FHA FHA HIGHLIGHTSHIGHLIGHTS

FHA For anyone who has a Social Security numberFHA For anyone who has a Social Security number

Occupy the property as the Occupy the property as the principal residenceprincipal residence

Possess a valid Social Security Possess a valid Social Security NumberNumber

• • Have a two-year employment Have a two-year employment history;history;

• • School and military service count School and military service count towards this two-year requirement.towards this two-year requirement.

• • Not be delinquent on any Federal Not be delinquent on any Federal debt such as a student loan or other debt such as a student loan or other FHA-insured mortgageFHA-insured mortgage

HOW MUCH CAN THEY HOW MUCH CAN THEY BUY?BUY?

$$ • • Caps on payment and debt-to-income ratios Caps on payment and debt-to-income ratios

not exceed 31% and the debt-to-income ratio not exceed 31% and the debt-to-income ratio may not exceed 43%.may not exceed 43%.

• • The buyer’s The buyer’s entire entire cash investment—as cash investment—as little as 3.5 %—can be a gift from a family little as 3.5 %—can be a gift from a family member, employer, charitable organization or member, employer, charitable organization or local government entity.local government entity.

• • The seller can contribute up to six percent The seller can contribute up to six percent of the home’sof the home’s

price toward closing costs through a seller’s price toward closing costs through a seller’s concessionconcession

CREDIT CREDIT Flexible Credit RequirementsFlexible Credit Requirements Three credit references, including at least one Three credit references, including at least one

from Group I, covering the most recent 12 from Group I, covering the most recent 12 months activity from the date of application.months activity from the date of application.

If there is a credit score, the minimum score If there is a credit score, the minimum score WFHM will accept for a purchase or rate term WFHM will accept for a purchase or rate term refinance is refinance is 600600. On cash out transactions, a . On cash out transactions, a 620620 score is required. Streamline refinances are also score is required. Streamline refinances are also required to meet the 600 minimum requirement. required to meet the 600 minimum requirement. Exception: Exception: If the existing loan is serviced by If the existing loan is serviced by Wells Fargo and the transaction is a non-credit Wells Fargo and the transaction is a non-credit qualifying streamline, a minimum credit score is qualifying streamline, a minimum credit score is not required. not required.

Note: Note: FHA has no published guidelines on FHA has no published guidelines on minimum credit scores; this is a minimum credit scores; this is a WFHM overlayWFHM overlay..

WELLS RULESWELLS RULES Borrowers without credit scores are not disqualified.Borrowers without credit scores are not disqualified. Obtain the most recent 12-month mortgage history by Obtain the most recent 12-month mortgage history by

direct Verification of Mortgage (VOM) or through copies of direct Verification of Mortgage (VOM) or through copies of cancelled checks, and include in ratios if:cancelled checks, and include in ratios if:

Mortgage debt does not appear on the credit report, orMortgage debt does not appear on the credit report, or The credit report does not have a 12-month history, or no The credit report does not have a 12-month history, or no

rating is available.rating is available. If any mortgage trade line including mortgage line-of-credit If any mortgage trade line including mortgage line-of-credit

payments, during the most recent 12 months, show any of payments, during the most recent 12 months, show any of the following, the loan must be manually downgraded:the following, the loan must be manually downgraded:

Three or more late payments of greater than 30 days, orThree or more late payments of greater than 30 days, or One or more late payments of 60 days plus one or more 30-One or more late payments of 60 days plus one or more 30-

day late payments, or One payment greater than 90 days day late payments, or One payment greater than 90 days latelate

Wells Fargo policy does not allow new financing to Wells Fargo policy does not allow new financing to applicants with any of the following adverse credit accounts applicants with any of the following adverse credit accounts from Wells Fargo/Wachovia within the last seven years:from Wells Fargo/Wachovia within the last seven years:

Why is wells so?Why is wells so?• • Charge-offCharge-off

• • or Deed in Lieuor Deed in LieuThis policy does not apply to: HECM loans, non-credit qualifying streamline refinance This policy does not apply to: HECM loans, non-credit qualifying streamline refinance transactions, and any FHA loan that receives and accept/approve from an FHA approved (AUS) – transactions, and any FHA loan that receives and accept/approve from an FHA approved (AUS) – unlessunlessmanually downgraded.manually downgraded.Requiring the payoff of the above referenced Requiring the payoff of the above referenced Settled for less accounts Repossession Settled for less accounts Repossession BankruptcyBankruptcy• • Foreclosure Foreclosure Wells Fargo/Wachovia debts does not render the applicant eligible for Wells Fargo/Wachovia debts does not render the applicant eligible for WFHM financing. This is a Wells Fargo & Co. rule not FHAWFHM financing. This is a Wells Fargo & Co. rule not FHAIf a Wells Fargo/Wachovia debt was included in theIf a Wells Fargo/Wachovia debt was included in thebankruptcy, the borrower is not eligible. Wells Fargo & Co. RULEbankruptcy, the borrower is not eligible. Wells Fargo & Co. RULE

