Nationwide Mortgage & Realty, LLC
Tel: 844-953-0100 Email: info@nationwidemtg.net
Friday, March 24, 2023

Nationwide Mortgage & Realty, LLC

Fast Quote
  • Home
  • About Us
    • Career Opportunities
    • Contact Us
    • Meet the Team
  • Purchase
    • Conventional Mortgage
    • Condotel & Non-Warrantable
    • FHA Loan
    • FHA 203k
    • Fix & Flip
    • Investment
    • Jumbo Loans
    • New Construction
    • Non-QM Loans
    • USDA Loans
    • VA Purchase Loan
  • Refinance
    • Cash Out & Debt Consolidation
    • Conventional Refinance
    • Condotel & Non-Warrantable
    • FHA 203k
    • FHA Streamline Refinance
    • Investment
    • Non-QM Loans
    • Reverse Mortgage
    • VA IRRRL (Streamline)
  • Loan Process
    • Application Checklist
    • Credit Repair
    • Home Buying Do’s and Don’ts
    • Interest Rates
    • Mortgage Calculator
  • Mortgage Blogs
  • Request Information
    • Apply Now
No Result
View All Result
Contact Info | Request Info
Home Manual Underwriting

Compensating Factors FHA & Compensating Factors for VA Loans

byNicholas Auriemma, NMLS# 1455001
4 years ago
inManual Underwriting, Purchase
Compensating Factors for VA Loans Compensating Factors FHA

Compensating Factors FHA & Compensating Factors for VA Loans

Looking for a mortgage company that does manual underwriting for FHA and VA loans? Some lenders will deny a loan because they will not manually underwrite a loan. Lenders may have an overlay, an internal rule on top of guidelines, which can make qualifying for a mortgage more difficult.

Manual Underwriting Explained

The Automated Underwriting System (AUS) analyzes credit, capacity, and collateral, which results in a logic-based loan decision. There are factors that can trigger a manual underwrite and even when there are approved findings, a loan can be downgraded to a manual underwrite. A lender will either dismiss a borrower because they do not do manual underwrites or inform them that they should look for other options.

Every borrower’s situation is unique and is based on a case by case scenario, but manual underwritten loans can overcome by properly pre-approving a borrower and structuring a loan before it is submitted to underwriting. It is important to take the time to provide as much information as possible to your Loan Originator before shopping for a home.

Compensating Factors Explained

Compensating factors for manual underwriting are:

  • Just another way for lenders to layer risks.
  • Recognize justification for manual underwrites.
  • To demonstrate a borrower’s ability to repay the mortgage.

There are compensating factors for VA loans and compensating factors for FHA loans.

Compensating Factors for VA Loans

Factors that are compensating affect the manual VA loan decision, but will not compensate for unsatisfactory credit. The max debt-to-income ratio is 41% but can go higher with compensating factors for VA loans.

12 Factors for Approving Higher Debt-to-Income – VA

A list of compensating factors for VA loans, but not limited to:

  1. Payments for housing expenses – being able to demonstrate the ability to pay housing expenses greater or equal to the proposed mortgage payment for the past 12-24 months.
  2. Down payment – making a larger down payment towards the purchase.
  3. Savings – demonstrating the ability to save and conservative overusing credit.
  4. Cash reserves – having documented cash, funds, or assets such as a retirement account that allow withdrawals.
  5. Potential increased earnings – depending on job training or education, the potential increase in earnings.
  6. Nontaxable income.
  7. Income or compensation that is not reflected as effective income – received documented compensation or income that may affect the ability to pay the mortgage, such as food stamps or other similar benefits.
  8. Prior credit history – previous credit history that shows the ability to apply a greater portion towards housing expenses.
  9. Minimal debt.
  10. Being employed long-term.
  11. Benefits from the military.
  12. Residual income.

One factor that causes a loan to require manual underwriting is borrowers with non-traditional credit – a minimum of 3 trade lines with 12 month rating are required.

Manual Underwriting FHA – Compensating Factors FHA

The minimum down payment for an FHA loan is:

  • 3.5% for a 580 or higher FICO credit score.
  • 10% for borrowers below 580 credit score.
  • Regardless of compensating factors for manual underwriting.

When a FHA loan is manually underwritten, the max debt-to-income ratio is 43% without compensating factors. Reserve requirement for FHA manually underwritten loans are 1 month reserves for 1-2 unit properties and 3 months reserves for 3-4 units.

5 Factors for Approving Higher Debt-to-Income Ratios – FHA

Some examples of compensating factors for FHA loans, but not limited to:

  1. Borrowers with 580 FICO credit score or below may not exceed ratios of 31/43, unless energy efficient can stretch to 33/45.
  2. Reserves – 3 months reserves for 1-2 units and 6 months for 3-4 units.
  3. No payment shock – mortgage payment is not more than $100 or 5% higher than the previous housing payment.
  4. Residual income.
  5. Additional income that is not considered effective income.

