Good news on FHA manually underwritten loans!

There have been lots of rumors about the new Qualified Mortgage Rule that started earlier this year and the effect on getting loans approved without the benefit of automated underwriting.

 

FHA just came out two days ago with formal guidance that will make lenders far more comfortable in making loans with higher debt ratios WITHOUT the benefit of an automated approval. The new rules now put a cap on a 43% total debt ratio on manually approved loans in order to conform the “qualified mortgage”

 

Now, FHA will insure loans up to a 40% payment ratio, and up to a 50% total debt ratio with a min 580 score and two compensating factors! This will allow far more buyers to get into homes that cannot currently.

 

Compensating factors are things like: 3 months payments after closing (single family home) , rent similar to new house payment, other income that does not meet regular guidelines, and meeting VA residual income guidelines.

 

These rules have not been implemented yet, and if individual lenders choose to use these guidelines they are effective after April 21st, 2014. Stay tuned!