All About: FHA Manually Underwritten Loans
Most FHA lenders are increasing their minimum credit score for FHA loans to 620 or higher as of this month. But the FHA program will allow lower credit scores with compensating factors if an FHA underwriter manually reviews and approves the file.
The FHA manual underwriting process is the best way to get your home buyers stuck with low credit scores or high debt-to-income ratios approved and closed. Only 3.5% down payment - which can be all gift - for 1 to 4 family homes. 6% seller concessions and many other features to make it easier for your buyer to get approved.
A Primer on FHA loan types
The Department of Housing and Urban Development (HUD) offers mortgage loans through the FHA program. There are two ways to qualify for these low down payment loans.
The first way to qualify is for your buyer to submit an application and have an FHA lender approve the loan through the FHA automated underwriting system. In some cases, buyers with credit scores below 620 will be able to obtain approvals through this system.
That is where Residential Finance Network can help.
If your buyer does not get approved through the automated system, the second way to obtain a loan approval is through the manual underwriting process.
Instead of a computer algorithm deciding whether or not your buyer gets approved, a real person reviews the
loan application in detail to find a way to approve the loan.
Manual underwriting has become especially important since many lenders have now added their own minimum credit score requirements for any FHA loans they do. As of January 2009, many lenders will not do an FHA loan with a credit score below 600 even with an automated approval.
A manual underwritten loan is often required for borrowers with special circumstances or for other things that need explaining and can be backed up by proof.
After the explanations are submitted along with any proof, the underwriter can approve the loan based on
their discretion or ask for any additional information needed to make a decision.
Understanding what an FHA manual underwriter is looking for in the submissions package will greatly improve the approval percentage for the loan.
The credit decision is based on a thorough analysis of the entire loan and not any one single factor. The
factors underwriters look at include: Down payment - 3.5% is the minimum, but more may help.
Source of the down payment - The FHA program allows all down payment funds to be gift funds, but the more a borrower can show they are putting in their own money the better their application will look.
Post-Closing Reserves - How much money a borrower will have after paying for the down payment and closing costs is a very important factor that shows a borrower will have funds available in case of emergency.
Ability to Save - Borrowers need to show that they have the ability to save. If a borrower's new housing payment will be higher than their current rent, they should be able to show that they have either been saving or paying down debts with the extra money.
Ability to repay the loan - this includes income and employment analysis to show that income will be steady now and in the future. Willingness to repay the loan - credit history is usually the biggest part of manual underwriting.
Manual underwriters will allow for some banged up credit histories, but they need to show that any past problems have been taken care of and that there should not be any problems going forward in the future.
Sound like a lot of work? It is for us, but it's worth it if you want to make the dream of home ownership a reality for your buyers and the manual underwriting process is really their only option.
Residential Finance Network can help your buyers get their loans approved through the FHA manual underwriting process.
To get started, contact The Border Group at 203-906-2489. We'll put you in a house quicker than you thought!
The FHA manual underwriting process is the best way to get your home buyers stuck with low credit scores or high debt-to-income ratios approved and closed. Only 3.5% down payment - which can be all gift - for 1 to 4 family homes. 6% seller concessions and many other features to make it easier for your buyer to get approved.
A Primer on FHA loan types
The Department of Housing and Urban Development (HUD) offers mortgage loans through the FHA program. There are two ways to qualify for these low down payment loans.
The first way to qualify is for your buyer to submit an application and have an FHA lender approve the loan through the FHA automated underwriting system. In some cases, buyers with credit scores below 620 will be able to obtain approvals through this system.
That is where Residential Finance Network can help.
If your buyer does not get approved through the automated system, the second way to obtain a loan approval is through the manual underwriting process.
Instead of a computer algorithm deciding whether or not your buyer gets approved, a real person reviews the
loan application in detail to find a way to approve the loan.
Manual underwriting has become especially important since many lenders have now added their own minimum credit score requirements for any FHA loans they do. As of January 2009, many lenders will not do an FHA loan with a credit score below 600 even with an automated approval.
A manual underwritten loan is often required for borrowers with special circumstances or for other things that need explaining and can be backed up by proof.
After the explanations are submitted along with any proof, the underwriter can approve the loan based on
their discretion or ask for any additional information needed to make a decision.
Understanding what an FHA manual underwriter is looking for in the submissions package will greatly improve the approval percentage for the loan.
The credit decision is based on a thorough analysis of the entire loan and not any one single factor. The
factors underwriters look at include: Down payment - 3.5% is the minimum, but more may help.
Source of the down payment - The FHA program allows all down payment funds to be gift funds, but the more a borrower can show they are putting in their own money the better their application will look.
Post-Closing Reserves - How much money a borrower will have after paying for the down payment and closing costs is a very important factor that shows a borrower will have funds available in case of emergency.
Ability to Save - Borrowers need to show that they have the ability to save. If a borrower's new housing payment will be higher than their current rent, they should be able to show that they have either been saving or paying down debts with the extra money.
Ability to repay the loan - this includes income and employment analysis to show that income will be steady now and in the future. Willingness to repay the loan - credit history is usually the biggest part of manual underwriting.
Manual underwriters will allow for some banged up credit histories, but they need to show that any past problems have been taken care of and that there should not be any problems going forward in the future.
Sound like a lot of work? It is for us, but it's worth it if you want to make the dream of home ownership a reality for your buyers and the manual underwriting process is really their only option.
Residential Finance Network can help your buyers get their loans approved through the FHA manual underwriting process.
To get started, contact The Border Group at 203-906-2489. We'll put you in a house quicker than you thought!
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O:203-400-6439 • F: 203-538-4012
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132 Monroe Turnpike. Trumbull, CT 06611
O:203-400-6439 • F: 203-538-4012
E-mail Direct
Each Keller Williams office is individually owned and operated
132 Monroe Turnpike. Trumbull, CT 06611
