FHA Credit Guide LInes - Debt and Obligation - Part VI

DEROGATORY CREDIT CAN’T STOP YOU! COLLECTIONS, CHARGE OFFS, JUDGEMENTS, TAX LIENS AND LATE PAYMENTS CANNOT STOP YOU FROM BUYING NOW

10 PART SERIES

Debt & Obligations

PART VI

Eric Lawrence Frazier, MBA President|CEO|Broker CaLDRE 01143484 | NMLS 461807 800-401-8994 ext. 703 The Power Is Now Inc. CAldRE 1980407 | NMLS 1435243

INTRODUCTION ERIC LAWRENCE FRAZIER, MBA President | CEO | Broker CALDRE 01143484 | NMLS 461807 THE POWER IS NOW INC. CALDRE 1980407 | NMLS 1435243 MEDIA COMPANY ESTABLISHED 2009 Radio | TV | Magazine | Events | Mortgage Services | Real Estate Services ADDRESS: 3739 6th Street Riverside, CA 800-401-8994 ext. 703 eric.frazier@thepowerisnow.com 4

PRESENTATION DISCLAIMER The Power Is Now Mortgage Services is a Mortgage Brokerage licensed by the State of California Bureau of Real Estate (license #1980407) and the National Mortgage License System and Registry (license #1435243), and is a division of The Power Is Now Inc. (license # 01980407).

The Power Is Now Inc. is not affiliated with any state or federal agency. The Power Is Now Real Estate Services is also licensed by the State of California Bureau of Real Estate (licensed #01980407), and is a division of The Power Is Now Inc. The Power Is Now Inc., is an Equal Housing Lender.

Our corporate office is located at 3739 6th Street Riverside, CA 92501. Our Telephone and Fax number is 800-4018994. Eric Lawrence Frazier MBA, is a California licensed Loan Originator (NMLS license # 461807), and a licensed Real Estate Broker (CA Bureau of Real Estate license #01143484).

Restrictions may apply to all loan programs. The Information and/or data is subject to change without notice. All loans are subject to credit approval. The information is not a commitment to lend or extend credit. Not all loans or products are available in all states. The Power Is Now Mortgage Services and Real Estate Services are A Division of The Power Is Now Inc., and are only licensed to conduct business in the State of California.

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YOUR RESOURCE FOR REAL ESTATE WE ARE PROUD SPONSORS OF THE OC REALTIST CHAPTER OF NAREB

THE POWER LUNCH

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MISSION The mission of the Power of Now Inc., is to inspire, educate, and empower real estate professionals, and consumers to build wealth through real estate with information, services and support that will give them the power to act now for their future.

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VISSION The mission of the Power of Now Inc., is to inspire, educate, and empower real estate professionals, and consumers to build wealth through real estate with information, services and support that will give them the power to act now for their future.

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OUR COMPANY MANTRA

WE ARE AT OUR BEST AND WE MAXIMIZE OUR SUCCESS WHEN WE ACT NOW. OUR POWER IS NOW! 18

OUR COMPANY SLOGAN

WE MAKE HOMEOWNERSHIP DREAMS A REALITY

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INTRODUCTION As a Mortgage Brokerage, The Power Is Now Mortgage Services has access to many lenders that offer programs for first time homebuyers, move up buyers, investors, churches, non-profits and foreign nationals. We are a full service mortgage brokerage.

www.applytobuynow.com www.neverleaseagain.com

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DEROGATORY CREDIT CAN’T STOP YOU! COLLECTIONS, CHARGE OFFS, JUDGEMENTS, TAX LIENS AND LATE PAYMENTS CANNOT STOP YOU FROM BUYING NOW

10 PART SERIES

10 PART CREDIT SERIES

Collection Accounts

Judgements Tax Liens

Bankruptcy 7 and 13

Foreclosure and Short Sales

Credit Counseling Mortgage Credit

Debt and obligations

Divorce and Separation

Student Loan Debt.

Strategies to improved your credit scores.

Strategies to Save Money to Prevent Credit Issues

Debt and Obligations

PART VI

DEBT AND OBLIGATION •Closed End Debt • Authorized Users •Loan Secured Against Deposited Funds •Paying Off Debts Prior to Closing •Alimony, Child Support, and Maintenance • 30 Day Accounts •Contingent Liability •Obligations Not Considered Debt •Business Debt in Borrower’s Name

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Closed End, Authorized User , Paying Off Debt

CLOSED END, AUTHORIZED USER, PAYING OFF DEBT CLOSED END DEBT •Closed-end debts do not have to be included if they will be paid off within 10 months and the cumulative payments of all such debts are less than or equal to 5 percent of the Borrower’s gross monthly income.

