FHA approval (insurance, home loan, credit score, requirements)

[bentz69]

I am currently house hunting and I would like to use an FHA loan from Wells Fargo. I noticed on FHA Loan Refinance and FHA Home Loans | Mortgages they have debt to income ratios that they say are the standard for determining whether or not someone will get approved.

They want
29% mortgage payment expense to effective income (p/i, taxes, insurance, mortgage insurance)
my mortgage would be about 40%
41% total fixed payment to effective income
my payments take me to about 51% (car loan, personal loan)

I am looking for A home on Long Island in the 340-360 range. I did notice this note they have on the bottom of the page..

"Please note that the above indicators do not exclusively determine whether or not a candidate will qualify for an FHA loan. Other factors will be considered, including credit history and job stability."

I have excellent credit with a fico score of 790 and Ive been a police officer in NYC for 5 years. I am choosing FHA for low down payment option.

So i guess my question is, has anyone been approved and been over there percentage numbers? Any other info you could share regarding FHA? THANKS

[renriq02]

how much do you have in reserves?

if you have less than 2months then you will more than likely get declined

[bentz69]

Originally Posted by renriq02

how much do you have in reserves?

if you have less than 2months then you will more than likely get declined

2 months worth of mortgage payments as reserves after all initial costs are taken care of? If thats what your asking then yes. But not much more

[Sub-Urban Princess]

Originally Posted by renriq02

how much do you have in reserves?

if you have less than 2months then you will more than likely get declined

Unfortunately, this is not true. FHA has no reserve reqirement. However, reserves do help if you are over ratio maximums.

Also, FHA's ratio requirements are 31/43. Automated underwriting engines are used to determine approval status.

THe poster has great credit and some reserves so, I feel that you'd be fine.

I've seen files be approved by the system as high as 55% debt to income ratios but with adequate reserves...

Signed,

Former Wells employee and 13 year Veteran in the business

[renriq02]

I recently ran one, and got referred, and declined

Ultimately, it's up to the lender

I do know that FHA doesn't require reserves, but as you stated it helps as a compensating factor.

Credit score is also not a factor with FHA

Originally Posted by Sub-Urban Princess

Unfortunately, this is not true. FHA has no reserve reqirement. However, reserves do help if you are over ratio maximums.

Also, FHA's ratio requirements are 31/43. Automated underwriting engines are used to determine approval status.

THe poster has great credit and some reserves so, I feel that you'd be fine.

I've seen files be approved by the system as high as 55% debt to income ratios but with adequate reserves...

Signed,

Former Wells employee and 13 year Veteran in the business

[Dopo]

I could be wrong, but I think there's a limit to the mortgage loan
check on that.

[Sub-Urban Princess]

Originally Posted by renriq02

Credit score is also not a factor with FHA

Not a factor with FHA but the automated engine takes it into account, that's for sure.

Also, FHA uses the total score card method...so technically they do take the score into account when the loan is run through the engine...

I believe the score is not taken into account when a loan is underwritten manually by a live underwriter.

However, you are less likely to get a manual underwrite at Wells if you are over 45 debt to income and with that, you must have strong compensating factors.

*Long time on job
*Adequate reserves
*Low or No Payment Shock (increase or decrease in payment vs. current housing payment)
*Good Credit
*Future salary increases that can be verified

These are just a few...

[renriq02]

and that's why i mentioned reserves ...

Originally Posted by Sub-Urban Princess

Not a factor with FHA but the automated engine takes it into account, that's for sure.

Also, FHA uses the total score card method...so technically they do take the score into account when the loan is run through the engine...

I believe the score is not taken into account when a loan is underwritten manually by a live underwriter.

However, you are less likely to get a manual underwrite at Wells if you are over 45 debt to income and with that, you must have strong compensating factors.

*Long time on job
*Adequate reserves
*Low or No Payment Shock (increase or decrease in payment vs. current housing payment)
*Good Credit
*Future salary increases that can be verified

These are just a few...

[Sub-Urban Princess]

Originally Posted by Dopo

I could be wrong, but I think there's a limit to the mortgage loan
check on that.

Good Call...I think he's fine though...The Long Island counties have pretty healthy loan limits..


https://entp.hud.gov/idapp/html/hicost1.cfm

[Sub-Urban Princess]

Originally Posted by renriq02

and that's why i mentioned reserves ...

You did...

You know in our business that you have to be specific because there is tons of info that can be misconstrued by the common borrower.

To tell them they will get declined if they have less than two months is not always true. Generally, we are at the mercy of the automated underwriting systems...agreed?

Just today, I had a 624 FICO...45% back end ratio go through and she had a 1/2 month reserves...It was weird but the machine liked it...