Requirements

Mortgage Qualification Requirements
Whether buying a home or refinancing an existing home, you should be aware of the the restrictions and requirements so that you can make good long-term financial decision.

The Basics

There are 3 key elements to any mortgage transaction

Credit - Your credit score & history are the driving factor in today’s market.
Debt to Income (DTI) - This ratio determines how much of a payment you can afford under the lending guidelines.
Loan to Value (LTV) - This ratio determines how much you can borrow against the value of the property.

FHA Mortgage Requirements for Refinancing
Conventional to FHA (Rate and Term)

  • Borrower must meet FHA mortgage requirements as detailed above.
  • Conventional loan may not be delinquent.
  • An FHA appraisal is required.
  • The up-front MIP (Mortgage Insurance Premium) will be 1.75% of the loan amount.
  • Any second liens must be subordinated to FHA being the first lien, unless combined into one loan.
  • Loan must not exceed 97.75% LTV.
FHA Cash-out / Debt Consolidation

  • Borrower must already have an FHA loan and meet FHA mortgage requirements as detailed above.
  • Borrower must have 12 months of seasoning as a primary residence with no mortgage late payments to get to 85% LTV.
  • The up-front MIP (Mortgage Insurance Premium) will be 1.5% of the loan amount.
  • Purchased properties with less than 12 months of seasoning must use 85% LTV of purchase price.
  • Only on 1 to 2 unit dwellings.
  • Non-occupant borrowers may not be added in order to meet FHA’s credit underwriting guidelines or for income purposes.
FHA Streamline (Rate and Term)

  • Borrower must already have an FHA loan and meet FHA mortgage requirements as detailed above.
  • Base loan amount must not exceed the amount of original Mortgage Note.
  • No appraisal is necessary unless base amount of new loan will exceed the amount of original Mortgage Note.
  • The up-front MIP (Mortgage Insurance Premium) will be 1.5% of the loan amount.
  • Borrower must have made at least 6 monthly payments.
  • If refinancing with less than 12 months of seasoning no delinquent payments allowed.
  • If refinancing with more than 12 months of seasoning no more than 1×30 late payments allowed in the last 12 months and last 3 months must be on time payments.
  • The payment reduction has to be 5% or greater of the total previous payment.
  • The borrower may not receive cash from loan proceeds in excess of $500.
  • Any subordinate financing may remain in place as long as it is subordinated on title and does not exceed 125% Combined Loan to Value (CLTV). For FHA streamlines without an appraisal, the property value is based on the original appraised value of the previous FHA loan.
  • The term of the new mortgage must be the lesser of 30 years or the unexpired term of the mortgage plus 12 years. A borrower cannot refinance from a 15 year loan to a 30 year loan.
  • No termite report is required.
  • Borrower cannot be late, delinquent, or in default of any federal debt.