Income Documentation Changes For FHA Loans & VA Lending

FHA Loans and VA Lending Income Verification Changes

The question, in reality, is a moot one. I say this because the lending regulations for FHA and VA lending have not changed, even in light of the Dodd-Frank Act of 2010. The only small change was that in a streamline situation for VA and FHA existing loans, the income documentation is not so much of a factor.

The rationale is that if your current employment is the same as it was when you originally applied and were approved, AND your payment is going down, it is only logical that you can afford the lower payment… BUT… if you have racked up a lot of debt since you financed or last re-financed, then be prepared to show all of your income documents again.

Please note that if you have student loans that have not been paid off or there are late payments, chances are a VA or an FHA loan will NOT be approved… BUT… if you can show a legitimate reason (legitimate meaning: medical emergency, death in the family) and you can prove these things, then re-financing or financing via FHA or VA would probably be a viable alternative to conforming, conventional lending.

NIV – FHA Mortgages and VA Loans Guidelines

Income Documentation For FHA Loans & VA LoansThe guidelines for FHA mortgages and VA loans are pretty much the same and have remained so for as long as I can remember. I have been in the business since 1992 and changes to these kinds of loans are slow to be made and slow to be implemented. The major difference to VA and FHA financing is in the area of paper work.

In a VA loan situation, there are additional documents that the borrower must fill out. These documents include a DD-214. a Certificate of Eligibility from the VA and any normal documents that an FHA or FNMA/FHLMC normally require.

Negative Items Reported To FHA & VA

Please note that under CAIVRS, a report will be made to the underwriter for any defaulted student loans, unpaid IRS taxes, unpaid state taxes, unpaid child support obligations, and of course any other VA or FHA loans that have not been paid off or on time.

There are lending limits and these limits are set by county and that information can be obtained by the prospective lender and provided by the lender at time of origination. Borrowers do NOT have the ability to run CAIVRS on themselves, it MUST be run by an underwriter or has been approved by the government to:

  1. Run CAIVRS through a mortgage underwriting systems like Point, DocMagic, or Contour
  2. The Underwriter must have full eagle approval to manually underwrite governmental loans.

No FHA & VA Guideline Changes Expected

These regulations are strictly adhered to and are subject to audit under federal regulations and via a provision within the Patriot Act.

No Income Documentation Changes For FHA Loans & VA Lending. A direct result of what happened on 9/11 and with the mortgage market collapse, I would not expect these regulations to change at 2012 and a prudent business person would be sure to follow through on these regulations on every loan in his pipeline.

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