FHA 2012

Definitions for mortgage terminology.

VOR= verification of rent if the borrowers rents from a private individual I have to have 12 months canceled checks or bank statements showing the exact amount of money coming out each month for money orders or automated rent payments or a property management company can verify in writing if the home is managed by a property manager or it’s an apartment complex.

Non Occupying co borrower= A co borrower that is not going to live in the house (example a daughter with no income buys a home and dad co signs and we use his money for qualifying for the new payment and of course dad has his own home.)

Reserves= cash in the bank after closing usually when a lender wants reserves it’s just for mortgage payments. Example PITI is 700.00 a month and the lender wants 2 months reserves after all money is paid at closing 1400.00 is left in the bank.

Ratios= 32/45 he first number is the new housing payment and the second is the new housing and all other installment dept or revolving dept.

DU= an automated underwriting software that FHA VA and Conventional lenders use to approve loans.

Trade Lines= a trade line for example would be credit card or car payment reporting to the credit bureau for at least 12 months most lenders want 3 trade lines. If a borrower only has; say a car payment reporting we can use alternative trade lines.

Alternative Trade Lines= example phone, water, electric, car insurance or rent (12 month history)

Most of these loan products require 100,000 loan amount

FHA Credit scores between 560 and 579

· 12 month rental history

· 3 trade lines with 12 month rating

· NO non occupying borrowers

· NO gifts allowed

· Borrower must have their own money for down payment and closings cost

· Borrower must have 3 months reserves

· No payment shock

· Max ratios 31//43

· All collections less than 2 years old must be paid

· Spouses that are not on the loan we must include her dept in the borrowers ratios

· All judgments must be satisfied

FHA Credit scores between 580 and 599

· 12 month rental history

· 3 trade lines with 12 month rating

· NO non occupying borrowers

· NO gifts allowed

· Borrower must have their own money for down payment and closings cost

· Borrower must have 2 months reserves

· No payment shock

· Max ratios 31//43

· All collections less than 2 years old must be paid

· Spouses that are not on the loan we must include her dept in the borrowers ratios

· All judgments must be satisfied

FHA Credit scores between 600 and 619

· 12 month rental history

· 2 trade lines with 12 month rating (1 has to be on the report the other can be rent.

· NO non occupying borrowers

· NO gifts allowed

· Borrower must have their own money for down payment and closings cost

· NO reserves needed

· Max ratios 40/45

· All collections less than 2 years old must be paid

· All judgments must be satisfied

FHA Credit scores between 620 and 639

· No rental history (unless DU requires)

· 2 trade lines with 12 month rating ( 1 can be rental)

· NO non occupying borrowers

· Gifts are ok

· Max ratios 42/55 with DU approval

· Collections ok with DU approval

· All judgments must be satisfied

FHA Credit scores over 640

· No rent verification

· No trade line requirements

· Non occupying borrowers OK

· Gifts allowed

· Max ratios 43/56.99 with DU approval

· Collections do not have to be paid

· All judgments must be satisfied