Wednesday, March 30, 2016

Using FHA Gift Funds for a Kentucky FHA Mortgage Approval.

Clarification of FHA Definition of "Family Member"
In all instances where FHA uses the term "Family Member", it is defined as any of the following:
  • Child: defined as any son, stepson, daughter, stepdaughter, or foster child
  • Parent: including step-parents and foster parents
  • Grandparent: including step-grandparents and foster grandparents
  • Sibling: defined as any brother, stepbrother, sister, or stepsister
  • Uncle
  • Aunt
  • Legally adopted son or daughter, including a child who is placed with the borrower by an authorized agency for legal adoption
  • Spouse or domestic partner
  • In-Laws: defined as any son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law of the borrower

credit report 101
Earnest Money 
Old Rule – Document source of earnest money if the amount exceeds 2% of the sales price
New Rule – Document source of earnest money if the amount exceeds 1% of the sales price
Old Rule – defaulted federal debt makes borrower ineligible
New Rule – VERIFIED defaulted federal debt makes the borrower ineligible
Part-Time Income
Old Rule – Underwriter discretion allowed when received less than 2 years
New Rule – Two years uninterrupted part-time income is required.  Average income over prior 2 years or use 12-month average of hours at the current pay rate if the lender documents an increase in pay rate.
Rental Income on Retained Primary Residence
Old Rule – Rental income may be counted when relocating outside of reasonable commute distance for job and borrower has 25% equity.
New Rule – Rental income may be counted when relocating and the new residence is at least 100 miles from previous residence.  If no history of rental income since the last tax filing, borrower must have 25% equity.
Non-taxable income 
Old Rule – Gross up using tax rate evidenced on last tax return.  If borrower did not file a return, use tax rate of 25%.
New Rule – Gross up using the greater of 15% or actual tax rate.  If borrower did not file a tax return, use tax rate of 15%
Installment Debts Less Than 10 Months
Old Rule – May be excluded from ratios.  If manual underwrite—may be excluded if debt will not affect ability to pay the mortgage.
New Rule – May be excluded ONLY if—they have cumulative payment of less than or equal to 5% of the borrower’s gross monthly income AND the borrower may not pay the debts down to achieve this percentage.
Multiple FHA Loans
Old Rule – If relocating for employment, borrower may obtain a second FHA loan for a new principal residence if current residence is more than a reasonable commute to new residence.
New Rule – If relocating for employment, the commuting distance between the old residence and new residence must be more than 100 miles.