Update to 2009 FHA Refinance Guidelines


Update to 2009 FHA Refinance Guidelines




Mortgagee Letter 08-40 communicates changes to FHA refinance transactions and are effective January 1st, 2009. Although this update includes guidelines that have not changed, I have listed the unchanged ones anyway as a review for those of you already familiar with FHA guides.
Here are the 10 things you need to know about these changes:
1.  The maximum Loan To Value for rate & term refinances (including streamlines WITH an appraisal) is 97.75%*
2. The maximum Loan To Value for cash-out refinances is 95%* for loan amounts less than the conforming limit and 85%* for loan amounts at or above the conforming limit. (Must have 12 months seasoning and no 30 day late payments)
3. Two appraisals will be required for all cash-out refinances with an LTV above 85%.
4. The mortgage must be current for the month due.
5. New or current 2nd mortgages are eligible with no maximum CLTV.
6. Loan amount for streamline refinances WITHOUT an appraisal cannot exceed the original loan amount.
7. UFMIP rates: 1.75% for all rate & term and cash-out refinances AND 1.5% for all streamline refinances.
8. The FHA Secure refinance will be terminated.
9. Refi loan amount CAN include: Closing costs, discount points, current interest, prepayment penalties, prepaids, late charges, and escrow shortages.
10. Cash back on rate & term and streamline refinances CANNOT exceed $500.
*All LTVs are before adding the UFMIP


Virginia State Mortgage VHDA Increases To 50% DTI Change 2009

VHDA Changes


VHDA Changes to Maximum Qualifying Ratios

New Changes to the Maximum Debt to Income Ratio 50.00% for all VHDA Loans which was upped from 43%.  This will allow more people to qualify with limited income.  This is great news! Below are the official changes taking place Feb 2009.

All VHDA loans (including FHA, VA, RHS, PMI or uninsured loans) will be limited to a maximum of 50.00% debt to income ratio when using an automated underwriting Approve/Eligible Decision.

Stated program ratio guidelines will apply for manually approved loans. This new restriction is effective for loan reservations made beginning February 1, 2009.

FHA Plus: (103% Financing)

VHDA will continue to accept FHA Total Scorecard approvals for FHA Plus with the following limitations:

Loans may exceed FHA’s standard ratio requirements of 31% payment to income and 43% debt to income (to a maximum of 50% debt to ratio) only if the applicable credit score is 620 or above.

Credit scores below 620 and non traditional credit must adhere to the maximum 31%/43% FHA program ratios. 

This new requirements are effective with loan reservations made beginning February 1, 2009. 

Reminder: FHA Changes Effective Jan 1st 2009 Highlights

FHA Changes Highlights 2009

Reminder: FHA Changes Effective Jan 1st 2009 Highlights


  • Maximum LTV Financing: The required cash down payment will be 3.5% of the appraised value or the sales price (whichever is less). Closing costs may not be used to meet the minimum 3.5% cash down payment requirement.
  • Maximum base mortgage amount: For purchase loans, the maximum base mortgage loan amount will be 96.5% of the appraised value or the sales price (whichever is less). (Upfront Mortgage Insurance Premiums (UFMIP) may still be financed in the loan)
  • Maximum refinance LTV amount*: the maximum refinance LTV will be 97.75% of the appraised value. This LTV will replace the High-Cost/Low-Cost Factors in the maximum loan calculations. 

Note: although a Mortgagee Letter has not been published as of the deadline for this article, the FHA previously indicated that 97.75% LTV will be published and effective on Jan 1, 2009. Any other changes announced in the Mortgagee Letter will be analyzed and communicated as soon as possible.

Note:At this time, the revised LTV does not impact: 203(h) for disaster victims & HUD 184 for Native American loans

Virginia Fannie Mae and Freddie Mac Loan Limits for 2009


Virginia Fannie Mae and Freddie Mac 2009


Other Loan Limits vary by different counties. 


Below are the major limits for the State of Virginia.

Alexandria $625,500

Williamsburg – $458,850

Richmond – $535,900

Hampton – $458,850

Newport News – $458,850

Portsmouth – $458,850

Suffolk – $458,850

Chesapeake – $458,850

Norfolk – $458,850

Virginia Beach – $458,850


Bottom line is that if you have a higher loan amount than these loan limits then its kicked over to classification “Jumbo or Non-Conforming” status which is usually more stricter mortgage guidelines and higher rates normally.

FHA Co-Signers & Co-Borrowers Continued 411 Mortgage Loan

FHA Co-Signer / Co-Borrwer Family

FHA Co-Signer / Co-Borrower Family

FHA Co-Signers & Co-Borrowers Continued 411

This post is a continuation post from FHA First Time Home Buyer Cosigner Kiddie Condo Loan

Most people refer to this loan as the Kiddie Condo Loan because the main concept was to help your children with buying a first house or help out with the housing while your children are gone for college.

