This document outlines qualification requirements for FHA and conventional loans based on a borrower's FICO score. For FHA loans with a 620-639 score and a housing payment, the borrower must have 12 months of on-time payments documented, a DTI below 45% or an exception for up to 50%, and payment shock below 125%. For scores of 640+ some requirements are determined by the AUS. Conventional loans require a DTI of 50% or less or an AUS approval above that. Alternative qualification options exist that allow for higher DTIs if other criteria are met.

1. • My borrower is looking for an
FHA loan
• My borrower is looking for a
Fannie Mae conventional loan
What are my borrower’s basic requirements to qualify?
If you can’t move forward, either your borrower
doesn’t qualify or you need an exception request

2. • What is my borrower’s FICO
range?
• 620–639
• 640–659
• 660+
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FHA DTI Ranges

3. • My borrower has… • A present housing payment
(verifiable 12 months or more)
• No present housing payment (or
less than 12 months verifiable)
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FHA: 620–639 FICO (Housing Payment Options)

4. • Requirements:
• Verification of twelve (12) months of
current housing expense required; a
traditional VOR is acceptable. If the
borrower rents from a relative or
individual (anyone other than an LLC
or management company), then
twelve (12) months of cancelled
checks or bank statements are
required to document payment
history. See section 5.17 for more
information
• HBE required
• Payment shock of 125% or less
• DTI of 45% or less
• But my borrower’s DTI is above
45% and is equal to or lower than
50%...
• But my borrower exceeds those
payment shock guidelines…
FHA: 620—639 (With Housing Payment)
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5. • Requirements:
• VOR documenting no housing
payment
• HBE required
• Maximum DTI 31% front-end and
45% backend; never to exceed
45% backend DTI
• Three (3) months PITI reserves
• Minimum two (2) years with
present employer
• Meet VA Residual Income
requirements
• There are no alternative
qualification guidelines for this
FICO band
FHA: 620–639 (No Housing Payment)
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6. • Requirements:
• Verification of amount of current
housing expense required (even if
borrower has no housing
payments); a payment history is
not required
• DTI of 50% or less
• But my borrower exceeds those
DTI requirements, and AUS
approves above 50%...
FHA: 640–659 FICO
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7. • Requirements:
• DTI ratio per AUS findings
• Please note: a letter of
explanation will be required if the
borrower has no housing payment
to report on the 1003
FHA: 660+ FICO
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• There are no alternative
qualification guidelines for this
FICO band

8. • What is my borrower’s FICO
score range?
• 640–659
• 660+
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Conventional: DTI Ranges

9. • Requirements:
• DTI 50% or less
• But my borrower exceeds those
DTI requirements, and AUS
approves above 50%...
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Conventional: 640–659 FICO

10. • Requirements
• DTI per AUS findings
• There are no alternative
qualification guidelines for this
FICO band
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Conventional: 660+ FICO

11. Select one option from both categories
• Two (2) years employed with the
current employer
OR
• Two (2) months PITI reserves
• A maximum DTI 31% frontend
OR
• Meets VA Residual Income Tests
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You do not need to make an exception request for these requirements.
These requirements are in addition to the other requirements in your
borrower’s FICO band, except for the specific DTI or payment shock
requirement being excepted.
Category 1 Category 2
Alternative Qualification Requirements