In this blog, I am going to run through the 2016 FHA Loan Requirements. FHA Loans historically have been one of, if not the easiest loan to get and it is due to the fact that the minimum requirements are rather lenient when compared to Conventional Loans. FHA Loans are very popular amongst first-time home buyers as well as people without the best credit history. The reason why FHA Loans are so popular is the credit guidelines that are enforced. If you have a minimum FICO credit score of 580 or greater, you are able to get an FHA Loan with only 3.5% down payment. The one caveat comes with a credit score of 620 and this is if you are under a 620 FICO, you can only have a debt to income ratio of 43%. Meanwhile, if you are over 620 FICO, your debt to income ratio can be as high as 56.9%, giving you a lot more buying power for having a slightly higher credit score. Debt to income ratio is the amount of monthly debt with your new house payment divided by your monthly gross income. In the next few paragraphs, you will see the 2016 FHA Loan Requirements that must be followed.
With the new 2016 FHA Loan Requirements, there were some changes dealing with FHA Home Appraisals. The new FHA Home Appraisals need to document a three year chain of title on all home appraisals and needs to refer 2 sources from the MLS and/or public records. Along with checking the history of the home, the appraiser needs to make sure all appliances are operational and the utilities need to be on at the time of inspection. The appraiser will also evaluate the last 12 months of ownership of the property to check for undisclosed identity of interest property transactions.
This is a big change coming on the 2016 FHA Loan Requirements and it has to deal with deferred student loans. In the past, as long as student loans were deferred for at least 12 months, the debt wasn’t included in the borrower’s debt to income ratio. With the updated 2016 FHA Loan Requirements, the minimum monthly payment is what will be calculated into the debt to income ratio. If this is not available, then an amount of 2% of the open balance will be used to calculate the amount factored into your debt to income ratio.
The old rule with installment debts of less than 10 months remaining was that they were excluded from the borrower’s debt to income ratio calculations. However, with the 2016 FHA Loan Requirements, installment debt of 10 months of less remaining can be excluded in your debt to income ratios only if the payment is 5% or less than your gross monthly income.
In the new 2016 FHA Loan Requirements it is required that if a borrower has changed employers more than 3 times in the past 12 months, the lender is required to take measures and steps to verify that the borrower has stable employment and income is likely to continue for at least 3 years. In the past, it was up to the discretion of the underwriter to decide if there was confidence in income, but not so much these days.
According to 2016 FHA Loan Requirements gift funds are allowed by FHA loans. If the gift funds are given to the borrower for a down payment, then the lender will need to verify those funds and make sure the funds have been in the borrower’s bank account for 30 days.
As you can see there are some new changes in the 2016 FHA Loan Requirements. So make sure you work with an educated professional in this field if you are in the market for an FHA Loan. Please feel free to give me a call at 888-900-1020, email me at firstname.lastname@example.org, or visit www.loanconsultants.org.