This document provides an overview of FHA loan programs and how they can help borrowers in California's declining housing market. It outlines key features of FHA loans including lower down payment requirements, more flexible credit and debt-to-income ratios, ability to use co-signers and gifts for down payments, and financing for renovations. The summary describes how FHA loans provide alternatives for borrowers with imperfect credit, limited savings, or properties needing repairs by allowing lower credit scores, bank-owned properties, and no required reserves. It concludes by noting other FHA programs like streamlined refinances and reverse mortgages as well as cases where FHA may not be suitable like non-owner occupied homes or borrowers

1. FHA Basics
Brian Bush
President
Specialty Lending Group

2. Lending in California
Access to Conforming products continues
to diminish for Californian Borrowers
Statewide Declining Market Classification
Private Mortgage Insurance Risk Overlays
Decreasing Role of Broker (TPO)
Home Valuation Code of Conduct (HVCC)
Specialty Lending Group

3. FHA Steps Up…
Low Down Payment (3.5%) – Can be all Gift
No Declining Market issues
Flexible Credit (620 vs. 720)
DTI can exceed 41% (PMI limit)
Little or No Reserves
Co-Signers can assist with Income Qualification
No HVCC issues
6% Seller Paid Closing Costs allowed
Specialty Lending Group

4. Recognizing the FHA Borrower
Property to be Owner-Occupied
Little or No Savings
Imperfect Credit History
Relative Motivated to Assist Borrower
Income Stable, but Qualifying Concerns
Interested in Renovating/Customizing Any Property
Specialty Lending Group

5. The Property…
Primary Borrower must intend to Occupy
1-4 Units, SFR, Townhomes, Condos
Can be Bank-Owned, Foreclosure, Short Sale
May be in State of Disrepair (and unqualified for
Conforming)
Most properties now fall within Loan Amount Limit -
up to $729,750 (1 unit)
No Seasoning for Refinancing Recently Listed
Properties
Specialty Lending Group

6. The Borrower’s Credit…
Minimum 620 Credit Score for all Borrowers
(vs. 720 PMI Score Overlay for Conforming loans)
Credit Score driven pricing hits much less that for
Conforming loans
BK Discharge > 2 Years (vs. 4 or more for PMI)
Foreclosure > 3 Years (vs. 4 or more for PMI)
No CAIVRS issues allowed
Community Property State, so Spouse Credit Scores
& Liabilities do factor in
Specialty Lending Group

7. The Borrower’s Assets…
No Reserves are Required for 1-2 Unit Properties
(PMI has 2 month PITI Reserve overlay)
3.5% Down Payment may be satisfied by a Gift
from a relative or fiancé
6% of Closing Costs allowed to be paid by Interested
Party usually covers most costs (Conforming loans
only allow 3% for LTVs > 90%)
Specialty Lending Group

8. Income Qualifying…
Income Stability tests apply to all sources of income
No limit to the number of Occupying Co-Signers as
long as property characteristics support number of
residents
Income & Debts of Non-Occupying Co-Signers are
Blended in
DTI not limited to PMI imposed limit of 41%
Specialty Lending Group

9. Renovation Loans
Ability to Purchase, Renovate & Finance
improvements in One Loan based on the
Improved Value of the property
Borrowers purchasing homes & customizing
to their own preferences
Bank-Owned, Foreclosures, Fixer-uppers
Popular with Homeowners renovating their existing
home
Go to www.renovationfunds.com for more details
Specialty Lending Group

10. Other Special FHA Programs
Streamlined FHA – No appraisal, credit underwriting,
income verification, qualifying ratios if Borrower is
refinancing into another FHA loan
Reverse Mortgages (HECM) – allows senior
homeowners (62 and older) to borrow against their
home equity and never make a mortgage payment as
long as they live in their home
Specialty Lending Group

11. When FHA does not fit…
Non-Owner Occupied, Second Homes, Investment
Properties
Borrower already has another FHA loan (and plans to
keep it)
CAIVRS issues
Large Down Payment (20% or more)
Specialty Lending Group

12. Brian Bush
President
Specialty Lending Group
bbush@slglends.com
800-607-1941 x220