One of the most common types of loans is FHA. The 15th of September 2015 updates to FHA loan qualification include many critical updates. Below is an overview of those updates.

Debt Ratios

Debts are being handled much differently. Installment loans with less than 10 months left are not easily excluded from your monthly debt. Your remaining payments must be less than five percent of your gross monthly pay. For deferred loans, the full loan balance is interpreted as the monthly payment. Charge accounts are only excluded from debt if you can show a one-year history of timely payments in full. If any late payments were made, then 5% of the current balance will be included in monthly debt calculations. Finally, accounts where you are only an authorized user are excluded only if payments were made on-time for that account during the previous 12 months.

Investment and Mixed-use Properties

Updates apply to rental and mixed-use real estate. For rental real estate, only 75% of rental income can be considered as qualifying income. Figures are based on either signed leases or on appraisal estimates of reasonable rents. More than half of a building must be for residential use to qualify for an FHA loan.

Income Qualification Changes

  • Part-time Work
    Part-time workers must document a 2-year history. The average is used for loan qualification. If your wages recently improved, an average of the past year may be used.
  • Overtime and Bonus Loan
    If a borrower is able to provide a two year pattern of bonus or overtime pay, then it may considered as qualifying pay.
  • Reduced Self Employment Loan
    If you are self-employed and your earnings reduced by twenty percent or greater, self-employment earnings may not be counted as qualifying income. There might be an exception for special circumstances AND if you can prove stable or increased earnings during the past 12 months.
  • Other Sources of Income
    Non-taxable income such as social security or disability may be qualified but only up to 15%.

Additional Changes

  • Gifted Funds – Any home buying funds that were received as gifts must come from a family member, excluding cousins, nieces, and close friends. Transfer of funds must be documented through bank statements.
  • More Than One FHA Loan – More than one FHA loan is now allowed if you are moving a distance of more than 100 miles for employment reasons.
  • Streamline Refinance – Streamline refinancing is allowed only if the monthly payment including principal, interest, and mortgage insurance increases no more than fifty dollars monthly.

Employment History Requirements

Multiple job moves or gaps in employment history are scrutinized. If you have moved employment 3+ times over the past year, then you must provide confirmation that the changes were for training purposes or that you earned greater pay and benefits each time. If you were unemployed for 6+ months, you must prove that you received consistent pay over the past 6 months and some history over the past two years (not counting training).

Additional Changes

  • Gifted Funds – Any home buying funds that were received as gifts must come from a family member, excluding cousins, nieces, and close friends. Transfer of funds must be documented through bank statements.
  • More Than One FHA Loan – More than one FHA loan is now allowed if you are moving a distance of more than 100 miles for employment reasons.
  • Streamline Refinance – Streamline refinancing is allowed only if the monthly payment including principal, interest, and mortgage insurance increases no more than fifty dollars monthly.

More On The The 15th Of September 2015 Updates To FHA Loan Qualification

The the 15th of September 2015 updates to FHA loan qualification described above apply to FHA case numbers generated on or after the 15th of September 2015. If you are already qualified and received a case number, then the updates will not impact you. If you are currently on the market for a home and plan to obtain an FHA loan, be sure to contact your loan officer about these changes and how they may affect your price range.