Get Your FHA Buyers Re-Pre-Approved

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Mortgage and Lending with Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, NMLS #138061 MMCD #1141

Get Your FHA Buyers RE-Pre-Approved

 

Have you heard the latest fashion trend in the mortgage industry?  Re-Pre-Approval?  No?  Well, that's OK, because it's not really a thing.  

 

 

BUT, FHA recently changed the way they score mortgage loans, and this month, the new rules/algorithms are in full swing.  What does that mean?

FHA guidelines

 

It means a buyer who was previously pre-approved through automated underwriting may no longer receive that preapproval, and since FHA dates adhere to timelines based on case # assignment (and if there's no property identified, there's no case #), your buyer's previous preapproval may be worthless today.

 

 

HUD has expressed some concern about the quality of FHA loans being insured, and specifically noted "layered risk" to be a top priority to address - layered risk is when there are multiple factors on a loan application that could result in a high likelihood of foreclosure or delinquency.  For example, if a buyer has both a high debt-to-income ratio AND a questionable credit history, this would be layered risk.  Or a very low down payment, poor credit, and no asset reserves - more layered risk.  

 

 

Over the past few years, getting approval through automated underwriting was a fairly simple and predictable task.  That has changed this month.  Automated underwriting now may reject files with layered risk, resulting in more strict 'manual underwriting'.  Unlike automated underwriting (DU/LP), manual underwriting comes with strict criteria that an underwriter is not allowed to override, including debt-to-income maximums nearly 10% lower than automated underwriting allows for.  Manual underwriting also has restrictions on rental lates that automated underwriting could not factor in - since rents are typically not a part of the credit report, if automated underwriting issued an approval and a note that "rental history documentation is not required", it didn't matter if a client had been 30 days late on their rent 10 times in the past year.  With manual underwriting, there is a hard stop on rental/housing late payments.

 

 

What does this mean to you as a real estate agent?  Well, if you have an FHA pre-approved buyer, it's a good idea to get them re-pre-approved.  Especially for buyers with questionable credit or high debt-income ratios, you'll need some reassurance to prevent a potential nightmare of getting a contract accepted only to find out in underwriting that your client is no longer approved.

 

 

This should be a really simple thing for a lender to do - just a couple of buttons pushed and a fresh approval should be available, but is VERY important to do for all FHA buyers that were preapproved before the start of this month.

 

Want to work with a lender with NO FHA, VA, USDA, or any other government loan overlays?  Give me a call at 484.680.4852.  Questions about the FHA changes?  Ask an expert here!

 

 

 

 

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Re-Blogged 1 time:

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  1. Barbara Todaro 04/08/2019 02:56 PM
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Ambassador
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Anna Banana Kruchten CRB, CRS 602-380-4886
Phoenix Property Shoppe - Phoenix, AZ
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John I had no idea this just took effect. Very helpful information to have - thank you for keeping us informed!

Apr 08, 2019 02:43 PM #1
Rainmaker
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Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
Marketing Agent for The Todaro Team

this is information for all to know and act upon.... John Meussner 

Apr 08, 2019 02:55 PM #2
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Silvia Dukes PA, Broker Associate, CRS, CIPS, SRES
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Interesting, thank you for this information. Better to know and act now than be unpleasantly surprised later. 

Apr 08, 2019 03:29 PM #3
Rainmaker
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Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hi John- - -relatively easy but what about for the applicants/borrowers:  more time/stress involved? 

Apr 08, 2019 03:52 PM #4
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Carolyn Roland-Historic Homes For Sale In Delaware and S. Chester County PA
Patterson-Schwartz Real Estate - Wilmington, DE
Carolyn Roland, GRI, CRS

John-Sounds like a lot of little places for a loan to fall off the edge. Guess we have to be ready to grab it and get it re-pre-approved!

Apr 08, 2019 07:10 PM #5
Rainmaker
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Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Southlake, TX
Selling Homes Changing Lives

John Meussner - Whoa! I had no idea. I have a listing that just went under contract and the buyers are pre-approved with an FHA Loan. I'm going to bring this to the Buyer's Agent right away.

Thank you!

Apr 08, 2019 09:46 PM #6
Rainmaker
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Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Southlake, TX
Selling Homes Changing Lives

John Meussner - So glad to see this FEATURED by ActiveRain!!!

Apr 08, 2019 09:51 PM #7
Rainmaker
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Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

Soo  important for agents and lenders alike to stay on top of lending practices..the transaction you save may be your own !

Apr 09, 2019 03:04 AM #8
Rainmaker
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Kat Palmiotti
Grand Lux Realty, Monroe NY, 914-419-0270, kat@thehousekat.com - Monroe, NY
The House Kat

I wasn't aware of this - thank you for the information!

Apr 09, 2019 04:03 AM #9
Rainmaker
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Amanda S. Davidson
Amanda Davidson Real Estate Group - Alexandria, VA
Alexandria Virginia Homes For Sale

John, you are always on top of the latest news. I knew about the new FHA guidelines but, had no idea it meant buyers would need to be re-pre-approved. While I haven't seen FHA financing used in over a year on one of my listings I will definitely make a mental note of this. Thank you!

Apr 09, 2019 05:04 AM #10
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Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Voice of reason & reality found here...

Apr 09, 2019 10:54 AM #11
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
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John every time FHA starts to become more of a go to product, they change things to make it more difficult, and to make sure they do not get more of a market share than they want.

Apr 10, 2019 08:58 AM #12
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Margaret Rome, Baltimore Maryland
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Thanks John Meussner Thanks for alerting us   (and if there's no property identified, there's no case #), your buyer's previous preapproval may be worthless today.

Apr 10, 2019 08:32 PM #13
Rainmaker
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Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Great assessment of the current HUD/FHA situation, John Meussner ... as always.  Needless to say, LOs ... need to stay on top of their files regarding this matter.  And many others.  It's certainly no time to be working with a rookie ... or with a lender that doesn't conduct much business.  Knowledge and education is key ...

Gene

Apr 11, 2019 10:20 AM #14
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Liane Thomas -Top Listing Agent
BROKER Allison James Estates & Homes BRE 01885684 - Corona, CA
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Wow! Wasn't aware of the changes. Thank you as always for the good info. Hope all is well with you my friend. 

Apr 11, 2019 02:07 PM #15
Rainmaker
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Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

It’s important to stay proactive when things little bit into different directions. I think repre-approval might be one of those things.

Apr 15, 2019 06:18 PM #16
Rainmaker
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Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

I think some of these changes are pretty new for a lot of people, but it looks like we’re going to have to roll with it for a bit. Liane Thomas -Top Listing Agent

Apr 15, 2019 06:40 PM #17
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