HUD is releasing it's new FHA handbook version 4000.1. All the changes to FHA guidelines will be effective on case numbers assigned on or after September 14th of this year. Some of these items reflect a tightening of the guidelines while others could be considered loosening. There are quite a few changes so here are just some of the highlights:'
General Changes:
Age of all credit docs is now 120 days unilaterally, inclusive of new construction properties.
Aside from borrowers on the subject mortgage, no additional parties may appear on the sales contract. Non borrowing family members, are excluded from this guideline and, may remain on the contract, without appearing on note.
EAD card is not required for individuals with refugee or asylee status as documented per the USCIS.
Any sales price increase, requires a revised Amendatory Clause.
Social Security number validation is required for all non-purchasing spouses in community property states, as applicable.
Asset Changes:
Large deposits are now defined as 1% of Adjusted Value (Lessor of Purchase price less any inducements to purchase or property value).
Earnest Money deposit must be verified if it exceeds 1% of sales price.
Terms and conditions of withdraw is required for all 401K assets used in any way in the transaction.
30% reduction in stocks and bonds are no longer required.
A copy of the Donor’s bank statement, is now required for all gifts, even when gift funds are wired directly to title. Large deposits into the donor’s bank statement (greater than 1% of adjusted value) must be documented from an acceptable source. In my opinion this one really sucks. We now
Secured borrowed funds are only acceptable when secured against depository accounts – Example – Taking out a vehicle loan or chattel loan is no longer acceptable. An example of an acceptable secured borrowed funds would be a loan against your 401k.
Income Changes:
Voluntary Child support is now an acceptable income source. Additional documentation and rules apply.
Nontaxable income may be grossed up to qualify. The “gross up” calculation, is now defined as 15% or the actual tax rate, whichever is less.
Vacancy factor for rental income is defined as 25% for entire US
In order for income to be considered effective income after an FHA defined extended absence from the work force, the borrower must be on their current job for a minimum of 6 months continuous, at time of case number assignment
Frequent job changes (more than 3 time in most recent 12 months) requires evidence of training and education, to demonstrate qualification for the new position or, evidence of continual increases in income and/or benefits from each job change.
Credit Changes:
Verification of borrower living rent free from property owner is required.
Student loan monthly payments must be included in DTI. If in deferment must verify mo payment when out of deferment or utilize a 2% payment. There is no longer a provision to exclude deferred student loan debt from the DTI. (Student Loans are a KILLER)
Installment loans with less than 10 monthly payments remaining may only be excluded from DTI, if total payment for all installment loans is less than 5% of qualifying income. A provision to pay down an installment account to less than 10 months owing to exclude it from qualifying, no longer applies.
Authorized user accounts must be included in DTI, unless the primary account holder has made all required payment on the account for the previous 12 months.
If the borrower has a child support, alimony, or maintenance debt, we must provide 28 days of paystubs to verify whether the borrower is subject to any garnishment. The greater of the court ordered monthly payment or the monthly garnishment amount, must be included in qualifying.
Debt paid by business may only be excluded from DTI, if the business tax returns reflect an expense in an amount equal to or greater than the amount of payments documented as paid out of company funds and, 12 mo cancelled checks verifying the business paid the debt are provided.
To qualify for the relocation exception to the maximum number of FHA insured mortgages rule, HUD has clarified that relocation is a minimum 100 miles.
Again, these are just the highlights and this is a pretty long list. To see all of the changes
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/handbook_4000-1
FHA is becoming a little tougher one some things.
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