FHA - A Deeper Dive

LTV's

If you are looking for some cash or to pay off debt, your new FHA loan must be under 85% LTV. Otherwise, you can go upwards of 97.75%

DTI's

Depending on the level of approval, your DTI may be maxed at 50% of your gross monthly income, or it may go as high as 56.99%

FICOs

The highest tier of approval for these loans go below 580. However, getting them to work below 600 can be challenging.

Bankruptcy

Clients can actually still be in a chapter 13 bankruptcy and find themselves approved as long as they've made twelve on time payments. Chapter 7's require a two year waiting period from discharge.

Foreclosure

If a foreclosure has occurred within the last three years of application the loan will not be approved by the FHA.

Mortgage Lates

If the plan is to just attack the mortgage, you can sneak by with up to two mortgage lates in the previous year. However, to get cash-out there cannot be any.

Understanding MIP

Pay Some Now, Some Later

FHA MIP is charged as a split premium since it is 'split' into both a premium paid upfront (an additional 1.75% is financed into your loan at closing) and also an annual premium that you pay monthly in your mortgage payment.

Breaking down your payment

Monthly premiums are calculated based on the loan's term and LTV. Loans with terms longer than 15 years have an LTV threshold of 95%, while loan terms 15 years or shorter have an LTV threshold of 90%. This is also the threshold that determines if the costs will be incurred for 11 years or the entire life of the loan.


See MIP Chart


Example: If you have a 15 year, $250,000 loan with an initial LTV of 85% your monthly MI comes to roughly $94/month (250,000*.0045/12). 

Recent History

The FHA is known to change the amounts charged on their premiums from time to time. This is usually due to surpluses or shortages in the reserves used by the FHA to insure their loans against default. The 'History of FHA MIP' chart shows the changes made to monthly premiums in recent history.

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