP Increase
• If the FHA case is assigned on and after 04/09/2012: UFMIP = 1.75% per Mortgagee Letter 2012-4
• If the FHA case is assigned 10/04/2010 – 04/08/2012: UFMIP = 1.00%

Annual MI Increases
If the FHA case is assigned on or after 04/09/2012 per Mortgagee Letter 2012-4
• > 15 yr Term: > 95% LTV = 1.25%
<=95% LTV = 1.20%
• < = 15 yr Term: > 90% LTV = .60%
>=79% LTV = .35%
• Single Family forward mortgages with amortization terms of 15 years or less, and a loan-to-value (LTV) ratio of 78 percent or less, remain exempt from the Annual MIP (see Mortgagee Letter 2011-35).


If the FHA case is assigned 04/18/2011 – 04/08/2012
• > 15 yr Term: > 95% LTV = 1.15%
<=95% LTV = 1.10%
• < = 15 yr Term: > 90% LTV = .50%
>=79% LTV = .25%
• Single Family forward mortgages with amortization terms of 15 years or less, and a loan-to-value (LTV) ratio of 78 percent or less, remain exempt from the Annual MIP (see Mortgagee Letter 2011-35).

If the FHA case is assigned on or after 06/11/2012 AND the base loan amount exceeds $625,500 Mortgagee Letter 2012-4:
• > 15 yr Term: > 95% LTV = 1.50%
<=95% LTV = 1.45%
• < = 15 yr Term: > 90% LTV = .85%
>=79% LTV = .60%
• Single Family forward mortgages with amortization terms of 15 years or less, and a loan-to-value (LTV) ratio of 78 percent or less, remain exempt from the Annual MIP (see Mortgagee Letter 2011-35).

Up-Front MIP Decreases for Certain FHA to FHA Streamline Refinances
If FHA case assignment is dated on and after 06/11/2012 and the current FHA loan being paid off was endorsed prior to 06/01/2009 per Case Query in FHA Connection, up-front MIP = .01% and annual MI = .55%.

FHA determined that these increases are necessary to encourage the return of private capital in the residential mortgage market and strengthen the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund. Taken together, these premium changes will enable FHA to increase revenues at a time that is critical to the ongoing stability of its Mutual Mortgage Insurance (MMI) Fund, contributing more than $1 billion to the Fund, based on current volume projections through Fiscal Year 2013. FHA estimates that the increase to the upfront premium will cost new borrowers an average of approximately $5 more per month.

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Kentucky Home Buyer & Homeowner Mortgage Guide

Kentucky Home Buyer & Homeowner Mortgage Guide.

via Kentucky Home Buyer & Homeowner Mortgage Guide.

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John Boel investigates Louisville’s vacant home crisis

A WAVE 3 News investigation finds the vacant home problem has gone from an eyesore to a staggering public safety issue.

via John Boel investigates Louisville’s vacant home crisis.

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Kentucky FHA loans

Kentucky 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 Kentucky 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 Kentucky Mortgage broker.

Advantages:

  1. Kentucky FHA loans are not as strict on credit scoring. We can go down to a 580 credit score with compensating factors and if it makes sense.
  2. High debt to income ratios: 31% / 55%
  3. 100% of down payment can be a gift from: relative, close friend, or employer. Currently Kentucky Housing will give you up to $6,000 for down payment assistance with Kentucky FHA mortgage loans
  4. 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.
  5. Buyer can finance closing costs into the loan, except for prepaids and discount points.
  6. 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:

  1. Kentucky FHA mortgage insurance may be more expensive than Conventional mortgage insurance.
  2. Maximum loan amounts are lower than conventional loans and they are determined by area.
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HUD Homes in KY

HUD Homes in KY.

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Louisville Ky FHA Mortgage Loans

Louisville Ky FHA Mortgage Loans.

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Louisville Kentucky mortgage rates

Louisville Kentucky mortgage�rates.

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Louisville Kentucky Mortgage Rates

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via Louisville Kentucky Mortgage Rates.

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