Manual Underwritten FHA Loans and Debt-to-Income Ratios

  • Non-traditional credit and below 580 FICO max debt-to-income is 31/43 or 33/45 for energy efficient purchases.
  • No compensating factors and 580 FICO plus max debt-to-income is 31/43.
  • One compensating factor and 580 FICO plus max debt-to-income is 37/47.
  • Two compensating factors and 580 FICO plus max debt-to-income is 40/50.
  • No discretionary debt and 580 FICO plus max debt-to-income is 40/40.

With compensating factors FHA, a borrower can go up to 50% debt-to-income ratio. FHA refer-eligible findings by AUS can be triggered due to non-traditional credit or other reasons.

Manual Underwriting Process

There is not a big difference when it comes to the process of underwriting a manual underwrite. In most cases, manual underwriting for FHA loans will require more documentation and underwriter typically will have more remarks versus automated approvals. Depending on the lender, they may have an internal guideline that will not allow manual underwrites or require a specific credit score.

The best way to find out if you qualify or are in need of a manual underwrite, is to go through the pre-approval process.

ShareTweetShare
Previous Post

Condotel Financing & Non-Warrantable Condo Loan | Wholesale Lending

Next Post

FHA Charge Off Guidelines and Collection Accounts

Nicholas Auriemma, NMLS# 1455001

Nicholas Auriemma, NMLS# 1455001

Nicholas Auriemma is a Loan Originator at Nationwide Mortgage & Realty, LLC, providing information on mortgages that can often be confusing even to real estate and mortgage professionals. Borrowers can be discouraged because mortgage professionals can be mistaken due to guidelines always changing, the extent of guidelines, their company having an overlay (stricter guideline), or other lenders not offering a loan program. Call or text Nick anytime at 630-779-8430 or email at nick@nationwidemtg.net.

Related Posts

3 Month Bank Statement Mortgage for Self-Employed Borrowers

3 Month Bank Statement Mortgage for Self-Employed Borrowers

March 22, 2022
Is there Still a No Doc Mortgage in 2022

Is there Still a No Doc Mortgage in 2022?

March 17, 2022

Categories

Get Pre-Approved

Start by applying to get pre-approved today.

Recent Posts

No Income Investment DSCR Cash Out Refinance

15 to 30 Year VA Cash Out Loan Up To 100% LTV

Cash Out Condotel Refinance Loan, Rate & Term, & Purchase

3 Month Bank Statement Mortgage for Self-Employed Borrowers

Is there Still a No Doc Mortgage in 2022?

Low Down Payment Jumbo Loans with No Mortgage Insurance

Request Information | Apply Now

Corporate Address:
1 TransAm Plaza Drive Suite 300
Oakbrook Terrace, IL 60181
Phone: (844) 953-0100
Fax: (630) 953-0101
Email: Info@nationwidemtg.net

Copyright 2021 © Nationwide Mortgage & Realty, LLC
Company NMLS Unique Identifier #276777.
For licensing information, go to:
www.nmlsconsumeraccess.org.
Privacy Policy | Terms of Use

Equal Housing Lender

Restrictions may apply. All loans are subject to credit, underwriting and property approval guidelines. Nationwide Mortgage & Realty, LLC is not acting on behalf of or at the direction of HUD/FHA or any government agency. CO: Check license status of your mortgage loan originator at www.dora.state.co.us/real-estate/index.htm. Also licensed in: CA, FL, IN, TN, VA, WI and TX: NMLS ID 276777. Illinois Residential Mortgage License | MB. 6760210. WA: Consumer Loan License MB-276777. GA: Georgia Residential Mortgage Licensee 60857

  • Home
  • Request Information
    • Apply Now
  • About Us
    • Career Opportunities
    • Contact Us
    • Meet the Team
  • Purchase
    • Conventional Loan
    • Condotel & Non-Warrantable
    • FHA Loan
    • FHA 203k
    • Fix & Flip
    • Investment
    • Jumbo & High Balance
    • New Construction
    • Non-QM Loans
    • USDA Loan
    • VA Purchase Loan
  • Refinance
    • Cash Out & Debt Consolidation
    • Conventional Refinance
    • Condotel & Non-Warrantable
    • FHA 203k
    • FHA Streamline Refinance
    • Investment
    • Non-QM Loans
    • Reverse Mortgage
    • VA IRRRL
  • Loan Process
    • Application Checklist
    • Credit Report
    • Home Buying Do’s and Don’ts
    • Interest Rates
    • Mortgage Calculator
  • Mortgage Blogs
No Result
View All Result

Request Information | Apply Now
Phone
: (844) 953-0100
Email:
info@nationwidemtg.net
Nationwide Mortgage & Realty, LLC
​1 TransAm Plaza Drive Suite 300
​Oakbrook Terrace, IL 60181
NMLS # 276777
Privacy Policy

Call Now Button