Underwriting is easing on FHA & VA loans to help more borrowers, see the changes in guidelines.

GIFTS, GRANTS, COMMUNITY SECONDS AND LOANS FROM FAMILY MEMBERS

• FHA purchase transactions in which the borrower’s funds for down payment, closing costs, prepaid expenses and/or discount points are provided by a gift, grant, community second or loan from a family member or

• FHA purchase or refinance transactions in which, for qualification purposes, the borrower receives a gift to pay down or payoff installment debt.
o Credit Score 580 – 639:

 Reserves are not required.
o Borrowers without credit scores and borrowers who do not meet minimum trade line requirements published in the “Credit History” section of FHA Product
 Gifts, etc. are now permitted.

PROPERTY FLIPPING – Effective Immediately; (This is GOOD for investors & getting the number of distressed properties off of the market).

For FHA and VA purchases, the seller seasoning requirement has been decreased from 90 days to 30 days.

• Flagstar continues to require a second appraisal for properties sold within 90 days of seller acquisition if the new purchase price exceeds the seller’s acquisition cost by 20% or more.

When determining the 20% increase in sales price, property improvements made subsequent to seller acquisition may not be included in the acquisition cost.

To Be Determined (TBD) Property Addresses for Underwriting of FHA & VA Loans
We are now underwriting loans for borrowers who have not yet selected a property. To ensure loan approval, it is imperative that loan packages contain all pertinent disclosures, credit, income, and asset documentation.

BORROWERS WITHOUT CREDIT SCORES

The following overlays replace our current guidance for FHA borrowers without credit scores:

• The borrower must now have a 12-month rental history. This requirement is reduced from the current 24-month requirement.

• Borrowers who live with family or otherwise live rent-free remain ineligible for FHA financing.

• The borrower must have at least two additional pieces of non-traditional credit, and each trade  line must have a 12-month history.• Borrower may not have had a previous bankruptcy or foreclosure.

• Maximum ratios 31/43.

• Gifts, grants, community seconds and/or loans from family members are now permitted for all or part of the borrower’s funds to close, subject to FHA requirements.

REPAIR ESCROW HOLDBACKS FOR REO PROPERTIES
Repair escrows are now permitted for FHA purchases of bank-owned properties when exterior repairs cannot be completed due to weather conditions.

• Approval of the repair escrow is granted on a case-by-case basis and will not be permitted for structural items or items that affect the health and safety of the occupants.