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Christine Ug…, Home Owner in

What does an FHA loan requires now a days?

Asked by Christine Ugarte, Sat Jan 19, 2013

From a lender's perspective of view, what are the most important risk factor an underwriter look at, when revewing an FHA loan, for a Purchase. And how a prospective homeowner should be encompass with this guidelines?

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An underwriter must analyze the four basis pilars of risk (followin guidelines pre-established by FHA and of the other agencies): 1) Credit 2)Income/Employment 3)Assets and 4) Collateral.
What concrerns you as a buyer is the how, the way they "think" or review your loan, is goin to affect the decisions you take:
1) Credit: While FHA establishes a bottom of 500 credit score, most lenders do not take that level of risk, and determine a minimum of 620. Some other lenders have a 640 minimum; and two or three in within the industry, are still willing to go down to 580.
2) Income/Employment: The most important aspect is the proportion of the income vs your liabilities, and that is what will determine your capacity of purchase. Also, the consistency of the income, and the stability and lenght of employment. However, employment is not the only source of income, you could use also other avenues: Retirement Income Annuities, Pasive Income, etc.
3) Assets: Must be seasoned, and there must be a reasonability of assets in relation with the income.
4) Collateral: What type of occupancy (only primary for FHA Purchase), and What type of property is what is going to determine your decisions. A condominium for instance, will not be much of an option. To finance condominiums utilizing an FHA financing, the project must be an approved FHA Condo. Lately, most condominiums have an expired approval. Some lenders can do a review, acting as a direct endorsment in behalf of HUD.
Also, as some others mentioned, the quality of the collateral is a big determining factor. On properties that have an association (even thou, not necesarily condos) sometimes they have some restrictions (such as the first right of refusal) that violate some of the requisites of FHA Financing (HMDA, and EQUOA).
1 vote Thank Flag Link Sat Jan 19, 2013
Thank you for your inquiry. From a home seller perspective unless you are a condo owner FHA loans are simple...just make sure the property you are selling is in livable condition.

Andre Shambley
The Andre Shambley Group
1 vote Thank Flag Link Sat Jan 19, 2013
All the time guidelines are first when underwriter look at file. Property physical condition and appraisal.
0 votes Thank Flag Link Sat Jan 19, 2013
They also have an issue with not having hand rails in areas that should... Peeling paint the other biggie.

0 votes Thank Flag Link Sat Jan 19, 2013
The condition of the roof, peeling paint if the house was built prior to 1978 because of lead based paint, electrical, no plumbing leaks, no evidence of obvious mold, toilets need to flush, etc. Otherwise when the FHA appraiser goes out to do the appraisal they cannot see obvious signs of a roof with curling shingles, peeling paint on an older home, they will flush toilets, etc.

There is the FHA 203k streamline mortgage if the house has "issues" that the seller cannot afford to repair before closing. What it does is allows a buyer to include the cost of the repairs in the mortgage and they are done after closing.

All the best,
0 votes Thank Flag Link Sat Jan 19, 2013
“Under most FHA programs, the borrower is required to make a minimum downpayment into the transaction of at least 3.5% of the lesser of the appraised value of the property or the sales price. Additionally, the borrower must have sufficient funds to cover borrower-paid closing costs and fees at the time of settlement.

Funds used to cover the required minimum downpayment, as well as closing costs and fees, must come from acceptable sources and must be verified and properly documented.”

• federal income tax returns for the most recent two years, both individual and business, including all applicable schedules, for self-employed borrowers,
• individual federal tax returns for commissioned individuals. ”

“The relationship of total obligations to income is considered acceptable if the total mortgage payment and all recurring monthly obligations do not exceed 43% of the gross effective income.

When the decision credit score is:
• 580 and above: Maximum financing
• 500-579: Maximum LTV 90.00%
• 499 and below: Not eligible for FHA insured financing

A transaction where one borrower has only “nontraditional credit” and the other has a decision credit score of less than 500 would also be ineligible.”

borrowers who do not meet the bank’s minimum credit requirements (often a FICO score of 620 or higher) may be denied a loan even though they technically meet the FHA minimum credit score. Borrowers who have concerns about their credit should contact the FHA to ask for a referral to a housing counselor who can offer advice on how to improve credit scores.

Myke Triebold 850-305-6256 MykeSaysSold@aol.com
0 votes Thank Flag Link Sat Jan 19, 2013
Homes in decent condition safety wise(no chipped paint, stable rails on decks & stairs, etc.). Also FICO score generally 620 or higher as well.
0 votes Thank Flag Link Sat Jan 19, 2013
Best next action is to ask a local Mortgage Broker by clicking "Find a Pro" in the main menu at the top of this website. http://www.naplesrealestateguys.com/
0 votes Thank Flag Link Sat Jan 19, 2013
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