How to Get Started

1. Please review the information at http://www.hud.gov/offices/hsg/sfh/lender/lendappr.cfm on how to become a HUD-approved lender. A Nonsupervised Loan Correspondent is the only type of approval mortgage brokers can apply for and allows them to originate Title II single family loans and/or Title I loans. Correspondent lenders and mortgage lenders who only want to originate should apply for this type of approval. The process generally takes about 6 weeks and is well worth it.
2. The requirements for each type of FHA lender approval are at: HUD FHA Lender Approval Requirements list

If your company is an approved Broker Correspondent with HUD (aka a ¿mini-eagle¿ approval), or has a full approval with HUD (aka a "full eagle" approval, acceptable in certain circumstances), you can easily become approved to close your FHA loans thru CMG. Simply complete the attached forms, return them to CMG, and in no time at all you¿ll be closing your FHA loans with us!

1. FHA Addendum to Mortgage Broker Agreement
2. Additional HUD Sponsorship Request

Submitting FHA Loans to CMG

CMG's HUD ID number: 78442-0000-0

• United States Map - FHA Approved
• Instructions - How to Submit
• Submission Requirement
• FHA Guidelines
• Appraisal Checklist

Appraisals & Properties

18) What kinds of properties will FHA insure a loan on?

FHA loans can be written on SFR's 1-4 units owner-occupied. FHA will allow loans on Agricultural-zoned properties as well as residentially-zoned properties. FHA will not allow insurance to be placed on loans for commercially zoned properties within the 203b loan program.

19) Can I use my own appraiser on FHA loans?

You may use your own appraiser provided that appraiser has been listed and certified by HUD and has a current CHUMS ID#, and has not been prohibited from providing appraisal services by HUD. There is a list of persons prohibited from doing business with HUD, available from HUD if you are a certified broker.

20) Does CMG fund rehab loans or loans on mobile homes using FHA financing?

No. CMG is currently not funding Mobile Home loans, or rehab (403K) loans.

21) How does an FHA appraisal differ from any other appraisal I'm used to seeing?

Typically, a FNMA appraisal is done on a 1004 form, whereas a FHA appraisal is done on a current HUD approved form. Other than that, the appraisal will cover inspection stipulations, such as specific condition-of-property questions usually not raised on a FNMA appraisal. The property must be inspected by a HUD approved appraiser with his own CHUMS ID#.

22) Why do I have to have 2 appraisals on my FHA loan?

Loans not meeting loan limit guidelines, (exceeding 392,500 in some areas) or those considered under the new Jumbo guidelines for HUD, may require a second appraisal to fairly determine the market value. The appraisals may be done by two separate appraisal companies, not involving a review appraisal specifically.

23) Does the appraiser need to inspect the roof and electricals on the subject property?

Typically the HUD appraisal will request a condition report on specific items on a property, one of which is the roof, and a condition of utilities by the appraiser.

24) Does HUD cut the appraisals like other lenders? What about declining areas?

Declining areas are not necessarily considered, however blighted or prohibited areas, such as airport pathways, commercial areas, etc., or areas where functional obsolescence are considered prevalent, may be prohibited, and will be reviewed when performing a HUD appraisal. Automatic soft-market cuts may be imposed by participating lenders, but are not directed to do so by HUD.

25) Can the appraiser sign off on repairs and conditions such as a 442?

HUD certified appraisers may sign off on certain conditions, such as workmanship-like manner of items, but may not take the place of a talented and experienced home inspector, or city building code inspector. An appraisal is not a home inspection. HUD certified inspectors will be called in from time to time to inspect certain repairs, etc.

26) How do I get my appraiser up to speed on FHA?

Your appraiser must already be certified by HUD, and must obtain the proper licensing and training required to perform HUD appraisals. Usually only committed individuals get the training as it is very involved and costly.

27) Why does the FHA appraisal cost more than a regular conventional FNMA appraisal?

Typically they may cost more because of the involved training and continuing education and certification requirements required of a HUD approved appraiser. There are also many more steps required to perform a HUD appraisal versus your typical FNMA appraisal.

Borrowers and Credit

28) What is the minimum FICO score for a borrower on an FHA loan?

The minimum credit score is an overlay for CMG and is 620 on normal limit FHA loans. The minimum credit score for jumbo limit FHA is 620 without exception.

29) How many years must a borrower have after a BK on FHA loans?

