topic Re: New FHA guidelines (manual underwriting)- Residual Income in Mortgage Loans

New FHA guidelines (manual underwriting)- Residual Income

lesse — Fri, 25 Apr 2014 02:33:11 GMT

So upset- I put in my mortgage app 4/11 and it has been in underwriting this whole time and apparently effective 4/21/14 NEW FHA guidelines have taken effect where if you need manual underwriting they take into consideration your Residual Income -same as the VA loans apparently - you need to have a cerain amount of money left over after all taxes, mortgage payments, and other household bills- for my family size i would need $888 that they want me to have left over. I am doing the loan on my own as my hubby is unable to be on the loan with me- yet they are counting my husband as part of the household- making us a family of 4 yet his income is not counted in the loan and it just WONT work. The dilemma with underwriting is that i passed a automated underwriting with an approval but the underwriter has the "authority" to downgrade it to manual underwriting i guess (Midscore of 630) only debt is car payment and 3 tiny ccs that are all paid in full- i have 2 unpaid meds from 3.5 years ago and a unpaid cc from 7.5 years ago falling off in 2 months - apparently he wants to consider residual income- which there is no way possible i would qualify- my LO is advocating for me and went to the u/w manager and now its been escalated further- something that usually takes less a few days is pushing almost 2 weeks and i just cant take this uncertainty and stress.. i am not confident in my "credit" as i have had bad credit since 18 and now at 28 spent the last two years fixing it and im just all nerves and wish they would just deny it or approve it already. the approval would only last 90 days and i havent seriously even looked as im afraid of finding something and being disappointed ughh this is tooo stressful for me - what if they approve me and i have issues with the next steps like finding a home, appraisal and all the other stuff i havent even considered because i couldnt get past the credit part and i go past the "90" days that the approval is good for- will i then have to start ALL OVER??? any insight would be helpful

Residual income on a mortgage- Hope its ok if i post here

lesse — Fri, 25 Apr 2014 07:08:50 GMT

I feel like this thread is home and the mortgage thread i never get responses so hopefully one of you can assist or drop some knowledge

OP,

Inmerged your threads together. Your thread is best served in mortgage lending.

Re: Residual income on a mortgage- Hope its ok if i post here

gdale6 — Fri, 25 Apr 2014 03:17:41 GMT

If you have the funds to pay off those medical bills Google search the HIPAA Process and contact its creator, we cant discuss it on this board. The CO about to fall off call the CRAs and ask it be removed early.

Now they wont exclude your husband he is part of your family and if he was not working he would still be part of your family..... If you cant get into a contract in 90 days you will have to go thru this all over again but it may be to your advantage anyway... Personally I would not have apped until all the negs were taken care of as you are going to have to satisfy them to close....

Re: New FHA guidelines (manual underwriting)- Residual Income

Anonymous — Fri, 25 Apr 2014 03:48:08 GMT

Wow, don't have any advice. Mine just went to underwriting and I had passed the automated desktop as well. My score is 703 so maybe it won't have to be manually underwritten? How do they calculate residual income? Is it the same as reserves?

Re: New FHA guidelines (manual underwriting)- Residual Income

ShanetheMortgageMan — Fri, 25 Apr 2014 04:11:41 GMT

Full details on the new manual underwriting guidelines for FHA loans can be found at http://ficoforums.myfico.com/t5/Mortgage-Loans/FHA-Revises-Manual-Underwriting-Requirements-effective-4-21-14/td-p/2766957

There are several reasons that your loan could be manually downgraded. Disputed negative accounts total $1k or more & negative credit not reflected on the credit report are usually the two biggest. The underwriter needs to have a reason though, they can't just say "Eh, I don't like this loan, going to manually downgrade it". Once the credit report is 90 days old in order to continue just a new credit report has to be pulled, you don't need to go through everything all over again (unless the new credit report is worse than the initial one).

Re: New FHA guidelines (manual underwriting)- Residual Income

lesse — Fri, 25 Apr 2014 04:30:00 GMT

Thanks Shane- i had 2 accounts under dispute a $650 medical that i had removed and a $6900 auto loan that i settled but wasnt reporting - and then of course a few days later it updates as paid and i wrote this info on the LOE that i provided along with the settlement letter and a copy of the title they sent me. The only other thing is the medical that had a dispute comment for $650 and a $111 unpaid medical - that was not under dispute. I have a $700 cc chargeoff (unpaid) from 7 years ago thats set to fall off in july. My student loans are all in good standing since 06- mainly deferments and i have a car payment paid off in full 3 years and a open car payment 2 years no lates- ccs are all a little over a year old with no lates- nothing negative within the last 3 years- Apparently my DTI is on the higher end and this can prompt a manual u/w. Im at 50.1 for backend DTI with my requested amount of 159k - i kept asking if i should lower the amount as i was just throwng a number out there and i didnt have a specific property and he said its fine. I make 40k but have a side business that i cant claim for income but statement from paypal shows over 40k in sales within 6 months(this is sales - i only cleared about 20k) and have a $10 a month student loan on the IBR plan and , a $360 a month car payment with only 9k left (the rate is ridiculoussssssss.. i was going to refi but my LO said to just leave it as is for now- im sure on a 9k loan for a bmw i can get my payments reduced by $100 - i financed this loan when i had scores in the 500's ) and 3 cc limits no more than $500 and they are all paid in full - at the time of report i think they were reporting no more than $15 each.

