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Fha Information

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Caroline Gerardo
Caroline Gerardo

The document provides information on FHA loan guidelines including eligibility requirements, purchase limits, credit requirements, and other program details. Key points include: - Anyone with a social security number who will occupy the home as their primary residence can qualify for an FHA loan. - Borrowers can finance up to 97.75% of the purchase price with a minimum down payment of 3.5% and debt-to-income ratios not exceeding 31% and 43%. - Credit requirements are flexible, requiring three credit references from the last 12 months and a minimum credit score of 600.

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FHA HIGHLIGHTS
FHA For anyone who has a Social Security number Occupy the property as the principal residence Possess a valid Social Security Number
• Have a two-year employment history; • School and military service count towards this two-year requirement. • Not be delinquent on any Federal debt such as a student loan or other FHA-insured mortgage
HOW MUCH CAN THEY BUY?
$ • Caps on payment and debt-to-income ratios not exceed 31% and the debt-to-income ratio may not exceed 43%. • The buyer’s entire cash investment—as little as 3.5 %—can be a gift from a family member, employer, charitable organization or local government entity. • The seller can contribute up to six percent of the home’s price toward closing costs through a seller’s concession
CREDIT Flexible Credit Requirements Three credit references, including at least one from Group I, covering the most recent 12 months activity from the date of application. If there is a credit score, the minimum score WFHM will accept for a purchase or rate term refinance is 600 . On cash out transactions, a 620 score is required. Streamline refinances are also required to meet the 600 minimum requirement. Exception: If the existing loan is serviced by Wells Fargo and the transaction is a non-credit qualifying streamline, a minimum credit score is not required. Note: FHA has no published guidelines on minimum credit scores; this is a WFHM overlay .
WELLS RULES Borrowers without credit scores are not disqualified. Obtain the most recent 12-month mortgage history by direct Verification of Mortgage (VOM) or through copies of cancelled checks, and include in ratios if: Mortgage debt does not appear on the credit report, or The credit report does not have a 12-month history, or no rating is available. If any mortgage trade line including mortgage line-of-credit payments, during the most recent 12 months, show any of the following, the loan must be manually downgraded: Three or more late payments of greater than 30 days, or One or more late payments of 60 days plus one or more 30-day late payments, or One payment greater than 90 days late Wells Fargo policy does not allow new financing to applicants with any of the following adverse credit accounts from Wells Fargo/Wachovia within the last seven years:
Why is wells so? • Charge-off • or Deed in Lieu This policy does not apply to: HECM loans, non-credit qualifying streamline refinance transactions, and any FHA loan that receives and accept/approve from an FHA approved (AUS) – unless manually downgraded. Requiring the payoff of the above referenced Settled for less accounts Repossession Bankruptcy • Foreclosure Wells Fargo/Wachovia debts does not render the applicant eligible for WFHM financing. This is a Wells Fargo & Co. rule not FHA If a Wells Fargo/Wachovia debt was included in the bankruptcy, the borrower is not eligible. Wells Fargo & Co. RULE
One More time… Requiring the payoff of the above referenced Wells Fargo/Wachovia debts does not render the applicant eligible for WFHM financing. This is a Wells Fargo & Co. rule not FHA If a Wells Fargo/Wachovia debt was included in the bankruptcy, the borrower is not eligible. Wells Fargo & Co. RULE
Chapter 7 BK • A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have elapsed since the date of the discharge of the bankruptcy. • The borrower must have re-established good credit or chosen not to incur new credit obligations. The borrower also must have demonstrate a documented ability to responsibly manage finances..Less than two years, but not less than 12 months, may be acceptable if can show the BK was caused by circumstances beyond control, and can document ability to manage financial affairs. Paper trail Story
. FHA $
Rental Rating Landlord Rating / Rental Borrower’s payment history of housing obligations through either the credit report, verification of rent directly from the landlord (with no identity-of-interest with the borrower), or verification of mortgage directly from the mortgage servicer, or through cancelled checks covering the most recent 12-month period. A landlord rating is not needed if evidence is provided that the borrower has been living in base housing.