The rule of thumb is 2 years with a really good explanation (medical BK for instance). Abuse of credit will be determined if more than 1 BK is detected and the loan may be declined. B.K.s with subsequent late payments or judgments or other defaults, may be declined as well.

30) What is the look-back period on mortgage lates?

Generally speaking, 12 months on streamlined refinances, and 24 months on regular purchase or refinance loans. However if going back further reveals multiple mortgage lates, the loan may be declined as the borrower having unsuitable credit risks.

31) What kind of credit is FHA looking for?

HUD is looking to insure loans where the borrower has demonstrated creditworthiness, but may be unable to meet stricter private guidelines. Clean credit for at least 24 months may be required.

32) What is non-traditional credit?

In some cases, where a borrower hasn't utilized traditional credit resources such as unsecured credit lines, etc, he may demonstrate creditworthiness by having a credit agency rate and report certain traditionally non-reported credit history on Cell-phones, furniture contracts, private automotive contracts, or any credit items which would demonstrate a credit pattern over a 24 month period.

33) How many months of reserves does FHA require?

FHA requires 2 months reserves typically, however additional reserves are noted in â¿¿compensating factorsâ¿¿ when a borrower exceeds a specific guideline or otherwise might not qualify.

34) How many credit references does my borrower need for an FHA loan?

The borrower must have a minimum of 3 credit references in addition to the rental rating for a minimum of 24 months. See non-traditional credit.

35) Does FHA do limited or stated documentation loans?

No. Period.

36) Does FHA allow multiple borrowers to buy a home?

Yes. HUD insurance will allow multiple buyers on a property but all buyers must occupy the home, unless a non-occupant co-buyer is present. All parties must meet a minimum DTI to qualify.

37) What is the maximum Debt-to-Income ratio on an FHA loan?

The maximum DTI on an FHA loan is 40%. Some compensating factors (3) may allow the maximum DTI to exceed 40% subject to other factors of the loan being less than the maximums set by the 203b program.

38) Why did my borrower get referred by CAIVRS and how do I get it cleared to get him/her an FHA loan? Is there a waiver I can obtain?

CAIVRS will alert the lender that the borrower does not qualify for an FHA loan for various reasons including the following:

a. Inclusion in the persons prohibited from doing business with HUD list,

b. Student loans outstanding and not kept current

c. Federal Tax liens not listed on the credit report or county rolls,

d. Previous federal obligations such as child support, debts to Armed forces entities, etc.

e. Previous FHA foreclosure either not having aged enough, or having still owed monies on a deficiency from an FHA or HUD-related foreclosure.

Clearing any items will be necessary before the borrower can be considered for a loan insured by HUD. HUD may issue a waiver on certain items subject to sufficient evidence that the obligation is not connected to the borrower, but this is time-consuming and not always successful. Student loans must be cleared by either paying them off, or bringing them current, Tax liens must be released and recorded as such, and other obligations must be dealt with to the satisfaction of the issuing entities.

39) What is â¿¿mattress moneyâ¿¿ and how does that affect my FHA borrower's loan?

Each transaction must take into account the seasoning and tracking of funds both for reserves and for cash investment requirements. A borrower who doesn't use traditional banking vehicles for savings, may obtain approval under a HUD insured program by demonstrating effectively the ability to save the down-payment, and closing costs out of their checks by filling out a form and schedule examining debt to income ratios and remaining or disposable cash. Traditional or conventional loan programs don't typically allow this. FHA does. The loan must be manually underwritten in this case, as LP won't show seasoning of funds or sources, but requires a DE underwriter to examine and sign this off.

40) What if the seller wants to carry a 100% 2nd on his property in an FHA purchase? Can I carry a 2nd to cover closing costs?

HUD typically will not insure a transaction where the borrower does not have the sufficient cash investment of at least 3%. Variances to this rule only include down-payment assistance programs such as city, county or certified DPA programs such as Neimiah. Loan to values may never exceed 100% except in very few instances of State-sponsored DPA's.

A broker who records or carries a second TD to cover his closing costs may be criminally prosecuted under fraud statutes, and will certainly lose certification as a correspondent, as this action is expressly prohibited.

41) Does my borrower have to be a citizen to obtain FHA financing?

No. HUD programs are only precluded from persons who do not have the right of residency under the Immigration law. Legal residents are a great source of borrowers for FHA.