Mortgage Matters: FHA Guideline Changes

FHA guideline changes. There were some recent changes to FHA guidelines. I’ve been seeing some people that have been burnt, and other lenders that hadn’t taken into account these changes that went in effect, September 4th. The biggest one is going to be how deferred student loans are treated. The previous guideline under FHA, Federal Housing Administration, was that if your student loans were deferred for a period of 12 months or greater, you didn’t have to count that debt or liability against the borrower in their debt ratio calculation. The new guidelines have reversed that, and now whether the loans are deferred or not, we have to count a payment against those deferred student loans. If there’s a payment listed on the credit report we’ll use that payment as a debt payment, and the ratios, or if there’s not, they’re going to take 2% of the loan balance and use that payment.

This is really hurting a lot of people that have deferred student loans. In a nutshell, people with student loans, deferred student loans are going to qualify for less of a mortgage, so it’s really important to watch out for that. A lot of the guys at some of the other mortgage companies aren’t aware of this change, and they’re pre-qualifying people and not considering the new guideline change. We are getting calls on some catastrophes that are happening in other offices.

Another one of the changes has to do with grossing up non-taxable income, used to be … The maximum would be, we could gross up non-taxable income to be like social security or disability by 25%. They’ve reduce that now to 15%. We always use what the actual effective tax rate for the borrower is, if they haven’t filed tax returns. One of the other things that is probably going to aggravate a lot of people has to do with gifts and how we documents the gifts. The donor will be say, family member. They’re giving … With FHA, the borrower can use 100% gift from a family member for down payment. We used to just document that with … We have to show it coming from the donor, that would be say the parent of the child. We would use a cancelled check, just a piece of paper, or cancelled or cleared check to document that transfer. Now we actually have to get a full bank statement from the donor, so just a little bit of paperwork there.

One of the good things that’s happened,  the FHA guidelines changes that happened September 4th have to with projected incomes. Say someone that is leaving an area going to another area, they have an ironclad offer/contract for a new job, but the job say won’t start for 30 days. We can actually use that income for the new job, as long as they have a contract that we can document, to qualify them for a mortgage. They could actually move here, or be in between the past job and the new job, and not have even started working on the job and have received the pay stub yet, and we can use that as income. We can go out as far as 60 days with that. We could close on a loan as long as the new income is going to start within 60 days.

These are just some of the highlights of the recent FHA guideline changes.