One More time…One More time…

Requiring the payoff of the above Requiring the payoff of the above referenced Wells Fargo/Wachovia referenced Wells Fargo/Wachovia debts does not render the applicant debts does not render the applicant eligible for WFHM financing. This is a eligible for WFHM financing. This is a Wells Fargo & Co. rule not FHAWells Fargo & Co. rule not FHA

If a Wells Fargo/Wachovia debt was If a Wells Fargo/Wachovia debt was included in theincluded in the

bankruptcy, the borrower is not bankruptcy, the borrower is not eligible. Wells Fargo & Co. RULEeligible. Wells Fargo & Co. RULE

Chapter 7 BKChapter 7 BK • • A Chapter 7 bankruptcy (liquidation) does not A Chapter 7 bankruptcy (liquidation) does not

disqualify a borrower from obtaining an FHA-disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have insured mortgage if at least two years have elapsed since the date of the elapsed since the date of the dischargedischarge of the of the bankruptcy.bankruptcy.

• • The borrower must have re-established good The borrower must have re-established good credit orcredit or

chosen not to incur new credit obligations. Thechosen not to incur new credit obligations. The

borrower also must have demonstrate a documentedborrower also must have demonstrate a documented

ability to responsibly manage finances..Less than ability to responsibly manage finances..Less than two years, but not less than 12 months, may be two years, but not less than 12 months, may be acceptable if can show the BK was caused by acceptable if can show the BK was caused by circumstances beyond control, and can document circumstances beyond control, and can document ability to manage financial affairs. Paper trail ability to manage financial affairs. Paper trail StoryStory

..

FHA $ FHA $

Rental RatingRental Rating Landlord Rating / Rental Landlord Rating / Rental Borrower’sBorrower’s payment history of housing obligations through payment history of housing obligations through

either the credit report, verification of rent either the credit report, verification of rent directly from the landlord (with no identity-of-directly from the landlord (with no identity-of-interest with the borrower), or verification of interest with the borrower), or verification of mortgage directly from the mortgage servicer, mortgage directly from the mortgage servicer, or through cancelled checks covering the most or through cancelled checks covering the most recent 12-month period.recent 12-month period.

A landlord rating is not needed if evidence is A landlord rating is not needed if evidence is provided that the borrower has been living in provided that the borrower has been living in base housing.base housing.

FHA has eliminated unnecessary FHA has eliminated unnecessary requirements to make minor repairs. Water requirements to make minor repairs. Water heater strapped. Don’t put termite in heater strapped. Don’t put termite in offer/contract or will be required.offer/contract or will be required.

• • The homebuyer and the seller, The homebuyer and the seller, individually or jointly, can pay closing costs individually or jointly, can pay closing costs as agreed to in the sales contract. FHA as agreed to in the sales contract. FHA doesn’t limit what closing costs the doesn’t limit what closing costs the homebuyer can pay.homebuyer can pay.

203k203k

FHA’s Section 203(k) Limited Repair Program FHA’s Section 203(k) Limited Repair Program is an excellent financing option for you is an excellent financing option for you whether buying or selling homes—when whether buying or selling homes—when repairs are identified during a home inspection repairs are identified during a home inspection or appraisal—because it gives buyers the or appraisal—because it gives buyers the ability to make repairs after closing.ability to make repairs after closing.

Buyers can finance up to an additional Buyers can finance up to an additional $35,000 into their mortgage to pay for minor $35,000 into their mortgage to pay for minor remodeling such as replacing flooring, remodeling such as replacing flooring, installing new appliances, and painting the installing new appliances, and painting the interior and/or exterior of the home.interior and/or exterior of the home.

StreamlineStreamline

Streamline refinancesStreamline refinances are designed to lower are designed to lower the monthly principal and interest payments the monthly principal and interest payments on a current FHA-insured mortgage and must on a current FHA-insured mortgage and must involve no cash back to the borrower except involve no cash back to the borrower except for minor adjustments at closing not for minor adjustments at closing not exceeding $500.exceeding $500.

Streamline refinances can be insured with or Streamline refinances can be insured with or without an appraisal. Can’t exceed original without an appraisal. Can’t exceed original loan amount.loan amount.

New individuals can be added on a streamline New individuals can be added on a streamline refinance.refinance.

