Introduction To FHA Origination
- 1. Introduction to FHA Origination An Overview of FHA Loan Origination
- 2. Topics of Discussion Introduction to FHA Fundamentals of Loan Origination FHA Loan Limits Borrower Eligibility Property Eligibility Documentation Marketing FHA Loans
- 3. Introduction to FHA Lending
- 4. Historical Information – Created by Congress in 1934 – Provides Mortgage Insurance – No cost to taxpayers
- 5. Benefits of FHA Loans Low Investment Flexible underwriting Assumable
- 6. Basic FHA Terms Direct Endorsement Base Loan Amount Minimum Investment Mortgage Insurance Premium - MIP
- 7. FHA Resources WWW.Hudclips.org Handbook 4155.1 – Credit Analysis Home Ownership Centers – HOC Mortgagee Letters
- 8. Fundamentals of Loan Origination
- 9. Frequently Used FHA Loan Programs Identified by Section Number – Section of the Act Most widely used – 203(b) – 234(c) – 251
- 10. Special HUD Programs 203(k) Energy Efficient Mortgage (EEM) Good Neighbor Next Door
- 11. Occupancy Owner occupied only unless: – Secondary residence if approved by HOC – Rare investment properties – Non-Profit Organizations – State and Local Agencies
- 12. Who is Eligible? Individuals only Permanent/Non-permanent Resident Aliens Military Personnel Living Trusts
- 13. Maximum FHA Insured Properties A borrower cannot own more than one HUD- insured property unless: – Relocation – Increase in family size – Splitting jointly-owned property – Non-occupying co-borrower
- 15. Maximum Mortgage Amount - Purchases Lesser of statutory limit or LTV limit 3.5% Minimum Investment Add up front MIP to Mortgage Amount
- 16. Statutory Loan Limits https://entp.hud.gov/idapp/html/hicost1.cfm
- 17. Allowable Closing Costs Borrower must invest 3.5% Standard borrower closing costs Seller contribution to 6%
- 18. Mortgage Insurance Premium Upfront Fee may be financed into loan amount Monthly renewal fee added to the monthly PITI MIP can be canceled A portion may be refundable
- 19. Total Mortgage Amount Base Loan Amount + Upfront MIP______ = Total Loan Amount
- 20. Transactions that Affect the Mortgage Amount Identity-of-Interest Non-occupying co-borrower Properties under construction Other
- 21. Non-Occupying Co-Borrowers Two or more borrowers – one non-occupant One Unit Property Only “Kiddie Condo”
- 22. 3-4 Unit Properties Must be self-sufficient Rental income based on appraiser’s estimate Projected rent used as gross income 3 months PITI reserves required
- 24. Eligibility for Federally-Related Credit FHA requires three “reports” to ensure borrower eligibility HUD Limited Denial of Participation (LDP) U.S. General Services Administration’s “List of Parties Excluded from Federal Procurement and Non-Procurement Programs” (GSA List) HUD’S Credit Alert Interactive Voice Response System (CAIVRS)
- 25. Credit Report Three repository merged credit report (TRMCR) or (RMCR)with at least two FICO scores A credit report is required for a non-borrowing spouse if the borrower lives in or the property is located in a community property state. Non-traditional credit is acceptable if borrower has no traditional credit or FICO scores.
- 26. Credit Analysis Credit History Bankruptcies Collections/Judgments
- 27. Liabilities Installment and revolving debt 401K payments Deferred student loans Alimony Co-signed obligations
- 28. Income Analysis Full or alternative documentation Raises Non-taxable “grossed up” 125%
- 29. Funds to Close Earnest Deposit Checking & Savings Accounts Gifts Other
- 30. Gift Funds Must be acceptable source Gift letter Proof of receipt
- 31. Secondary Financing Document Approval Copies of the executed Note and Security Instrument No cash back to borrower Acceptable sources include: – Government Agencies - CLTV can exceed 100% – Non-Profit Agencies― approved by HOC – Other organizations and private individuals See the 4155.1 for other sources
- 32. Qualifying the Borrower TOTAL Scorecard AUS vs Manual Ratios Qualifying Interest Rates
- 33. Compensating Factors Reserves Large Down Payment Same Housing Payment
- 35. Eligible Properties 1-4 unit residential properties only PUDS Condos Manufactured Homes Flipping Rule
- 36. New Construction Loans Proposed Construction Under Construction Existing Less Than 1 Year Old
- 37. New Construction -Manufactured Homes Permanent foundation meets FHA guidelines Move directly from the factory Inspection by a Certifying Engineer
- 38. Appraisal Requirements FNMA appraisal forms used Case number follows property Appraisal can be no older than 120 days at closing for existing properties and 180 days for new construction
- 39. Declining Markets Purchases Refinances Second Appraisals
- 40. Refinances
- 41. Cash-Out Refinances Max 85% LTV Full Qualifying Credit Packages/Appraisals 12 Month Seasoning for First Mortgagee Letter 2009-08
- 42. No Cash Out Refinances Full credit qualifying credit package Appraisal Pay off seasoned Home Equity Buy out co-borrower
- 43. Streamline Refinances Refinance existing FHA mortgages only Rate and term only No maximum CLTV (Combined Loan-to- Value) Evidence of cash to close not required
- 44. Types of Streamline Refinances Streamline with no appraisal Streamline with appraisal Streamline with credit qualifying
- 45. Streamline Without Appraisal Owner-Occupied Second Home & Non-Owner Occupied – The only type of refinance available – Maximum base loan amount is the principal balance of the existing loan only. Up Front MIP is added to the Base Loan Amount to arrive at the Total Loan Amount
- 46. Streamline With Appraisal Owner-occupied or approved non-profit only Max LTV is 97.75%
- 47. Credit-Qualifying Streamlines Requirements Full income and credit package No appraisal
- 48. Creating Your FHA Market
- 49. Marketing FHA Loans First Time Homebuyers Borrowers with less than stellar credit Borrowers with little to no cash Borrowers with high ratios Borrowers who require assistance to qualify Borrowers with ARM loans
- 51. FHA Disclosure/Form Requirements HUD/VA Addendum to URLA (92900-A) Amendatory Clause/Real Estate Certification Important Notice to Homebuyers Informed Consumer Choice Disclosure Notice For Your Protection Get a Home Inspection Notice to Homeowner Energy Efficient Disclosure FHA ARM Disclosure Worse Case Scenario
- 52. General Requirements Age of Documents Faxed/Internet Documents Certified Sales Contract
- 53. FHA Resources All FHA resources listed below may be found on HUD’s web site at http://www.hudclips.org. Handbook 4155.1 Rev. 5 - Credit Handbook 4150.2 - Appraisal Home Ownership Centers (HOC) Mortgagee Letters FHA Find Answers
- 54. Happy Selling!