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With 2021 almost behind us, I felt it would be a good idea to update you on any changes that will go into effect in 2022, as well as a reminder of the FHA Loan Program requirements are and any revisions that will go into effect in 2022. This will be a four-part series. Please remember to consult with your loan officer at 7th Level Mortgage for the most up to date information as some regulations could change, although there is usually enough warning about these changes, in my experience, some changes are made without notice to address any emergent issues that could come up during the calendar year. The first part is about qualifying for and obtaining an FHA loan.
- Application: There have been no changes to the requirement that all FHA-backed mortgage loan applications be signed off on by both you, the borrower, and your loan officer. Additionally, all state and federal mandated disclosures be signed off on and sent in with the loan package to the loan officer before processing the loan request will begin. If you haven’t received the full package from your loan officer, you must call him immediately so the process is not delayed. If there are errors on the application DO NOT USE WHITE OUT AND WRITE OVER TO MAKE CORRECTIONS. Simply write a line through the incorrect information, initial it and write next to it the corrected information.
- Appraisals: With the increase in home values in 2021 and the uptick in loan limits in 2022, the appraisal will be one of the most important facets of the loan application. The appraiser must be an FHA appraiser in good standing. The value of the property is based on comparable properties in the area and finally, it must meet the minimum property standards required by the FHA.
- Cash to Close: The FHA has very stringent rules regarding cash to close. The cash for closing must be verified. This verification will be completed by your processor. It must be seasoned and traceable for at least 2 months. Bank statements will be requested by your loan officer. In this day and age of internet banking, downloading statements from the bank and forwarding them to the loan officer or processor will complete this requirement.
- Credit Scores: FHA applicants who wish to finance 96.5% of the property’s agreed-to price, must have a minimum FICO score of 580. Applicants with scores between 500 and 579 are limited to 90% LTV.
- Documents: Once you have received your loan package from the loan officer at 7th Level Mortgage, please remember to sign the documents where indicated and submit to him W2’s (2 years), bank statements from all repositories, and, especially in the case of self-employed borrowers, personal IRS tax forms with all schedules.
- Income: All borrowers must show that they can afford the monthly payments based on their income and their continued work with the same employer, or in the same line of work. Mortgage processors are required to document your income and employment history, verify the accuracy of the income being reported as well as show that the income is effective. This means that you can reasonably be expected to work with the same employer for the next one to three years.
- Maximum Mortgage Amounts: Due to the uptick in home values during 2021. there has been a corresponding increase in the loan amounts permitted by the FHA. These limits are county-based and there could be some areas where high loan limits are permitted. What follows is a chart. It is not county or state-specific, however, if you have any questions, please remember to call your loan officer atb7th Level Mortgage for more guidance.
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- Mortgage Insurance: This requirement has been in place for many years and has not been changed. The FHA collects a one-time upfront fee of 1.75% of the loan amount and an annual amount of .85%, however, this can vary based on the loan amount and the term.
Finally, your loan officer is not there just to collect documents. He is a paid professional and it is part of his responsibility to answer any questions you may have before applying for the loan, during the application and processing of the loan as well as answer any questions you may have after the keys have changed hands or your refinance is complete. 7th Level Mortgage is the lender to go to for the answers. If your loan officer can’t answer the questions you may have, his supervisor and the processor as well as other staff can answer questions he can’t.