Fha Presentation Pdf


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Fha Presentation Pdf

  1. 1. FHA Relic of the Past or Tool of the Future?
  2. 2. Why learn FHA? • Reason # 1: Close more loans. Many borrowers who don’t qualify for FNMA or FHLMC products can be approved and closed, instead of being a crumpled up credit report at the bottom of a shredding bin. FHA underwriting uses common sense to make a decision, not a matrix.
  3. 3. Why Learn FHA? • Reason # 2: Ability to close more loans FHA loans have aggressive underwriting criteria that allows you to close more deals, coupled with lower interest rate and a higher YSP premiums it’s a winning combination.
  4. 4. Why Learn FHA? • Reason # 3: Survive Market Changes. FHA is re-emerging as the loan of choice for the “non-creampuff” borrower. Whenever an environment changes radically, failure to adapt results in a failure to survive.
  5. 5. FHA Basics • Owner Occupied Only Second homes and investment properties are not permitted under any circumstances. Owner-Occupied transactions have typically accounted for over 80% of all originations. As the allowable LTVs for NOO properties return to normal, mortgages on primary residences will again dominate pipelines.
  6. 6. FHA Basics • Full Doc Only Income documentation: VOE + Last 30 days paystubs. Self-employed borrowers: 2 years tax returns and YTD P&L (bank statements cannot be used to verify income) Asset documentation: VOD + one month statement, or two months statements (no VOD only option available)
  7. 7. FHA Basics • Full Doc Only FHA was not in high demand when 100% SISA financing was available for borrowers with little or no credit. However, now that the industry is beginning to return to normal, and with very few stated documentation products available or, the requirement of higher scores, more trade lines, and larger down payments put them out of reach. Stated Loans are no longer an option, FHA is often the best alternative.
  8. 8. Maximum LTVs • For those of you who are used to using a program matrix, we have prepared a simple grid detailing the maximum LTVs available, grouped by credit score and property type:
  9. 9. Max LTV Matrix Purchases and Rate/Term Refinances Score 1 unit 2 unit 3 unit 4 unit 500-580 96.5% 96.5% 96.5% 96.5% on exception 580-600 96.5% 96.5% 96.5% 96.5% 601-700 96.5% 96.5% 96.5% 96.5% 701-800 96.5% 96.5% 96.5% 96.5%
  10. 10. FHA Max LTVs If you don’t prefer a matrix, here is the max LTV for purchases and rate/term refinances: 1-4 Units, all scores: 96.5%
  11. 11. UFMIP • Up Front Mortgage Insurance Premium Every loan will have an Insurance premium added to of 1.75% It will look like this. Sales Price $100,000 Base Loan Amount $ 96,500 (SP x 96.5%) UFMIP (1.75% of BLA) $ 1,691 Total Loan Amount $ 98,191
  12. 12. Monthly MIP In addition to the funded UFMIP you will also have a monthly premium. .55% times the Base Loan Amount $96,500 x .55% = $530.75 per year divided by 12 = $44.23 per Month Monthly premium
  13. 13. FHA Max LTVs Max LTVs for FHA cash-out refinances: 1-2 Units 95%* *must own property for at least one year with no lates, or limited to 85% 3-4 Units 85%
  14. 14. Minimum Credit Scores • No Minimum Credit Score Our credit decision is based on an actual analysis of the borrower’s credit. Many borrowers with scores in the low 500s have been approved, and many with scores in the 600s have been denied.
  15. 15. Minimum Tradelines • No Credit OK, No Credit Score OK. No credit is better than bad credit. Use of alt- trades is permitted based on guidelines provided by HUD and specific rules of the Lender you are using.
  16. 16. Credit Analysis • Common Sense FHA looks at credit differently than FNMA or FHLMC and approves loans based upon the circumstances surrounding the credit history. Common sense prevails. All judgments must be paid prior to closing and collections may be left open at the discretion of the Lender.
  17. 17. Bankruptcy Guidelines • Chapter 7 Bankruptcy Must be discharged two years. Exceptions for periods between 12 and 24 months are available, but only if the reason for the BK was “out of the control” of the borrower (a difficult exception to qualify for).
