October 27, 2015 | By RGR Marketing Blog

Are Your Clients Looking to Secure FHA Loans?

Loans insured by the Federal Housing Administration of the U.S. Department of Housing and Urban Development, casually known as FHA loans, have historically been a very attractive option for borrowers looking to buy a first home. The loans have always been attractive due to their competitive interest rates, approval success for those with credit that is less than stellar, and relatively low down payment requirements.

However, recent changes to the program announced by the FHA may make it a bit more difficult for some to qualify for the loans. This development may make conventional financing an equally or more attractive option for some borrowers.

Deferred Student Loans

Federal and private student loans currently under deferment have been eligible for exclusion from the debt-to-income calculation for FHA loans, but under the new guidelines, this will no longer be the case. Going forward, if the borrower’s monthly student payment is either zero or not available, then two percent of the borrower’s total outstanding student loan balance will be used to estimate what a monthly payment would be.

This development may provide some borrower’s with incentive to elect an income-dependent plan or other graduated student loan payment plan over deferment in cases where their income will not support a full student loan and mortgage payment simultaneously. Under the new rules, graduated payment plans with a current payment of zero dollars will be allowed instead of the two percent of balance stipulation.

Authorized User Accounts

Going forward, any balances on credit accounts on which the borrower is an authorized user must be included in the debt-to-income calculation for FHA loans. However, this requirement may waived if the borrower can supply documentation that shows that the primary account holder for the debt has made all of their required payments on time for the last twelve consecutive months.

As being an authorized user provides little to no benefit for most borrowers on most credit accounts, this change in the rules may provide incentive for some borrowers to clean up their credit accounts prior to applying for FHA insured financing for a home.

Primary Conversions

No longer will the FHA allow homeowners to purchase a second home as a primary residence within the same geographic area as their current home. In other words, if the primary residence of the borrower will be vacated, but retained as a rental property, the home for which an FHA loan is used to buy must be at least a distance of one-hundred miles from the home they are vacating but retaining as a rental property.

FHA Is Still a Great Option for Some Borrowers

The FHA may still be the best option for some borrowers, but the recent changes have definitely made it more difficult for a great many borrowers to secure an FHA loan. With the restrictions on what properties can qualify for financing and what debt must be included in the debt-to-income calculation, conventional financing may be a better option for some than the HUD’s FHA program.

For a complete list of the recent changes to the FHA’s rules, go here. And when you're ready to purchase high quality mortgage leads for your business, get in touch with RGR Marketing. We've got the best leads in the industry.

[Photo Via: Telegraph]

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