Important Changes to FHA Home Loans Now In Effect

how long to wait after foreclosure

Tyler Frank,
Paramount Mortgage
NMLS ID 942420

The Federal Housing Authority (FHA) has made some changes for 2014, which took effect January 1 and affect FHA home loans. First and foremost, you will see a drop in the maximum allowable loan. In the St. Louis metro area, for example, the new max loan amount for a single-family home has been lowered to $271,050 from $281,250.

Other items of note regarding FHA have not changed; so as a refresher let’s look at FHA qualifications and rules:

  • Borrower must put 3.5% down based on sales price. 100% of the buyer’s contribution can be in the form of a gift. There are no reserve requirements; however, reserves can help to build a stronger case for a “tight” loan.
  • The seller can contribute 6% of the sales price towards closing cost, points and pre-paid items.
  • There is an up-front mortgage insurance premium (UFMIP) of 1.75% for all loan terms and amounts added to the base loan amount.

Some underwriting items include:

  • Income, such as a pay raise that will start before the first loan payment, may be counted towards qualifying.
  • In most cases, underwriters do not have to count any debt with 10 or less payments remaining. This is typically for non-revolving accounts, such as car payments and student loans.
  • A Chapter 7 bankruptcy will not disqualify a borrower if 2 full years have passed since the bankruptcy was discharged.
  • A borrower could obtain financing during a Chapter 13 bankruptcy if at least 1 full year has passed since it was filed, all Chapter 13 payments have been made on time, and the court gives permission to the borrower to incur additional debt.

About the author: Tyler is Paramount Mortgage Company’s general counsel as well as a licensed mortgage loan originator. Tyler is a 1999 graduate of the University of North Carolina at Chapel Hill where he was a member of the university’s Dean’s List. He received his J.D. from Washington University’s School of Law in 2002 and is a member of the Missouri Bar Association and the Illinois State Bar Association.

Tyler is “big brother” mentor and role model to a young man through the Big Brothers Big Sisters of Eastern Missouri. He is a member of the St. Louis Sports Commission’s Associates Board, the University of North Carolina at Chapel Hill’s Alumni Admissions Committee and Mary Institute and St. Louis Country Day’s Alumni Executive Committee. In 2012, Tyler successfully summited Mt. Kilimanjaro (19,341 ft.) in Tanzania, Africa, and ran his first full marathon.

Tyler can be reached by email at tfrank@paramountmortgage.com or by phone at 314.372.4313.

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