FHA follows suit on tightening underwriting guidelines
A few weeks ago I blogged about tighter underwriting guidelines pertaining to conventional loans for home-buyers who are seeking to close on a new home prior to selling their existing home.
Today we got notification from HUD indicating that FHA loans would also adopt similar guidelines (click this link to view the announcement for yourself).
Essentially, the new guidelines make it harder for home-buyers who have yet to sell their existing home to take out a new mortgage to buy a new home.
What does this mean for home-buyers?
It means that home-buyers who want to buy a new home without selling their existing home either must show enough income to reasonably afford both mortgage payments or plan on selling their existing home before or concurrently with their existing home.
Are there any exceptions?
Yes, if a home-buyer is being relocated for their job and can provide a legitimate rental contract they may use rental income to offset the mortgage payment on the existing home.
Or, if the home that is being vacated has a loan that is no more than 75% of the value of that home then the home-buyer may also use a legitimate source of rental income.