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March 26, 2012


FHA 500-620

  • DU Approve or Manual Underwrite
  • DTI up to 47%
  • Late Payments OK
  • Open Disputed Accounts must be paid, settled or deleted prior to submission
  • Collections over 5,000 can be required to be put into a payment plan by UW
  • Verification of Rent from Management/Leasing Company or 12 months Cancelled Checks Required From Private Landlord
  • Homebuyer Education Course
  • 500-579 FICO = 10% down payment

FHA 620-640

  • DU Approve or Manual Underwrite
  • Open Disputed Accounts must be paid, settled or deleted prior to submission

These are FHA loans, so all standard FHA guidelines apply – BK 2 years, FC 3 years, Short Sale 3 years, etc.. (FHA Back to Work Exception may allow 1 yr from BK, Foreclosure or Short Sale due to Lay Off or Business Closing)

We also have manufactured homes up to 90% LTV and 2 acres.  

CREDIT —  All Borrowers must have traditional credit and at least 1 valid credit score
Short Sales: Min 3 year lapsed time required. 
2 Years


50% Borrower Contributing 100% towards minimum investment requirement
DTI  45% Borrower using gift funds to meet the minimum investment requirement
45% when Payment Shock exceed 65% of current housing payment
45% For First Time Home Buyers with no housing payment history

Reserves Required: Minimum 2 months regardless of AUS approval


2 Months Reserves: FICO’s 600 – 619
4 Months Reserves: FICO’s 500 – 599

GIFTS  Maximum DTI 45% regardless of AUS recommendation


Non-Occupant Co-Borrowers permitted with additional co-borrower reserves:


2 Months Reserves: Both principal residence and subject FICO’s 620-639
6 Months Reserves: Both principal residence and subject FICO’s < 620

Property Issues: 

Approved FHA Condos only. New condo approvals will not be accepted

PROPERTY  No 3-4 Unit Properties except rate and term refinances

No Flips where seller has been on title less than 6 months allowed.

CASH OUT Maximum 80% LTV with Field Review paid for by Broker


Exceptions to the overlays listed above can be made with strong compensating factors.

EX: Payment shock > 65% with reserves may be approved with DTI >than 45%

Manual Underwriting is on an exception basis only.

Less Overlays = More Loans!!

For the last few years we’ve required 0x30 on all tradelines for FHA borrowers under 620 FICO – well no more! We can now accept late payments and up to 47% ratios for qualified borrowers. Go through your prospects from the last 6 months to see if you can bring any of · 620-640 Fico = Follow DU + Dispute Guidelines

  • 580-620 Fico = 96.5% LTV + FMC Overlays – Bring those old files back to life!
  • 500-580 Fico = 90% LTV + FMC Overlays


  • DTI: DU approval must reflect the max DTI ratios to be no greater than 47%. Any exceptions to exceed this ratio would be reviewed on a case by case basis only.
  • DISPUTES: If Total Scorecard issues an Approve/Eligible the loan does not have to be downgraded to a manaul underwrite if any of the following circumstances.
  • The disputed account has a 0 balance
  • The open disputed account is marked “Paid in Full” or “Resolved”
  • The open disputed account is both less than $500 and older than 24 months old
  • Paying off disputed accounts or credit supps do not automatically allow you to use the AUS, a new credit report must be generated and uploaded into DU to reflect the account as 0 balance or paid.
  • LATE PAYMENTS: Follow the DU findings for acceptable credit documentation
  • COLLECTIONS: Collections/Charge-Offs less than 24 months old and greater than $5000.00 will be reviewed on a case-by-case basis and requirement for payoff is at underwriter’s discretion
  • Strong compensating factors per the 4155
  • Buyers must complete homebuyer education and provide the signed certificate for each borrower (
  • Verification of rent by providing 12 months cancelled checks or a VOR from a property management company or a credit supplement showing the property management company verified the rent. If the borrower lived with a family member or paid cash for rent, borrower to provide a signed budget letter. (Note: A rental reference from a management company with payment history for the most recent 12 months may be used in lieu of 12 months of cancelled checks.)
  • Co-borrowers or co-signers are permitted as long as they are immediate family members; proof of relationship will be required. Other blood relatives (aunts, uncles, cousins etc.) will be permitted and the occupant borrower DTI cannot exceed 47%
  • Manufactured Homes: OK to 90% and 2 acres – call AE for additional details

4155.1 4.C.3.c Qualifying Ratios for Borrowers With Insufficient Credit

To enhance the sustainability of homeownership for borrowers with insufficient credit histories, the qualifying ratios

• are computed only on those borrowers occupying the property and obligated on the loan. Non-occupant coborrowers may not be included.

• may not exceed 31% for the payment-to-income ratio and 43% for the total debt-to-income (DTI) ratio.

Important: Compensating factors are not applicable for borrowers with insufficient credit references.

4155.1 4.C.3.d Cash Reserve Requirement for Borrowers with Insufficient Credit

Borrowers should have two months of cash reserves following mortgage loan settlement from their own funds. No cash gifts from any source should be counted in the cash reserves for borrowers with insufficient credit histories.

For FHA Product 07 and FHA Product 72, if Total Scorecard issues an “Approve/Eligible” finding based on the presence of one or more disputed accounts, the loan does not have to be downgraded to a manual underwrite in any of the following circumstances and the AUS findings may be used only when the below are present for the disputed account reported:

1. The disputed account has a zero balance

2. The disputed account is marked as “Paid in Full” or “Resolved”

3. The disputed account is both

a. Less than $500.00; and

b. More than 24 months old

NOTE: If the balance of the disputed account is above $500.00 and more than 24 months old, paying off the disputed account does not automatically allow you to use the AUS; a new credit report must be generated and uploaded into DU / Total Scorecard to reflect the account as zero balance and/or paid. A credit supplement cannot be used in any of the above instances.

All other instances involving a disputed account will be downgraded to a manual underwrite. Conventional product (01 or 72): Per Fannie Mae, all disputed accounts must be resolved per the DU findings as follows: DU identified the following tradeline(s) as disputed by the borrower and did not include the tradeline(s) in the credit risk assessment. The lender must verify the accuracy of the tradeline(s) by determining if it belongs to the borrower and by confirming the accuracy of the payment history. If the tradeline does not belong to the borrower, or the reported payment history is inaccurate, no further action is necessary. If the tradeline does belong to the borrower and the reported payment history is accurate, it must be taken into consideration in the credit risk assessment. To ensure it is considered, the lender may obtain a new credit report with the tradeline no longer reported as disputed and resubmit the loan case file to DU.

No Min. Tradeline requirement with DU approval.

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