FHA Policy Changes Affecting Credit that You Need to Know
September 18th, 2015
September 18th, 2015
If you’re shopping for a new home and are interested in getting an FHA loan, you need to be aware of several policy changes that FHA has put into effect on September 14, 2015.
FHA has made these changes to the Single Family Housing Policy Handbook in order to provide a consolidated, consistent and comprehensive set of policies. Before now, all of these FHA requirements were covered in various handbooks, mortgagee letters and other documents. By consolidating these policies into one handbook, lenders will be able to quickly find the information they need that’s relevant to your mortgage application situation.
Some important changes you need to be aware of concerning credit requirements are as follows:
| Topic | Old FHA Guideline | New FHA Guideline |
| Satisfactory Credit | The borrower has acceptable credit if he/she has:
|
A lender may approve a borrower if the borrower has:
“Acceptable payment history” means:
“Major derogatory credit” means:
|
| Judgements, liens and IRS tax liens | Judgments, liens and IRS tax liens must be paid prior to or at close. If the judgment is paid prior to close, a satisfaction of judgment is required. If the judgement is being paid at close, a payoff letter is required. |
|
| Deferred payments | If a payment is deferred beyond 12 months of close, payment can be excluded with proper documentation. | Deferred debt must be included in the debt ratio. |
| Revolving and installment debt | For revolving and installment debt on the borrower’s credit report, if there is no payment listed and no further documentation is provided to show the correct monthly payment, the lender will use the greater of 5% of the existing balance or $10 to calculate the monthly payment. | For all revolving accounts and deferred installment loans, including student loans, when no payment exists on the credit report, the lender will use the greater of $10 or 2% on student loans; greater of $10 or 5% on all other debt. |
| Installment loans | On installment loans, if there is no payment listed and no further documentation is provided to show the correct monthly payment, the lender should use the greater of 5% of the existing balance or $10 to calculate the monthly payment. | When an installment loan in repayment, including student loans in repayment, shows no monthly payment on the credit report, a statement is required. |
If you’re looking to get an FHA mortgage for your new home, contact the mortgage specialists at Grandview Lending in Indianapolis. They can help answer any questions you may have about the new FHA requirements and what documentation you will need for the underwriting process.
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