Blog Post Updated 6/22/17 — These are the major changes to how the Federal Housing Administration (FHA) underwrites and guarantees home loans for consumers. These changes went into effect in September of 2015.
Major changes to how the FHA will underwrite loans include:
- Student loan payments: Underwriters can no longer exclude most student loan payments from debt-to-income (DTI) ratios. Currently, FHA allows lenders to ignore student loan payments if they’ve been deferred for at least the following 12 months.
- Downpayment gifts: Lenders will be required to obtain a bank statement from the donor’s account and source any large deposits to that account.
- Short-term debts: Lenders must verify that the borrower paid the outstanding balance on any 30-day accounts, like American Express, in full each month for the past 12 months. If so, they can exclude 30-day accounts paid monthly from the borrower’s DTI ratio. However, 5 percent of the outstanding balance must be included in the debt ratio if borrowers made any late payments over the previous 12 months.
- Related short-term debts: Lenders must include in a DTI ratio all accounts in which the borrower is an authorized user, unless documentation shows that the primary account holder made all required payments over the past 12 months.
- Employment: Lenders must take additional steps to verify and document the stability of the borrower’s income if the borrower changed jobs more than three times in the last 12 months or changed lines of work.
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