FHA has eliminated unnecessary requirements to make minor repairs. Water heater strapped. Don’t put termite in offer/contract or will be required. • The homebuyer and the seller, individually or jointly, can pay closing costs as agreed to in the sales contract. FHA doesn’t limit what closing costs the homebuyer can pay.
203k FHA’s Section 203(k) Limited Repair Program is an excellent financing option for you whether buying or selling homes—when repairs are identified during a home inspection or appraisal—because it gives buyers the ability to make repairs after closing. Buyers can finance up to an additional $35,000 into their mortgage to pay for minor remodeling such as replacing flooring, installing new appliances, and painting the interior and/or exterior of the home.
Streamline Streamline refinances are designed to lower the monthly principal and interest payments on a current FHA-insured mortgage and must involve no cash back to the borrower except for minor adjustments at closing not exceeding $500. Streamline refinances can be insured with or without an appraisal. Can’t exceed original loan amount. New individuals can be added on a streamline refinance.
Streamline vesting changes CAN’T DELETE BORROWER from obligation streamline refinances that result in one or more borrowers being deleted from obligations under the mortgage note are not. However, streamline refinances that will result in the deletion of a borrower currently obligated on the note, provided the change in title occurred at least six months previously and the remaining borrowers can provide evidence they alone have made the mortgage payments during that period are permitted. This policy applies only to those loans that do not contain restrictions limiting assumptions only to creditworthy persons (typically, mortgages made before December 15, 1989 are freely assumable), or where the transferability restriction (due-on-sale clause) was not triggered, such as in a divorce, devise,or descent and the assumption or quit-claim of interest occurred more than six months previously and the remaining owner-occupant can demonstrate that he/she has made the mortgage payments during this time.
MIP Up Front Mortgage Insurance Premium (UFMIP) – On HUD insured loans with up-front mortgage insurance, the up-front MIP refund must be calculated and subtracted from the existing mortgage amount when determining the new mortgage amount. In those cases when the new UFMIP will be less than the credit, the amount of the new UFMIP can be deducted from the existing principal balance when calculating the new mortgage amount. This will prevent the borrower from having to bring in additional funds to close. In those cases that the credit exceeds the new MIP, any excess MIP owed to the borrower from the existing loan will be refunded directly to the borrower from HUD after closing.
MIP costs Up-front Mortgage Insurance Premium UFMIP May be financed OR paid in cash but may NOT be partially financed UFMIP added to Base Loan Amount (BLA) to equal Total Loan Amount (TLA) Cents always paid in cash for rounding purposes Purchases, Full Credit Qualify Refinances 1.75% Streamline transactions 1.50%
MIP More Annual Mortgage Insurance Premium (MIP) – When processing a Streamline Refinance (with or without an appraisal), on a mortgage that was originated and closed on or before July 1, 1991, the new loan will be exempt from the annual premium. The borrower's monthly payment amount should not include any annual premium. However, documentation must be provided in the case file that the mortgage being refinanced closed before July 1, 1991. This documentation may be in the form of a photocopy of the HUD-1 Settlement Statement, Mortgage Insurance Certificate or other credible evidence that shows that the mortgage being refinanced was closed before July 1, 1991.
