FHA GUIDELINE CHANGES EFFECTIVE 6/15/2015 in Greenville, SC
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For FHA case numbers assigned on or after 6/15/2015, there will be significant and game changing shifts in current guidelines that will impact the typical FHA borrower both positively and negatively.
Below are some of the most dramatic changes. They are not all encompassing however, and a more details will be forth coming.
Items with BIGGEST impact are listed first:
PART-TIME EMPLOYMENT: Must have a 2 year minimum, uninterrupted, history on order to be utilized as effective income. Previously, less than 2yrs but more than 1yr could be used if justified.
GIFTS: Whether the gift has been received or will be received, the DONOR’s Bank Account Statement must be provided. This statement must show DONOR’s ability and withdrawal of funds. Gift funds being given by the donor will need to be sourced, such a large deposits. A 30 day statement is all that is required.
STUDENT LOANS: If the current payment is either zero or deferred, the actual payment (we are trying to clarify IBR terms) must be used. If no payment can be obtained 2% of the outstanding balance is to be used to calculate the payment for DTI determination. In other words, no more NOT counting deferred student loans.
30 DAY ACCOUNTS ( AMEX): The LENDER must verify the Borrower paid the outstanding balance in full on every 30-Day Account each month for the past 12 months. 30-Day Accounts that are paid monthly are not included in the Borrower’s DTI. If the credit report reflects any late payments in the last 12 months, the Lender must utilize 5 percent of the outstanding balance as the Borrower’s monthly debt to be included in the DTI.
INSTALLMENT DEBT /LESS THAN 10 MONTHS: Closed-end debts do not have to be included if they will be paid off within 10 months AND the cumulative payments of all such debts are less than or equal to 5% of the borrowers gross monthly income.
MORTGAGE LATES: If the borrower has a 3x30 or 1x60 or 1x90 on either a mortgage or HELOC, in the last 12 months, the loan is automatically downgraded to a manual underwrite.
AUTHORIZED USER: Accounts for which the Borrower is an authorized user must be included in a borrower’s DTI ratio unless the Lender can document that the primary account holder has made all required payments on the account for the previous 12 months. If less than three payments have been required on the account in the previous 12 months, the payment amount must be included in the Borrower’s DTI. Option 2 is to remove the authorized user account from the borrower's account.
CO-BORROWER /CO-SIGNER: If the cosigned liability is not included in the monthly obligation, the Lender must obtain documentation to evidence that the other party to the obligation has been making regular on-time payments during the previous 12 months and does not have a history of delinquent payments on the loan.
VOLUNTARY ALIMONY / CHILD SUPPORT: Voluntary alimony and child support must be received for the most recent 12 months to be included in qualifying income. The most recent 6 months must be stable and consistent. If not, an average can be utilized over the previous 2 years or over the time received.
EMPLOYMENT HISTORY: If an employee has changed jobs more than 3 times in the previous 12 months, OR has changed lines of work, the lender must take additional steps to verify and document the stability of the Borrower’s Employment Income.
The lender must obtain:
1- Transcripts of training or education demonstrating qualification for a new
position; or
2- Employment documentation evidencing continual increases in income
and/or benefits
Gaps of employment greater than 6 months require 6 months on the new job, regardless of what created the gap. Raising a family is no longer an acceptable reason for the gap. A two year history prior to the absence will also be required. Time is measured by the date the case number was obtained. So the six months is measured from the start of employment to case number assignment.
IRA/ 401k INCOME: If the income is being received and fluctuates to market or drawn as needed, a two year average will need to be established. If received less than 2 years, it is averaged over the time received. Should the distribution be just starting, evidence of receipt will be required, for example a recent bank statement. Monthly income must deemed stable and consistent.
The above changes are provided to give you a heads up of what is happening with the FHA. FHA has completely gone through an overhaul and the list of mortgagee letters that have been superseded either in their entirety or partly superseded is lengthy.
As always, questions can be directed to randy.shamburger@movement.com.
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