NEW GUIDELINES FOR FHA LOANS

The FHA has revised they lending guidelines to provide additional stimulus to the housing market.  These new guidelines make FHA loans more available and flexible for many borrowers. 

Here is a summary of the New Program –

Income:

Ø      Expanded Qualifying Rations – Up to 50% with automated underwriting approval

Ø      Allows non-occupant co-borrower income to be considered for qualifying ratios

Ø      Non-taxable income can be “grossed up” for more qualifying opportunities (with tax returns)

Ø      Student loans do not have to be counted in debt rations if deferred at least 12 months from date of closing.

Credit:

Ø      Credit scores are not required by FHA

Ø      Alternative credit permitted – Any alternative credit that is paid at least every 3 months and has a 12 month history (i.e., auto insurance, utilities, rent)

Ø      Bankruptcies are allowed after being discharged for 2 years.

Closing Costs:

Ø      All closing costs are allowable except tax service fees

Ø      Seller can contribute up to 6% toward borrower’s closing costs and prepaid expenses

Ø      Any credit for repairs is included in the 6%

Down Payment Options:

Ø      3% investment required and verification down payment is from borrower’s funds is required

Ø      Down Payment Assistance (DPA) such as Ameridream is acceptable

Ø      DPA can be used for the 3% down payment and to cover all closing costs

Ø      Ameridream does not have income or credit qualifications, but seller must be willing to participate in the program

Ø      Seller can still contribute 6% toward closing costs

Ø      Gifted funds must come from a relative or fiancée and be verified

Ø      Borrower does not have to contribute any of their own funds prior to the use of gifted funds

Ø      Gift donors must provide evidence of funds being given

Properties Covered by FHA

Ø      Single Family Residences, 1 to 4 unit condos, Town Homes and Manufactured Homes

Ø      Condos must be on FHA approval list

Ø      Termite inspection are not required, unless appraiser notes deficiency or in purchase contract

Ø      Minor repairs are not automatically required (i.e., missing handrails, cracked windows glass, cracked exit doors, minor plumbing issues)

Ø      Repairs are required for conditions affecting health/safety (i.e., leaking roofs, settlement damage, wood rot)

Manufactured Homes

Ø      Must have been built after June 15, 1976

Ø      Have at least 400 square feet of living space

Ø      Must be affixed – permanent foundation built to HUD standards – concrete footings with tie downs, enclosed crawl space

Ø      Permanent water and sewer facilities

Ø      Cannot be in a flood zone

Ø      Singlewide is acceptable

“Kidde” Condos

Ø      Parents can purchase housing for a child attending college

Ø      Children can purchase housing for elderly parents

Ø      Both go on loan, but child does not need income

Ø      If purchaser has a lot of rentals, approval is case by case

Other Considerations

Ø      No Investment properties allowed

Ø      Borrowers can hold only one FHA loan at a time – there may be exceptions

Ø      Seller must have owned the property for more than 90 days

Ø      Maximum Loan amount is $316, 250 in PIMA county Arizona, but varies by each county within each state

 Give us a call to discuss your interests in Tucson home ownership or where to get more information on the new FHA program.