The HUD is introducing a new underwriting handbook on June 15, 2015. The new guidelines will apply to all FHA case numbers that are obtained on this date or after.
The new handbook is designed to combine existing handbooks, notices, and letters into a simpler, clearer format. Although there are over forty differences between the old handbook and the new, there are only a few major changes. They will have both positive and negative effects on future FHA borrowers. Here’s a look at the most significant changes and how they may affect you in the future.
Current Debt
In the past, student loans that had 12 or more months of deferment left were not considered in the debt-to-income (DTI) ratio calculations. Beginning with the new guidelines, however, student loan debt will not be excluded from FHA loans, even if that debt is in deferral. The actual monthly obligation of the loan is to be used in the DTI. If the monthly payment is either zero or is unavailable, the monthly payment will be established at 2 percent of the outstanding balance of the loan.
30-day accounts, like credit card accounts, will also see changes. Mortgage companies will be required to verify that borrowers have paid the outstanding balance in full each month for the previous 12 months. But these debts, if paid off monthly, will not be calculated in the DTI. If borrowers have had any late payments in the past 12 months, 5% of the account’s outstanding balance will be included in the DTI. Additionally, accounts for which the borrower is an authorized user will now be included in the DTI unless the lender can document that the primary account holder has made all payments on that account for the past 12 months.
Employment Verification
If the borrower has changed employment more than 3 times in the past 12 months, the lender is obligated to take steps to verify that the borrower has stable employment income. Gaps of employment that lasted for more than six months require at least six months on the new job. And raising a family is no longer considered an acceptable reason for an employment gap.
Gifts as Down Payment
If down payment money is given to the borrower, the lender will now have to verify the source of these funds. The lender must obtain a statement of the giver’s bank account and ensure that any large deposits in the account came from a reliable source.
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