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Did You Know About These FHA Guideline Changes?

January 20, 2016

credit report 101

Earnest Money 

Old Rule – Document source of earnest money if the amount exceeds 2% of the sales price

New Rule – Document source of earnest money if the amount exceeds 1% of the sales price

CAIVRS 

Old Rule – defaulted federal debt makes borrower ineligible

New Rule – VERIFIED defaulted federal debt makes the borrower ineligible

Part-Time Income

Old Rule – Underwriter discretion allowed when received less than 2 years

New Rule – Two years uninterrupted part-time income is required.  Average income over prior 2 years or use 12-month average of hours at the current pay rate if the lender documents an increase in pay rate.

Rental Income on Retained Primary Residence

Old Rule – Rental income may be counted when relocating outside of reasonable commute distance for job and borrower has 25% equity.

New Rule – Rental income may be counted when relocating and the new residence is at least 100 miles from previous residence.  If no history of rental income since the last tax filing, borrower must have 25% equity.

Non-taxable income 

Old Rule – Gross up using tax rate evidenced on last tax return.  If borrower did not file a return, use tax rate of 25%.

New Rule – Gross up using the greater of 15% or actual tax rate.  If borrower did not file a tax return, use tax rate of 15%

Installment Debts Less Than 10 Months

Old Rule – May be excluded from ratios.  If manual underwrite—may be excluded if debt will not affect ability to pay the mortgage.

New Rule – May be excluded ONLY if—they have cumulative payment of less than or equal to 5% of the borrower’s gross monthly income AND the borrower may not pay the debts down to achieve this percentage.

Multiple FHA Loans

Old Rule – If relocating for employment, borrower may obtain a second FHA loan for a new principal residence if current residence is more than a reasonable commute to new residence.

New Rule – If relocating for employment, the commuting distance between the old residence and new residence must be more than 100 miles.

Get Help From the Experts.  Platinum Mortgage Company also offers Stated, Low Doc, Alt-A, Sub-Prime, Non-Prime and Bank Statement Home Loans.

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