Presentation on theme: "Your Contact Information FHA Makes it Easier to Qualify: The Five Things REALTORS® Need to Know."— Presentation transcript:
Your Contact Information FHA Makes it Easier to Qualify: The Five Things REALTORS® Need to Know
Highlights of FHA Changes Changes effective as of April 21st, 2014: Clear Debt to Income Requirements FHA has established clear guidance on approval requirements for loans with higher ratios if certain compensating factors are met. Compensating Factors are Now More Defined Previously lenders were reluctant to approve creditworthy loans in fear of FHA rejecting their decision to approve them. Cash Reserves Now Required in Some Cases For some loans that exceed income and debt requirements, borrowers will have to meet reserve requirements.
1. Clear Debt to Income Requirements Maximum ratios for borrowers with scores below 580, or above 580 with NO compensating factors: May not exceed 31/43 (33/45 for Energy Efficient Homes), regardless of compensating factors. Non-owner occupant income cannot be included if scores are below 580, but can be included for non-traditional credit borrowers. Previously, no maximum ratio limits were established, and it was left up to the underwriter to decide, therefore more loans got denied.
Clear Debt to Income Requirements (cont’d) Maximum ratios for borrowers with scores at or above 580 can go up to 37/47 if the borrowers have ONE acceptable compensating factor… Or up to 40/50 if TWO compensating factors are met. We will now define what a compensating factor is…
2. Compensating Factors A Compensating Factor is a positive aspect of a buyer’s loan file that compensates for a weakness in another area of the file, namely high ratios. Below are the acceptable compensating factors referenced: A.3 months cash reserves for one and two units; 6 months for three and four units, B.New payment cannot exceed the lesser of $100 or 5% of current housing expense; must have 12-month payment history with no 30-day late payments, C.Verified and documented significant additional income that is not considered effective income, and D.Meet residual (net-disposable) income requirements as outlined on pg. 14 of the mortgagee letter.
3. Cash Reserve Requirement Cash reserves are defined as the amount of money a buyer will have left in the bank after closing. 1 month reserves = 1 month of PITI. Below are the requirements, when reserves are used as a compensating factor: One and two unit properties must have cash reserves of 1 month PITI. Three and four units must have 3 months of reserves. Previously only 2 months PITI were required for borrowers with insufficient credit.
4. Buyer Agent Opportunity Easier loan qualifying criteria means more approved buyers! Take advantage of these changes. Below are some of the ways we can team up to help more people buy homes: Monthly First-time Home Buyer Seminars Direct mail campaigns to apartment complexes Database marketing campaign letting everyone know about these changes
5. Listing Agent Opportunity Easier loan qualifying criteria means a larger pool of buyers! Take advantage of these changes. Below are some of the ways we can team up to help more people sell homes: Open House flyers which promote these changes Custom lawn signs to attract more buyers to listings Database marketing campaign letting everyone know about these changes
Your Contact Info Here Thank you for attending We look forward to helping expand your business!