exemption paying of the annual premium applies closed before July 1, 1991, and subsequently streamline refinanced No annual second time if before 1991
Other stuff UFMIP – All new 203(b) loans are subject to an UFMIP. Those loans that are refinancing existing mortgages that were closed prior to July 1, 1991, there will not be an annual premium. The UFMIP will be 1.50 percent. Those loans that are refinancing existing mortgages closed on or after July 1, 1991, the standard UFMIP and annual premium will be charged. Annual MIP – An annual premium is collected on a monthly basis. The term of the annual premium is based on the loan to value. (For 15-year loans with loan to values of 89.99 percent or less, no annual premium is charged.) Special LTV calculations apply on Streamline Refinances Without Appraisals
mip Determine the base loan amount of the new mortgage. If the MIP for the old mortgage was financed, subtract the refund, if any, noted on the Refinance Authorization from the base loan amount. This avoids paying a new MIP on the refund credit amount. Select the applicable MIP factor from the premium calculation table Multiply the mortgage amount before MIP by the factor selected. SAY .82% Use this table for streamline refinances where the "old" mortgage closed on or before July 1, 1991. Mortgage Term Premium Factor More than 15 years 0.015 15 years or less 0.015
REFUND CREDIT $ The amount of the refund is determined from the Refinance Authorization. This refund amount must be subtracted from the new UFMIP to determine the net amount of UFMIP due on the new loan. Note : If refund exceeds new UFMIP the excess refund will be sent/refunded to the borrower directly from HUD
Netting Escrows WFHM will also allow the netting of escrow funds on a payoff of an existing WFHM loan if the customer is refinancing through WFHM. Netting of escrows is not a requirement but an option available to the borrower. With netting of escrows, the customer’s current escrow account balances are refunded against the principal balance owed on the current mortgage. This is shown on the payoff statement in detail. The principal balance prior to the netting of escrows is used to determine the new loan
Last payment proof at close The existing loan must be current for the month due (for example, if closing in December, November 1 payment must have been made).At closing current check.
Selling points Assumable – in upward rate climate MIP is tax deductable HMC Economics* Possible 10 extra bps of commission on all FHA loans That’s $200 on a $200,000 loan amount
Benefits Low down payment (only 3.5% cash investment) Seller Concessions (up to 6%) Reserves not required for 1 Unit Properties 100% Gift Funds allowed Assumable to qualified borrowers Citizenship is not required Non-occupying co-borrower allowed
tips Don’t put assets on 1003 that can’t be verified Don’t put termite in contract if it is to be ignored- catch 22 Condos must be Wells Approved and on FHA website

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Fha Information

  • 2. FHA For anyone who has a Social Security number Occupy the property as the principal residence Possess a valid Social Security Number
  • 3. • Have a two-year employment history; • School and military service count towards this two-year requirement. • Not be delinquent on any Federal debt such as a student loan or other FHA-insured mortgage
  • 4. HOW MUCH CAN THEY BUY?
  • 5. $ • Caps on payment and debt-to-income ratios not exceed 31% and the debt-to-income ratio may not exceed 43%. • The buyer’s entire cash investment—as little as 3.5 %—can be a gift from a family member, employer, charitable organization or local government entity. • The seller can contribute up to six percent of the home’s price toward closing costs through a seller’s concession
  • 6. CREDIT Flexible Credit Requirements Three credit references, including at least one from Group I, covering the most recent 12 months activity from the date of application. If there is a credit score, the minimum score WFHM will accept for a purchase or rate term refinance is 600 . On cash out transactions, a 620 score is required. Streamline refinances are also required to meet the 600 minimum requirement. Exception: If the existing loan is serviced by Wells Fargo and the transaction is a non-credit qualifying streamline, a minimum credit score is not required. Note: FHA has no published guidelines on minimum credit scores; this is a WFHM overlay .