  18. 18. Bankruptcy Guidelines • Chapter 13 Bankruptcy A borrower can currently be in a Chapter 13 repayment plan and still be approved for an FHA loan. The repayment plan must be at least 12 months old, and all credit (especially the mortgage) must have been paid with no lates since the inception of the plan. Additionally, there must be no lates on the plan itself, and the trustee must give written permission for the transaction and a payoff.
  19. 19. Seller Contributions Maximum Seller Contribution 6% All LTVs, 1-4 Units
  20. 20. Minimum Investment Minimum Investment Requirement 3.5% All LTVs, 1-4 Units
  21. 21. Minimum Investment • The borrower must contribute at least 3.5% of their own funds. The borrower’s own funds are defined as either savings, gift or grant. There is no requirement for any borrower savings; the entire 3.5% requirement can be a gift or grant.
  22. 22. Gifts • No Donor’s Ability There is no requirement to source the “donor’s ability” to give the gift, only to show that it is coming from the Donor’s account.
  23. 23. Gifts • Gift Documentation The simplest gift to document is a gift directly into the settlement agent’s escrow account. If done this way, and if the gift is large enough, no bank statements are required from the borrower: (1) FHA Gift Letter (available on our website) (2) Copy of bank check payable to escrow account (3) Evidence that the bank check was drawn on donor’s account (4) Escrow Letter from settlement agent confirming receipt of the gift check into escrow account
  24. 24. Ratios Standard Income Ratios 31/43* *These ratios can be exceeded with a compensating factor. In some cases, much higher.
  25. 25. Ratios • Compensating Factors Some examples of compensating factors are: - 3 months PITI reserves - Less than maximum financing - 10% down payment - housing payment increasing by less than 10% Once again, if the loan makes sense, the loan can be approved.
  26. 26. FHA Appraisals • Appraiser must be on the FHA Approved List. • Repair requirements are the same as a conventional appraisal. • No appraisal reviews, drive-bys, AVMs, BPOs, or any other additional appraisal items.* *unless property has transferred in the last six months with a large increase in sales price.
  27. 27. Streamline Refinances • Once a borrower has an FHA loan, they can be refinanced into another lower-rate FHA with very little documentation: - no employment, income or asset documentation - no credit report, just a mortgage history - no appraisal option Check with your Lender for Loan seasoning requirements.
  28. 28. Basic FHA Loan limits • FHA Mortgage Limits List - FHA Forward • The current basic standard mortgage limits for FHA insured loans are: – One- One-family Two- Two-family Three-family Three- Four-family Four- • FHA Forward $271,050.00 $347,000.00 $419,400.00 $521,250.00 • HECM $200,160.00 • Fannie/Freddie $417,000.00 $533,850.00 $645,300.00 $801,950.00 • High cost area limits are subject to a ceiling based on a percent of the Freddie percent • Mac Loan limits • The ceilings are currently: – One-family One- Two- Two-family Three-family Three- Four-family Four- • FHA Forward $729,750.00 $934,200.00 $1,129,250.00 $1,403,400.00 • HECM $362,790.00 • Fannie/Freddie $729,750.00 $934,200.00 $1,129,250.00 $1,403,400.00 • Section 214 of the National Housing Act provides that mortgage limits for Alaska, limits • Guam, Hawaii, and the Virgin Islands may be adjusted up to 150 percent of the percent • new ceilings. This results in new ceilings for these areas of: – One-family One- Two- Two-family Three-family Three- Four-family Four- • FHA Forward $1,094,625.00 $1,401,300.00 $1,693,875.00 $2,105,100.00 • HECM $544,185.00 • Fannie/Freddie $1,094,625.00 $1,401,300.00 $1,693,875.00 $2,105,100.00 • https://entp.hud.gov/idapp/html/hicostlook.cfm
  29. 29. Recap: Why FHA? Close more loans.
  30. 30. Recap: Why FHA? Make more money.
  31. 31. Recap: Why FHA? Survive market changes.