FHA allows Manuel underwriting although I would always send my loan through DU/LP first (we'll talk about that later). If you do get a Refer you can still do a Manuel underwrite. Remember when having a Manuel uw you must be within FHA ratio guidelines which are 31/43 (new construction meeting CABO requirements can go to 33/45). Compensating factors can help support a higher Ratio. You must be able to provide documentation for the compensating factors.
Here is a list of items the could be considered compensating factors.
- Less than a 10% increase from old rent/housing payment to the new housing expense
- A borrower’s excellent savings ability (as shown by savings accounts, IRA’s etc)
- 3 or more months cash reserves (house payments after closing) that are not part of a gift
- Limited use of credit, conservative attitude towards the use of credit
- Borrower has potential for increased earnings (career ladder)
- Borrower has income that cannot be used as qualifying income
- Larger than minimum down payment
- Debt Ratios significantly under maximums
- Strong credit or credit scores
- Time on the job, the longer the better
- Time at current residence, the longer the better
- Down payment has been saved by borrower verses getting a gift
- Large Down Payment
- No recent (last 12 months) derogatory accounts or prior derogatory accounts were caused by extenuating circumstances.
- Energy efficient dwelling