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Lender Alerts

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New Single Family Housing Policy Handbook and Updated Underwriting Guidelines for FHA Loans

Dear Licensed Partner,

The U.S. Department of Housing and Urban Development (HUD) has issued a new Single Family Housing Policy Handbook (4000.1). The new Handbook, which will go into effect on September 14, 2015, will consolidate existing FHA lending requirements and is designed to serve as a comprehensive source of single-family housing policy.

In addition to amending existing FHA policies, the new Handbook will also supersede a list of existing guides, Mortgagee Letters, and Housing Notices. For more information, please visit HUD’s Handbook page.

In preparation for the new Handbook, Sun West is updating its underwriting guidelines for FHA loans and will be rolling out periodic updates pertaining to the new Handbook.

Effective for FHA loans submitted to Sun West on or after August 17, 2015, the updated guidelines below will be implemented.

A) Self-employment income

  • Self-employed income may be used if the borrower has been self-employed for at least two years
  • If the borrower has been self-employed between one and two years, self-employed income may only be considered effective income* if the borrower was previously employed in the same line of work in which the borrower was self-employed or in a related occupation for at least two years

manual downgrade from FHA’s TOTAL Scorecard will be required if income from businesses declined more than 20% in effective income over a two year period. 

*In FHA Handbook 4000.1, Effective Income refers to income that may be used to qualify a Borrower for a Mortgage.

B) Income stability

  • If the borrower has changed jobs more than three times in the past 12-months or has changed lines of work, additional documentation below will be required to verify the stability of the borrower’s employment income
    • Transcripts of training and education demonstrating qualification for a new position; or
    • Employment documentation showing continual increases in income and/or benefits 

C) Evaluating credit history for manually underwritten loans

  • Acceptable payment history may be established if the borrower has made all housing and installment debt payments on time for the past 12 months and has no more than two 30-day late mortgage or installment payments in the past 24 months
  • The loan may be approved if the borrower has established acceptable payment history and has no major derogatory credit on revolving accounts in the past 12 months
  • Major derogatory credit on revolving accounts include any payments made more than 90 days after the due date, or three or more payments more than 60 days after the due date

If you have any questions, please contact your Client Relations Manager at (855) OK-SUNWEST  or (855) 657-8693.


Sun West Mortgage Company, Inc.
18000 Studebaker Road, Suite 200
Cerritos, CA 90703
Phone: (800) 453-7884
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Equal Housing Opportunity This information is provided to licensed brokers/lenders only and may not be copied or distributed to customers or potential customers. All loans are subject to approval. Certain restrictions may apply. Listed pricing is a morning indication only. Program rates, prices, guidelines, fees, costs, terms and conditions are subject to change without notice.