FHA Financing- The Real Story
(NAR) We are hearing more and more stories of lenders claiming FHA is changing their credit score criteria or stopping lending. These are not true. To date, FHA has NOT made any changes to credit scoring. The only change they have made for borrowers is to allow MORE flexibility in how a lender can verify employment. The new mortgagee letter states that if the borrower cannot provide written documentation of employment, they will allow verbal verification of employment. Even if the employee or employer is working remotely, they should still be able to verify employment.
Only if verbal or written verification is not available (if the borrowers business is closed completely and nobody is available by phone), the lender can only approve a loan with no verification of employment if the borrower can provide:
a minimum of 2 months of Principal, Interest, Taxes and Insurance (PITI) in reserves; AND
A year-to-date paystub or direct electronic verification of income for the pay period that immediately precedes the Note date, OR
A bank statement showing direct deposit from the Borrower's employment for the pay period that immediately precedes the Note date.
This would be a big hurdle for many FHA borrowers - but is ONLY REQUIRED if no employment verification (oral or written) is available.
Any lenders requiring more than this are implementing their own overlays - not FHA policy.
If anything should change with FHA policies, we will provide updates.
Joseph M. Ventrone
Vice President, Federal Policy and Industry Relations | Advocacy Group
NATIONAL ASSOCIATION OF REALTORS®