Streamline vesting Streamline vesting changeschanges

CAN’T DELETE BORROWER from obligation streamline CAN’T DELETE BORROWER from obligation streamline refinances that result in one or more borrowers beingrefinances that result in one or more borrowers being

deleted from obligations under the mortgage note are not.deleted from obligations under the mortgage note are not. However, streamline refinances that will result in the However, streamline refinances that will result in the

deletion of a borrower currently obligated on the note, deletion of a borrower currently obligated on the note, provided the change in title occurred at least six months provided the change in title occurred at least six months previously and the remaining borrowers can provide previously and the remaining borrowers can provide evidence they alone have made the mortgage payments evidence they alone have made the mortgage payments during that period are permitted.during that period are permitted.

This policy applies only to those loans that do not contain This policy applies only to those loans that do not contain restrictions limiting assumptions only to creditworthy restrictions limiting assumptions only to creditworthy persons (typically, mortgages made before December 15, persons (typically, mortgages made before December 15, 1989 are freely assumable), or where the transferability 1989 are freely assumable), or where the transferability restriction (due-on-sale clause) was not triggered, such as restriction (due-on-sale clause) was not triggered, such as in a divorce, devise,or descent and the assumption or quit-in a divorce, devise,or descent and the assumption or quit-claim of interest occurred more than six months previously claim of interest occurred more than six months previously and the remaining owner-occupant can demonstrate that and the remaining owner-occupant can demonstrate that he/she has made the mortgage payments during this time.he/she has made the mortgage payments during this time.

MIPMIP Up Front Mortgage Insurance Premium (UFMIP) Up Front Mortgage Insurance Premium (UFMIP)

– – On HUD insured loans with up-front mortgage On HUD insured loans with up-front mortgage insurance, the up-front MIP refund must be insurance, the up-front MIP refund must be calculated and subtracted from the existing mortgage calculated and subtracted from the existing mortgage amount when determining the new mortgage amount. amount when determining the new mortgage amount. In those cases when the new UFMIP will be less than In those cases when the new UFMIP will be less than the credit, the amount of the new UFMIP can be the credit, the amount of the new UFMIP can be deducted from the existing principal balance when deducted from the existing principal balance when calculating the new mortgage amount. This will calculating the new mortgage amount. This will prevent the borrower from having to bring in prevent the borrower from having to bring in additional funds to close. In those cases that the additional funds to close. In those cases that the credit exceeds the new MIP, any excess MIP owed to credit exceeds the new MIP, any excess MIP owed to the borrower from the existing loan will be refunded the borrower from the existing loan will be refunded directly to the borrower from HUD after closing.directly to the borrower from HUD after closing.

MIP costsMIP costs

Up-front Mortgage Insurance Premium Up-front Mortgage Insurance Premium UFMIPUFMIP

May be financed OR paid in cash but may NOT May be financed OR paid in cash but may NOT be partially financedbe partially financed

UFMIP added to Base Loan Amount (BLA) to UFMIP added to Base Loan Amount (BLA) to equal Total Loan Amount (TLA)equal Total Loan Amount (TLA)

Cents always paid in cash for rounding purposesCents always paid in cash for rounding purposes

Purchases, Full Credit Qualify Purchases, Full Credit Qualify Refinances 1.75% Streamline Refinances 1.75% Streamline transactions 1.50%transactions 1.50%

MIP MoreMIP More Annual Mortgage Insurance Premium (MIP) – Annual Mortgage Insurance Premium (MIP) – When When

processing aprocessing a Streamline Refinance (with or without an appraisal), on a Streamline Refinance (with or without an appraisal), on a

mortgage that was originated and closed on or before July mortgage that was originated and closed on or before July 1, 1991, the new loan will be exempt from the annual 1, 1991, the new loan will be exempt from the annual premium. The borrower's monthly payment amount should premium. The borrower's monthly payment amount should not include any annual premium. However, documentation not include any annual premium. However, documentation must be providedmust be provided

in the case file that the mortgage being refinanced closed in the case file that the mortgage being refinanced closed before July 1, 1991.before July 1, 1991.

This documentation may be in the form of a photocopy of This documentation may be in the form of a photocopy of the HUD-1the HUD-1

Settlement Statement, Mortgage Insurance Certificate or Settlement Statement, Mortgage Insurance Certificate or other credible evidence that shows that the mortgage other credible evidence that shows that the mortgage being refinanced was closed beforebeing refinanced was closed before

July 1, 1991.July 1, 1991.

exemption paying of the annual premium exemption paying of the annual premium applies closed before July 1, 1991, and applies closed before July 1, 1991, and subsequently streamline refinanced subsequently streamline refinanced

No annual second time if before 1991 No annual second time if before 1991

Other stuffOther stuff UFMIP – UFMIP – All new 203(b) loans are subject to an All new 203(b) loans are subject to an

UFMIP.UFMIP. Those loans that are refinancing existing mortgages Those loans that are refinancing existing mortgages

that were closed prior to July 1, 1991, there will not that were closed prior to July 1, 1991, there will not be an annual premium. The UFMIP will be be an annual premium. The UFMIP will be 1.50 1.50 percent.percent.

