FHA Tricks I’ve learned over the years

To most originators now day’s FHA loans are something that can pertain to half a Loan Originators pipeline or more. I have compiled some of the coolest FHA tricks, debugged myths’ and special things done on FHA loans in a list to create the top 20 FHA tricks. Here they are;

1. FHA Streamlines have no income and no appraisal. Most companies require some form of a credit report. At Motive Lending we require a full tri-merge report but underwrite (look at) only the mortgage rating on the credit.

2. FHA allows transferred appraisals, most originators know this. The case number follows the property not the client. So if the case number is transferred to another lender the loan potentially can still be closed. **I say potentially because if you didn’t know most companies place a MCR on files (mortgage credit reject) if they have an overlay. At the new Lender they may review this MCR and not accept the loan if the MCR is marked for things like fraud.

3. FHA allows clients to have disputes on their credit report that do not need to be removed. If the cumulative balance of all disputed accounts is less than $1000, the disputes do not need to be removed.

4. 1×30 for a mortgage rating is allowed with Approved/Eligible findings. The client must be current at the time of funding.

5. Student loans can NOT be omitted on FHA any longer. Use 2% of the balance as a payment or gain a payment letter and we will use that.

6. FHA Allows collection accounts to be omitted if collectively less than $2000.

7. FHA Streamlines can be on investment properties.

8. FHA now requires a well cert to verify the purity of the water if the property has a private septic and well system.  **FYI newest guideline.

9. FHA allows different types of pay to be used and calculated in the income when you have at least 1 year of receiving that income type. Such as shift differential pay, or over time, or bonus income.. **Provided that the underwriter feels that it’s likely to continue you can use that income. Commission income you must be receiving for 2 years to use.

10. FHA allows you to be a buyers agent as a Realtor, and do the home mortgage for the same client. You just can not be a selling agent Realtor and do the loan. This rule only applies to any LO on a broker side of things, if any Lender is also fully endorsed with FHA they can not have an employed Agent do this.

11. FHA allows a client to combine a 1st and 2nd loan (even if not purchase money) and consider the transaction a rate and term transaction. Up to 97.75% LTV on refi’s.

12. FHA allows a client who had a modification to do a loan if they have been paying on time for 12 months proceeding the modification. They also have to be current on all installment debt. If they are late a 3 year waiting period is imposed.

13. FHA allows a manual underwrite with max ratios of 31/43 if you receive findings that are refer/eligible. With 1 compensating factor you can do 37/47 with ratios and with 2 compensating factors go to 40/50 with ratios.

14. FHA allows a client to do a loan 2 years after a Bankruptcy or 3 years after a foreclosure. If the client included a mortgage in the BK they have to wait 3 years.You can now even do a loan when someone just discharged a CHP 13 BK.

15. FHA allows non-occupied co-borrowers to help with the approval on loans.

16. FHA mortgage insurance will never fall off the loan now days, they once did have a time where MIP could be removed off a loan. The client would have to have 78% LTV and had the MIP for a minimum of 5 years.

17. FHA will insure loans with DTI’s up to 57% with approved/eligible findings.

18. FHA has announced they no longer will be charging client’s 30 days of interest if the loan is not paid off at the first of the month. FHA will only be allowed to charge interest until the day paid off. Just like conventional. Great news for Streamlines.  Now this was on case numbers originated at the beginning of FEB last year (2015).  When the change to monthly MI happened.  So we will start to see these loans coming soon.

19. With the MI amount dropping from 1.15 to .85 last year, if you find a FHA loan originated prior to 2015, you can do the streamline refi and achieve 5% payment reduction at the same rate.  That’s right, you read that right.  SAME rate on the loan amounts of about 115k or more will save 5% alone in the MI reduction to .85.  This was and is GOLD for those that work the right campaign..

20.  I got a guy questions come flowing in all the time to me about FHA manual underwriting guidelines.  Motive goes down to 580 FICO and we allow for manually underwritten guidelines.  – JUICEMAN

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