  • 7. WELLS RULES Borrowers without credit scores are not disqualified. Obtain the most recent 12-month mortgage history by direct Verification of Mortgage (VOM) or through copies of cancelled checks, and include in ratios if: Mortgage debt does not appear on the credit report, or The credit report does not have a 12-month history, or no rating is available. If any mortgage trade line including mortgage line-of-credit payments, during the most recent 12 months, show any of the following, the loan must be manually downgraded: Three or more late payments of greater than 30 days, or One or more late payments of 60 days plus one or more 30-day late payments, or One payment greater than 90 days late Wells Fargo policy does not allow new financing to applicants with any of the following adverse credit accounts from Wells Fargo/Wachovia within the last seven years:
  • 8. Why is wells so? • Charge-off • or Deed in Lieu This policy does not apply to: HECM loans, non-credit qualifying streamline refinance transactions, and any FHA loan that receives and accept/approve from an FHA approved (AUS) – unless manually downgraded. Requiring the payoff of the above referenced Settled for less accounts Repossession Bankruptcy • Foreclosure Wells Fargo/Wachovia debts does not render the applicant eligible for WFHM financing. This is a Wells Fargo & Co. rule not FHA If a Wells Fargo/Wachovia debt was included in the bankruptcy, the borrower is not eligible. Wells Fargo & Co. RULE
  • 9. One More time… Requiring the payoff of the above referenced Wells Fargo/Wachovia debts does not render the applicant eligible for WFHM financing. This is a Wells Fargo & Co. rule not FHA If a Wells Fargo/Wachovia debt was included in the bankruptcy, the borrower is not eligible. Wells Fargo & Co. RULE
  • 10. Chapter 7 BK • A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have elapsed since the date of the discharge of the bankruptcy. • The borrower must have re-established good credit or chosen not to incur new credit obligations. The borrower also must have demonstrate a documented ability to responsibly manage finances..Less than two years, but not less than 12 months, may be acceptable if can show the BK was caused by circumstances beyond control, and can document ability to manage financial affairs. Paper trail Story
  • 12. Rental Rating Landlord Rating / Rental Borrower’s payment history of housing obligations through either the credit report, verification of rent directly from the landlord (with no identity-of-interest with the borrower), or verification of mortgage directly from the mortgage servicer, or through cancelled checks covering the most recent 12-month period. A landlord rating is not needed if evidence is provided that the borrower has been living in base housing.
  • 13. FHA has eliminated unnecessary requirements to make minor repairs. Water heater strapped. Don’t put termite in offer/contract or will be required. • The homebuyer and the seller, individually or jointly, can pay closing costs as agreed to in the sales contract. FHA doesn’t limit what closing costs the homebuyer can pay.
  • 14. 203k FHA’s Section 203(k) Limited Repair Program is an excellent financing option for you whether buying or selling homes—when repairs are identified during a home inspection or appraisal—because it gives buyers the ability to make repairs after closing. Buyers can finance up to an additional $35,000 into their mortgage to pay for minor remodeling such as replacing flooring, installing new appliances, and painting the interior and/or exterior of the home.
  • 15. Streamline Streamline refinances are designed to lower the monthly principal and interest payments on a current FHA-insured mortgage and must involve no cash back to the borrower except for minor adjustments at closing not exceeding $500. Streamline refinances can be insured with or without an appraisal. Can’t exceed original loan amount. New individuals can be added on a streamline refinance.
  • 16. Streamline vesting changes CAN’T DELETE BORROWER from obligation streamline refinances that result in one or more borrowers being deleted from obligations under the mortgage note are not. However, streamline refinances that will result in the deletion of a borrower currently obligated on the note, provided the change in title occurred at least six months previously and the remaining borrowers can provide evidence they alone have made the mortgage payments during that period are permitted. This policy applies only to those loans that do not contain restrictions limiting assumptions only to creditworthy persons (typically, mortgages made before December 15, 1989 are freely assumable), or where the transferability restriction (due-on-sale clause) was not triggered, such as in a divorce, devise,or descent and the assumption or quit-claim of interest occurred more than six months previously and the remaining owner-occupant can demonstrate that he/she has made the mortgage payments during this time.
  • 17. MIP Up Front Mortgage Insurance Premium (UFMIP) – On HUD insured loans with up-front mortgage insurance, the up-front MIP refund must be calculated and subtracted from the existing mortgage amount when determining the new mortgage amount. In those cases when the new UFMIP will be less than the credit, the amount of the new UFMIP can be deducted from the existing principal balance when calculating the new mortgage amount. This will prevent the borrower from having to bring in additional funds to close. In those cases that the credit exceeds the new MIP, any excess MIP owed to the borrower from the existing loan will be refunded directly to the borrower from HUD after closing.
