September 30, 2015
With the publication of HUD 4000.1 in its entirety, FHA single family home loans have a new policy handbook. It contains existing policy, revised or amended loan rules, and other changes that are relevant when it comes to applying for a single family home loan or refinance loan.
With the new rule book, we’re examining the contents of those rules in a variety of areas to show the current state of FHA loan rules, credit requirements, appraisal rules and other important topics. Let’s examine some basics of qualifying for an FHA mortgage under the new rulebook.
In general, HUD 4000.1 instructs the lender, referred to here as “the mortgagee”, as follows:
“The Mortgagee must obtain a credit report for each Borrower who will be obligated on the mortgage Note. The Mortgagee may obtain a joint report for individuals with joint accounts. The Mortgagee must obtain a credit report for a non-borrowing spouse who resides in a community property state, or if the subject Property is located in a community property state.”
What does HUD 4000.1 require of the credit report, especially when it comes to non-borrowing spouses? “The credit report must indicate the non-borrowing spouses SSN, where an SSN exists, was matched with the SSA, or the Mortgagee must either provide separate documentation indicating that the SSN was matched with the SSA or provide a statement that the non-borrowing spouse does not have an SSN. Where an SSN does not exist for a non-borrowing spouse, the credit report must contain, at a minimum, the non-borrowing spouses full name, date of birth, and previous addresses for the last two years.”
Remember that FHA loan rules require all applicants to have a valid Social Security Number, so the inclusion of a non-borrowing spouse’s SSN is a logical step where required.
Regardless of past policies found in the old HUD 4155.1 manual, FHA loan rules about credit reports in HUD 4000.1 are quite specific when it comes to traditional credit reports versus non-traditional credit reports. HUD 4000.1 states clearly:
“The Mortgagee must use a traditional credit report. If a traditional credit report is not available or the traditional credit report is insufficient, the Feedback Certificate will show a Refer recommendation, and the Mortgagee must manually underwrite the Mortgage.”
That’s very important to keep in mind when applying for an FHA mortgage. Later in HUD 4000.1, however, the following information is also listed:
“For Borrowers without a credit score, the Mortgagee must either obtain a Non- Traditional Mortgage Credit Report (NTMCR) from a credit reporting company or independently develop the Borrowers credit history using the requirements…”
Additionally, the contents of the credit report have specific requirements in HUD 4000.1:
“Credit reports must contain all information from at least two credit repositories pertaining to credit, residence history, and public records information; be in an easy to read and understandable format; and not require code translations.”
We will cover more credit report issues in another blog post.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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