I have about 18k in cash saved up and have more than 6 months reserves and enough for downpayment and closing. Apparently it went to higer up at company.. ugh what if it opens a can of worms and he is more picky about my file and starts to pick apart every little thing and i get declined.. ughhhh and to think this is ONLY the beggginning - i wonder if not having a property attached is hurting me???

Re: New FHA guidelines (manual underwriting)- Residual Income

lesse — Fri, 25 Apr 2014 04:31:45 GMT

Once the credit report is 90 days old in order to continue just a new credit report has to be pulled, you don't need to go through everything all over again (unless the new credit report is worse than the initial one).

Hmmm the LO stated the "approval" is only good for 90 days - so i guess it could be either or?? maybe it has to go through undewriting again..

Re: New FHA guidelines (manual underwriting)- Residual Income

lesse — Fri, 25 Apr 2014 04:39:41 GMT

@Anonymous wrote:
Wow, don't have any advice. Mine just went to underwriting and I had passed the automated desktop as well. My score is 703 so maybe it won't have to be manually underwritten? How do they calculate residual income? Is it the same as reserves?

I think you will be Ok- my credit file is probably considered a bigger risky file due to the reasons listed below- im glad my LO is fighting for me and even the underwriting manager was on the fence and didnt say just deny so it was brought to a higher up but who knows how long they could take to decide. Not the same as reserves- its the amount of money they require for you to have left over after all these below bills are paid... for a family of 4 its $888 that they want you to have leftover (but home is going to be only in my name- so yes we do have the leftover money& im comfortable with the 159k mortgage- my husband is a foreman electrician and makes decent money but cant be counted for income as he is not on the loan because he filed BK before we got married 1.5 years ago so i dont inherit his debt and he was laid off before then before i got him this good job (yes i know im such a wonderful wife lol)
Either way this is what i found for residual income

VA residual income is one of the major underwriting guidelines required to qualify for a VA mortgage. Residual income is calculated by determining the gross monthly income of the veteran and spouse. Then, ... deduct from that total gross monthly income the following monthly expenses

State Taxes
Social Security
Federal Taxes
Proposed new monthly house payment (PITI: principle, interest, taxes and insurance)
Estimated Maintenance and Utilities
Monthly Child Care Expense
Alimony or Child Support
Monthly consumer debt payments: installment and revolving credit cards

Re: New FHA guidelines (manual underwriting)- Residual Income

ShanetheMortgageMan — Fri, 25 Apr 2014 04:42:15 GMT

If the $6,900 auto loan still showed owing, and in dispute, and was considered a "derogatory credit account" (see link below for definition) then that would be grounds for doing a manual downgrade. Medical accounts aren't included in that amount though.

http://ficoforums.myfico.com/t5/Mortgage-Loans/FHA-changing-collection-account-judgments-amp-disputed-account/td-p/2376607

The new manual underwriting guidelines are only for FHA case #'s ordered on/after 4/21/14, so since you are still in the pre-approval stage it would apply to your situation.

I'd ask the LO how much you are missing the residual income requirement by, if it's by $100 or less then it sounds like refinancing your auto loan could be the trick... remember you can refinance it out over another 5 years even if you have much less time on it left, and then you can just keep on making the payment you are making now and pay it off in the same amount of time (or sooner if you get a better interest rate on the refi). The payment amount on paper is just what the underwriter is concerned with, not how much more than the minimum payment you actually pay.

Debt ratio over 50% cannot be approved with FHA manual underwriting no matter what though, so a 50.1% debt ratio can't get approved unless it's through automated underwriting. Read the guidelines in the link in my previous post. To get a debt ratio up to 50% approved through manual underwriting you only need 2 compensating factors... it sounds like you have at least 3 months PITI in reserves + you have that other income that can be documented but can't yet qualify, so that would be 2 compensating factors right there.

It's a good thing you are getting all of this out of the way before you make an offer though, just imagine how much more stressful it'd be if you were under contract to purchase a home, with the clock ticking, while this was going on?

