One of the most used types of loans is FHA. Home buyers must be aware of the the 15th of September 2015 changes to FHA loan qualification criteria. The following is a summary of them.
Interpretation of Debt
Some debts are being viewed a bit differently. Installment loans with 10 or fewer months remaining are only excluded if the remaining payments are less than 5% of your gross monthly pay. For deferred loans, the full loan balance is counted as the monthly payment. Charge accounts are only excluded as debt if you have a 1 year history of full and on-time payments. If there were late payments, then five percent of the current balance will be viewed as debt. Lastly, accounts where you are strictly an authorized user may be excluded only if payments were remitted on-time over the last year.
Rental and Mixed-use Properties
Changes based on property type cover rental and mixed-use properties. For multi-family homes, only 75% of rental income can be used as qualifying income. Figures are obtained from either actual leases or on appraisal opinions of possible rents. FHA loans may only be used for properties with a minimum 51% residential use.
Changes Relating to Types of Income
- Part-time Work
Part-time workers must present verification of pay over the last two years, the average of which may be used for qualification purposes. For applicants with recently improved pay, an average of the past 12 months can be used.
- Overtime and Bonus Loan
If you are able to provide a 2-year history of overtime or bonus pay, then that additional amount may considered as qualifying pay.
- Declining Self Employment Loan
For self employed individuals whose earnings lowered by 20% or greater, your earnings will not be used for mortgage qualification. There can be an exception for extenuating circumstances AND if you can prove re-stabilized or increased earnings for the past year.
- Non-taxable Income
Non-taxable income such as disability or social security will be considered but only up to 15%.
Employment History Requirements
Multiple employment moves or gaps in employment history are particularly important. If you have moved employment more than 3 times over the past year, then you must provide verification that the changes were for training reasons or that you attained higher pay and benefits from each move. If you were unemployed for 6 or more months, you must document that you received consistent pay over the last 6 months and some history during the past two years (training excluded).
- Money Received as Gofts – Gifted funds for a home purchase must come from a family member, excluding cousins, nieces, and close friends. Transfer of funds must be shown in bank statements.
- More Than One FHA Loan – A second FHA loan is now permitted if you are moving 100+ miles due to employment reasons.
- Streamline Refinancing – A streamline refinance is allowed only if the monthly payment including principal, interest, and mortgage insurance increases no more than fifty dollars monthly.
More On The 15th Of September 2015 Changes To FHA Loan Qualification Criteria
The the 15th of September 2015 changes to FHA loan qualification criteria in this article impact FHA case numbers created loan or later. If you are already qualified and received a case number, the changes should not impact you. If you are not yet qualified, then you might want to get started before this deadline. Waiting may reduce the amount for which you qualify or make it more difficult for you get approved for a loan.