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| Originally Posted by Dr D Dwight- I am truly surprised by your answer. It has probably been over 2 years since I have done an FHA loan in Phoenix, because the rapid appreciation has priced FHA somewhat out of the market. Were you able to get Desktop Underwriter to approve the loans, or were the loans manually underwritten? My recollection of a sign off by a single DE underwriter is about 585 FICO, and perhaps 550 for a regional underwriter. Perhaps things have changed recently, or your local HUD authority is more lenient than Phoenix. Inquiring minds want to know. |
Many of the loans that have closed received a Refer/Eligible. They then were manually underwritten. I would like to stress again that compensating factors are always HUGE in these lower score borrowers. I have also recieved some Approve /Eligible DU results. There is no rhyme or reason to it. They don't all go FHA, but many of them do!
I too was under the impression that borrowers needed to be in the 580 range, but after some very DRY reading of the FHA lender guide I found that it specifically states that there is no minimum credit score requirement.
Every borrower that has low scores, good ratios, and some reserves, gets submitted to FHA by my company and we have found that it is truly all about compensating factors.
The most recent example of an FHA loan that I closed: 523 middle score, 10 years on the job, $67,000 annual income, $25,000 vested in a 401K. The purchase price was around $180,000. Of course ratios cannot exceed FHA maximiums. In this case, I believe that they were about 8% below. This one got a refer eligible and the borrower was required to submit a letter of explanation about some old lates. The letter was acceptable and the loan flew right through.
I didn't address values in my earlier post, but I would assume that a borrower who makes $42,000 per year would not be looking in a price range that was above FHA guidelines. I understand that many areas have been priced out of the FHA market. Interestingly, I am currently working on some larger loans in Maryland and Georgia. They are both are good sized loans and are under FHA limits for those particular areas.
It appears that FHA is making some max loan adjustments in response to the increase in values.
The company that I work for closes several million in FHA loans every year and we lend in 23 states. We are experiencing similar results with the 95% FHA refinance loans as well.
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