Well interestingly enough this guideline also serves another purpose.

Co-Signer / Co-Borrower to help with Income and Debt-To-Income Ratios

I had a client that was having trouble getting FHA approved for his new home purchase.  He tried 3 different ways and the 3rd time he finally got approved and here’s how.

1st Time – My client Mr. Livingston was applying for a standard FHA loan, all seemed pretty normal until his Federal Student Loans came up in the Debt-to-income guideline.  Mr. Livingston had about 10 outstanding Federal Student Loans.  Now normally the student loans will not be counted towards the client’s ratios if the Student Loans were “Deferred Payments”.

When I questioned Mr. Livingston if the Student Loans were deferred, he told me they were but there was 1 problem.  The deferrment period was every 6 months instead of every 12 months.  Within guidelines we had to count the Student Loans as debt and therefore made Mr. Livingston’s Debt-To-Income too high.

FHA Father Son

FHA Father Son

2nd Time (The Family Co-Signer / Co-Borrower) – This time we utilized the Non-Occupying Co-Borrower / Co- Signer of Mr. Livingston’s Father.  Per FHA guidelines we don’t have to have the Parent’s to move in this house as the primary residence, they could just help by co-signing for income purposes.

Normally this would work out great!  Unfortunately for Mr. Livingston’s situation, his Father actually brought on more debt that didn’t help much on the ratios, even though we were adding more income we still have to include the Father’s debt too.

3rd Time (The Long-Time Friend) – This is very powerful not only is the Co-Signer and Co-Borrower only limited to Family Members, per FHA guidelines you can add Friends too!  Mr. Livingston had a life-long friend who agreed to co-sign and help out Mr. Livingston (what a great friend) this time around it worked, the ratios were good and debts were good.

Now the Friend does have the Debt included in his credit report now as a Real Estate Mortgage he owes on.  So now if he wants to buy a house, he has to keep in mind to get removed from this loan by Refinancing Out from the loan.

VA Mortgage Cash Out Refinance 100% 411


VA Mortgage Cash Out Refinance 100%

VA Mortgage Cash Out Refinance 100%

VA Mortgage Cash Out Refinance 100%

Veterans’ Benefits Improvement Act of 2008 Changes recently signed by President Bush on 10/10/2008 implement 4 major changes below.

The official Bill Circular is found  HERE

1.)  Mortgage Loans allow Cash Out Refinances to 100% changed from 90%.

2.)  The VA ARMs (Adjustable Rate Mortgages) are good through 2012

3.)  The Temporary Extended Loan Limit Amounts are extended through Dec 31st 2011

4.)  Guaranty of refinances from $36,000 to the same guaranty for purchase deals.

FHA Sweat Equity – Alternative to FHA Down Payment Assistance 411

FHA Sweat Equity

FHA Sweat Equity

Labor performed or materials furnished by borrower before closing may be considered as the equivalent of a cash investment.
Believe it or not FHA Sweat Equity Program has been around forever.  The idea behind Sweat Equity is a way to have the Seller Credit for Purchaser’s Down Payment through Labor or Materials being put forth into the house.
Sweat equity may be gifted subject to both gift requirements and additional requirements. 
  • Existing construction – only the repairs or improvements listed on the appraisal are eligible for sweat equity. Any work completed or materials provided prior to the appraisal are not eligible.
  • Proposed construction – the sales contract must indicate the tasks to be performed by the borrower during construction.
  • Borrower’s labor may be considered as the equivalent of cash if the borrower can demonstrate his/her ability to complete the work in a satisfactory manner.
  • Lender must document the value of the labor through either the appraiser’s estimate or through a cost estimating service. 
  • Delayed work (on-site escrow), clean up, debris removal, and other general maintenance cannot be included as sweat equity.
  • There can be no cash back to the borrower in sweat equity transactions.
  • Sweat equity on a property other than the subject property being purchase is not acceptable. Compensation for work performed on other properties must be in cash and properly documented.
  • Sweat equity credit cannot exceed the estimated cost of the work or the materials.
  • Verification of source of funds used to purchase materials and market value of materials must be provided on any materials furnished by borrower.
  • Paid receipts for the materials should be obtained. 
  1. Buyers to get with the Contractors after an appraisal is done to lend “LABOR” to compensate for “Credit” towards down-payment.
  2. Buyers to paint the house or do some side jobs to help earn “Credit” for the “Labor”
  3. The Sellers will pay for the credit and can raise the sales price in order to compensate for the credit.