FHA Update: The more you know the more homes you can sell-
FHA UPDATE: HUD released Mortgagee Letter 08-11 on April 29th, defining new terms for acceptable "non-traditional credit". In a nutshell, HUD is defining different classes of non-traditional credit into Group I type and Group II type. With credit in Group I being the more desired type. HUD is also adding more guidelines for lenders to consider when using non-traditional credit.
Group I - rental housing payments (subject to independent verification if the borrower is a renter), utility company reference (if not included in the rental housing payment), including gas, electricity, water, land-line home telephone service, cable TV. If the borrower is renting from a family member, request independent documents to prove regularity of payments, such as cancelled
Group II - insurance coverage, i.e., medical, auto, life, renter's insurance (not payroll deducted); payment to child care providers - made to a business providing such services; school tuition; retail stores - department, furniture, appliance stores, specialty stores; rent to own - i.e., furniture, appliances; payment of that part of medical bills not covered by insurance; Internet/cell phone services; a documented 12 month history of saving by regular deposits (at least quarterly/non-payroll deducted/no NSF checks reflected), resulting in an increasing balance to the account; automobile leases, or a personal loan from an individual with repayment terms in writing and supported by cancelled checks to document the payments.
What this means to the mortgage market and Realtors... Well, it help us the Loan Consultant have more options when trying to qualify our clients with minimal or no credit for loans. Not everyone comes with the traditional three credit cards no late payments and perfect credit. This improvement to FHA will help loan origination across the board.
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