Changes to FHA loans

        

Highlights from the new
HUD Handbook 4000.1

            HUD has a new 809 page handbook that
will apply to all FHA cases assigned on or after September 14, 2015. If you are
like most people then you don’t have the time or the desire to dig into this huge
document. What I have done here is highlight a few changes that I think will be
the most likely to have an affect on my business, and the most common ones
people will encounter when applying for FHA loans.

            You’ve made it to the second
paragraph without falling asleep so I promise to make the rest of this article
easy to read and understand. Here it goes…

DEFERRED OBLIGATIONS:

This is HUGE as I know a TON of people that have
student loan debt.

OLD RULE: If
the debt is deferred for more than 12 months we DON’T have to include it in
debt ratios.

NEW RULE:
ALL deferred obligations, regardless of when they will begin, must be included
in the qualifying ratios. If no payment is available you will have to take 2%
of outstanding balance on student loans and 5% of outstanding balance on
installment debt.

Scenario:
You have a borrower who is in graduate school with $80,000 in undergrad debt
that is deferred until 2017 when they finish grad school. You now have to
include a $1600/mo payment in their debt ratios! Ouch

MEDICAL COLLECTIONS:

NEW RULE:
Not considered debt.

GAPS IN EMPLOYMENT: 

OLD RULE:
Borrower must explain any gap in employment of one month or more

NEW RULE:
Borrower must explain any gap in employment of six months or more

HOURLY WAGE INCOME CALCULATIONS

OLD RULE: No
specific guidance provided

NEW RULE:

 ● If hours do not vary, use hourly rate

● If hours
vary, use the average of the last 2 years

● If hours
vary and there was in increase in pay, use the most recent 12 month average at
the current rate

COMMISSION INCOME

OLD RULE:
Defined as a person who receives over 25% of annual income from commissions

Must be
earned for 2 years

NEW RULE:
Defined as being paid contingent upon the conducting of a business transaction
or the performance of a service

Earned
income for at least one year in the same/similar line of work and likely to
continue

                    
The changes listed here are just a few of the ones I found interesting
and that I felt would be the most common for borrowers to encounter. If you
have any specific scenario questions it is a good idea to seek advice from a
mortgage professional who can get clarification from HUD directly and also
advise on whether or not the lender they work for has additional guidelines.

Here is a link to the new handbook if you would like some
leisurely reading:

http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/hsgh