Re: New FHA guidelines (manual underwriting)- Residual Income

ShanetheMortgageMan — Fri, 25 Apr 2014 04:43:02 GMT

@lesse wrote:
Once the credit report is 90 days old in order to continue just a new credit report has to be pulled, you don't need to go through everything all over again (unless the new credit report is worse than the initial one).
Hmmm the LO stated the "approval" is only good for 90 days - so i guess it could be either or?? maybe it has to go through undewriting again..

Just means after 90 days in order to extend it, a new credit report needs to be run.

Re: New FHA guidelines (manual underwriting)- Residual Income

lesse — Fri, 25 Apr 2014 04:59:36 GMT

@ShanetheMortgageMan wrote:
@lesse wrote:
Once the credit report is 90 days old in order to continue just a new credit report has to be pulled, you don't need to go through everything all over again (unless the new credit report is worse than the initial one).
Hmmm the LO stated the "approval" is only good for 90 days - so i guess it could be either or?? maybe it has to go through undewriting again..
Just means after 90 days in order to extend it, a new credit report needs to be run.

Thank you shane- i guess the wording threw me off - but i suppose issues happen all the time where there is a delay so that makes sense..

thank you so much for the clarification on the DTI and compensating factors and the refi info on the car.. i was so nervous but i feel much better now- the LO and manager were trying to get the underwriter to honor the automated approval - with that i am good for that amount and everything else would be good- they may potentially counter at a lower approval amount but im ok with that- if the higher up states we need to use the Residual income rule and manual underwrites me it will be a decline without a doubt no way around that- lo is arguing the savings, side sales, 8 years on the job with same company etc- the refi is a good idea to get as long as i can to lower my monthly "debt" i didnt think of that and just pay the higher amount.. such a great idea thanks! the Residual will not work no way no how lol with the 360 car pmt, the lets say $50 for cc, $10 for SL and House payment with insurance and utlities- i wont have the $888 left over - no where close- but again they are including my husband as part of the"family of 4" yet not including is income even if he is exempt im not sure $788 would be left over after my taxes and stuff. Honestly shane in my state its is almost 1 am and i have been in underwriting for 2 weeks and cant sleep but you just made me feel a little better - if i dont qualify im at a 633- when my cc that is hurting my util falls off in july i should be able to qualify for conventional and save more money so im trying not to stress to much im just afraid of those ghost creditors that try to pop up during the mortgage process- i have been stalking for inquires etc but nothing as of yet but they are sneakkyyyy

Re: Residual income on a mortgage- Hope its ok if i post here

lesse — Fri, 25 Apr 2014 05:11:49 GMT

@gdale6 wrote:
If you have the funds to pay off those medical bills Google search the HIPAA Process and contact its creator, we cant discuss it on this board. The CO about to fall off call the CRAs and ask it be removed early.

Now they wont exclude your husband he is part of your family and if he was not working he would still be part of your family..... If you cant get into a contract in 90 days you will have to go thru this all over again but it may be to your advantage anyway... Personally I would not have apped until all the negs were taken care of as you are going to have to satisfy them to close....

hi gdale6- the meds dont need to be paid as they are under $1000 and over 3 years old ive been told by multiple sources before i applied (FHA guidelines) idk if conventional is different

One is set to fall off next year - i attempted the begginning stages of the hippa process but didnt pursue it further as one is falling off next year and the other one is $111 which i might just bit the bullet and pay it after the mortgage is handled as i dont want to renew this old debt quite yet until i have a for sure answer. I have attempted to PFD many of times and was denied so i have just decided to hold off and use it as leverage in hopes of getting a YES to a pfd request one of these days i mean its only $111 lol- and the eye doctor stated they would get insurance info from my primary as they are the same office - just different sections and they referred me over and i assumed they would send over my info and of course i then moved and im sure you know the rest- never got bill until boom - a few years later i start checking my report- they admitted sending to wrong address also. My husband is working- he is a foreman electrician and makes decent money and i believe there is an exclusion listed on the FHA guidelines if his income is substantial BUT not sure what else is required or how they go about this. Soooooo much information - my brain is going to exploddeeeee - soon as i think i understand the process something else pops that has me baffled

Re: Residual income on a mortgage- Hope its ok if i post here

Anonymous — Fri, 25 Apr 2014 06:35:10 GMT

save up 20% dp and get a coventinal loan? better terms lower rates no pmi, the list goes on. if you dont find a home and close on it within the specified time as long as your credit situation hasnt changed the reapproval process is pretty simple.

Re: Residual income on a mortgage- Hope its ok if i post here

lesse — Fri, 25 Apr 2014 16:19:00 GMT

@Anonymous wrote:
save up 20% dp and get a coventinal loan? better terms lower rates no pmi, the list goes on. if you dont find a home and close on it within the specified time as long as your credit situation hasnt changed the reapproval process is pretty simple.

If i dont get this loan - i will definitely look in the fall when 2 baddies fall off my report and my scores improve a little more thanks -