  • 18. MIP costs Up-front Mortgage Insurance Premium UFMIP May be financed OR paid in cash but may NOT be partially financed UFMIP added to Base Loan Amount (BLA) to equal Total Loan Amount (TLA) Cents always paid in cash for rounding purposes Purchases, Full Credit Qualify Refinances 1.75% Streamline transactions 1.50%
  • 19. MIP More Annual Mortgage Insurance Premium (MIP) – When processing a Streamline Refinance (with or without an appraisal), on a mortgage that was originated and closed on or before July 1, 1991, the new loan will be exempt from the annual premium. The borrower's monthly payment amount should not include any annual premium. However, documentation must be provided in the case file that the mortgage being refinanced closed before July 1, 1991. This documentation may be in the form of a photocopy of the HUD-1 Settlement Statement, Mortgage Insurance Certificate or other credible evidence that shows that the mortgage being refinanced was closed before July 1, 1991.
  • 20. exemption paying of the annual premium applies closed before July 1, 1991, and subsequently streamline refinanced No annual second time if before 1991
  • 21. Other stuff UFMIP – All new 203(b) loans are subject to an UFMIP. Those loans that are refinancing existing mortgages that were closed prior to July 1, 1991, there will not be an annual premium. The UFMIP will be 1.50 percent. Those loans that are refinancing existing mortgages closed on or after July 1, 1991, the standard UFMIP and annual premium will be charged. Annual MIP – An annual premium is collected on a monthly basis. The term of the annual premium is based on the loan to value. (For 15-year loans with loan to values of 89.99 percent or less, no annual premium is charged.) Special LTV calculations apply on Streamline Refinances Without Appraisals
  • 22. mip Determine the base loan amount of the new mortgage. If the MIP for the old mortgage was financed, subtract the refund, if any, noted on the Refinance Authorization from the base loan amount. This avoids paying a new MIP on the refund credit amount. Select the applicable MIP factor from the premium calculation table Multiply the mortgage amount before MIP by the factor selected. SAY .82% Use this table for streamline refinances where the "old" mortgage closed on or before July 1, 1991. Mortgage Term Premium Factor More than 15 years 0.015 15 years or less 0.015
  • 23. REFUND CREDIT $ The amount of the refund is determined from the Refinance Authorization. This refund amount must be subtracted from the new UFMIP to determine the net amount of UFMIP due on the new loan. Note : If refund exceeds new UFMIP the excess refund will be sent/refunded to the borrower directly from HUD
  • 24. Netting Escrows WFHM will also allow the netting of escrow funds on a payoff of an existing WFHM loan if the customer is refinancing through WFHM. Netting of escrows is not a requirement but an option available to the borrower. With netting of escrows, the customer’s current escrow account balances are refunded against the principal balance owed on the current mortgage. This is shown on the payoff statement in detail. The principal balance prior to the netting of escrows is used to determine the new loan
  • 25. Last payment proof at close The existing loan must be current for the month due (for example, if closing in December, November 1 payment must have been made).At closing current check.
  • 26. Selling points Assumable – in upward rate climate MIP is tax deductable HMC Economics* Possible 10 extra bps of commission on all FHA loans That’s $200 on a $200,000 loan amount
  • 27. Benefits Low down payment (only 3.5% cash investment) Seller Concessions (up to 6%) Reserves not required for 1 Unit Properties 100% Gift Funds allowed Assumable to qualified borrowers Citizenship is not required Non-occupying co-borrower allowed
  • 28. tips Don’t put assets on 1003 that can’t be verified Don’t put termite in contract if it is to be ignored- catch 22 Condos must be Wells Approved and on FHA website

Editor's Notes

  • #17: NEED A BORROWER WITH GREAT CREDIT