Those loans that are refinancing existing mortgages Those loans that are refinancing existing mortgages closed on or after July 1, 1991, the standard UFMIP closed on or after July 1, 1991, the standard UFMIP and annual premium will be charged.and annual premium will be charged.

Annual MIP – Annual MIP – An annual premium is collected on a An annual premium is collected on a monthly basis. The term of the annual premium is monthly basis. The term of the annual premium is based on the loan to value. (For 15-year loans with based on the loan to value. (For 15-year loans with loan to values of 89.99 percent or less, no annual loan to values of 89.99 percent or less, no annual premium is charged.)premium is charged.)

Special LTV calculations apply on Streamline Special LTV calculations apply on Streamline Refinances Without AppraisalsRefinances Without Appraisals

mipmip Determine the base loan amount of the new Determine the base loan amount of the new

mortgage. If the MIP for the old mortgage was mortgage. If the MIP for the old mortgage was financed, subtract the refund, if any, noted on the financed, subtract the refund, if any, noted on the Refinance Authorization from the base loan amount. Refinance Authorization from the base loan amount. This avoids paying a new MIP on the refund credit This avoids paying a new MIP on the refund credit amount.amount.

Select the applicable MIP factor from the premium Select the applicable MIP factor from the premium calculation table calculation table

Multiply the mortgage amount before MIP by the Multiply the mortgage amount before MIP by the factor selected.factor selected.

SAY .82%SAY .82% Use this table for streamline refinances where the Use this table for streamline refinances where the

"old" mortgage closed on or before July 1, 1991."old" mortgage closed on or before July 1, 1991. Mortgage Term Premium FactorMortgage Term Premium Factor More than 15 years 0.015 15 years or less 0.015More than 15 years 0.015 15 years or less 0.015

REFUND CREDIT $REFUND CREDIT $

The amount of the refund is determined The amount of the refund is determined from the Refinance Authorization.from the Refinance Authorization.

This refund amount must be subtracted This refund amount must be subtracted from the new UFMIP to determine the from the new UFMIP to determine the net amount of UFMIP due on the new net amount of UFMIP due on the new loan.loan.

NoteNote: If refund exceeds new UFMIP : If refund exceeds new UFMIP the excess refund will be sent/refunded the excess refund will be sent/refunded to the borrower directly from HUD to the borrower directly from HUD

Netting EscrowsNetting Escrows

WFHM will also allow the netting of escrow funds WFHM will also allow the netting of escrow funds on a payoff of an existing WFHM loan if the on a payoff of an existing WFHM loan if the customer is refinancing through WFHM. Netting customer is refinancing through WFHM. Netting of escrows is not a requirement but an option of escrows is not a requirement but an option available to the borrower.available to the borrower.

With netting of escrows, the customer’s current With netting of escrows, the customer’s current escrow account balances are refunded against escrow account balances are refunded against the principal balance owed on the current the principal balance owed on the current mortgage. This is shown on the payoff statement mortgage. This is shown on the payoff statement in detail. The principal balance prior to the in detail. The principal balance prior to the netting of escrows is used to determine the new netting of escrows is used to determine the new loan loan

Last payment proof at Last payment proof at closeclose

The existing loan must be current The existing loan must be current for the month due (for example, if for the month due (for example, if closing in December, November 1 closing in December, November 1 payment must have been made).At payment must have been made).At closing current check.closing current check.

Selling pointsSelling points

Assumable – in upward rate climateAssumable – in upward rate climate MIP is tax deductableMIP is tax deductable HMC Economics*HMC Economics*

Possible 10 extra bps of commission on Possible 10 extra bps of commission on all FHA loans all FHA loans That’s $200 on a $200,000 loan amountThat’s $200 on a $200,000 loan amount

Benefits Benefits

Low down payment (only 3.5% cash Low down payment (only 3.5% cash investment)investment)

Seller Concessions (up to 6%)Seller Concessions (up to 6%) Reserves not required for 1 Unit Reserves not required for 1 Unit

PropertiesProperties 100% Gift Funds allowed100% Gift Funds allowed Assumable to qualified borrowersAssumable to qualified borrowers Citizenship is not requiredCitizenship is not required Non-occupying co-borrower allowedNon-occupying co-borrower allowed

tipstips

Don’t put assets on 1003 that can’t Don’t put assets on 1003 that can’t be verifiedbe verified

Don’t put termite in contract if it is Don’t put termite in contract if it is to be ignored- catch 22to be ignored- catch 22

Condos must be Wells Approved and Condos must be Wells Approved and on FHA websiteon FHA website