Over the past couple of years, FHA has changed some of their guidelines – some better, some worse. Â For some buyers, this will make a difference in whether they can qualify for a home or not. Here are some of the changes:
-Student loans – in the past, if your student loan was deferred for more than 12 months, we didn’t have to count it. That has gone away – now all student loans are counted in your debt to income ratios. Â We have to use 1% of the loan balance or the actual documented payment, as long as it will pay off the loan in the loan terms.
-Authorized user on credit cards- in the past, we didn’t have to use the debt for an authorized user on a credit card. Now we do unless we can show the card holder has made the payments for the past 12 months using cancelled checks or bank statements.
-Installment debt – in the past, if you had less than 10 months left on an installment loan, we didn’t have to use the debt. Now we have to use any portion of the payment exceeding 5% of your monthly income.
Overtime income – in the past, underwriters would use overtime without a two year history – now we have to document two years of overtime income in order to use it.
The biggest change for most buyers is the student loan change. Â Many buyers using FHA financing are first time homebuyers and they tend to have student loans. Â Using 1% of a $25, ooo student loan means a payment of $250 against your income. Â That can definitely affect how much you can qualify for. Â And for many, Â the student loans equal much more than $25,000 – that can hurt you.
If you are thinking about buying a home, FHA financing can still be a great way to buy a home – just make sure you know how some of the new rules will affect your qualifying.
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