The Borrower may not pay down the balance in order to meet the 10month requirement.

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CLOSED END, AUTHORIZED USER, PAYING OFF DEBT AUTHORIZED USER

•Accounts for which the Borrower is an authorized user must be included in a Borrower’s DTI ratio unless the Lender can document that the primary account holder has made all required payments on the account for the previous 12 months. If less than three payments have been required on the account in the previous 12 months, the payment amount must be included in the Borrower’s DTI. 27

CLOSED END, AUTHORIZED USER, PAYING OFF DEBT LOAN SECURED AGAINST DEPOSITED FUNDS •Loans secured against deposited funds, where repayment may be obtained through extinguishing the asset and these funds are not included in calculating the Borrower’s assets, do not require consideration of repayment for qualifying purposes.

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CLOSED END, AUTHORIZED USER, PAYING OFF DEBT PAYING OFF DEBTS PRIOR TO CLOSING •The Mortgagee must document that the funds used to pay off debts prior to closing came from an acceptable source, and the Borrower did not incur new debts that were not included in the DTI ratio.

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Alimony, Child Support, and Maintenance

ALIMONY, CHILD SUPPORT, AND MAINTENANCE •For Alimony, if the Borrower’s income was not reduced by the amount of the monthly alimony obligation in the Mortgagee’s calculation of the Borrower’s gross income, the Mortgagee must include the monthly obligation in the calculation of the Borrower’s debt.

•Child Support and Maintenance are to be treated as a recurring liability and the Mortgagee must include the monthly obligation in the Borrower’s liabilities and debt.

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ALIMONY, CHILD SUPPORT, AND MAINTENANCE •The Lender must verify and document the monthly obligation by obtaining the official signed divorce decree, separation agreement, maintenance agreement, or other legal order.

•The Lender must also obtain the Borrower’s pay stubs covering no less than 28 consecutive Days to verify whether the Borrower is subject to any order of garnishment relating to the Alimony, Child Support, and Maintenance.

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30 Day Accounts

30 DAY ACCOUNTS •The Lender must verify the Borrower paid the outstanding balance in full on every 30-Day Account each month for the past 12 months.

•30-Day Accounts that are paid monthly are not included in the Borrower’s DTI.

•If the credit report reflects any late payments in the last 12 months, the Mortgagee must utilize 5 percent of the outstanding balance as the Borrower’s monthly debt to be included in the DTI.

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Contingent Liabilities

CONTINGENT LIABILITIES •A Contingent Liability refers to a liability that may result in the obligation to repay only when a specific event occurs.

•For example, a contingent liability exists when an individual can be held responsible for the repayment of a debt if another legally obligated party defaults on the payment.

•Contingent liabilities may include Cosigner liabilities and liabilities resulting from a mortgage assumption without release of liability.

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CONTINGENT LIABILITIES •Good News - Non-occupying co-Borrower

•A non-occupying co-Borrower on an existing FHA-insured Mortgage may qualify for an FHA-insured Mortgage on a new Property to be their own Principal Residence.

•Vacating a Jointly Owned Property •A Borrower may be eligible for another FHA-insured Mortgage if the Borrower is vacating (with no intent to return) the Principal Residence which will remain occupied by an existing co-Borrower.

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CONTINGENT LIABILITIES •The Lender must include monthly payments on contingent liabilities in the calculation of the Borrower’s monthly obligations unless the Mortgagee verifies and documents that there is no possibility that the debt holder will pursue debt collection against the Borrower should the other party default or the other legally obligated party has made 12 months of timely payments.

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Obligations not Considered Debt

OBLIGATIONS NOT CONSIDERED DEBT •Obligations not considered debt include: medical collections, federal, state, and local taxes, if not delinquent and no payments are required •Automatic deductions from savings, when not associated with another type of obligation •Federal Insurance Contributions Act (FICA) and other retirement contributions, such as 401(k) accounts 40

OBLIGATIONS NOT CONSIDERED DEBT •Collateralized loans secured by depository accounts,

•Utilities ,child care, commuting costs union dues, •Insurance, other than property insurance •Open accounts with zero balances

•Voluntary deductions, when not associated with another type of obligation

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Business Debt in Borrower’s Name

BUSINESS DEBT IN BORROWER’S NAME When business debt is reported on the Borrower’s personal credit report, the debt must be included in the DTI calculation Exception: •can Lender document that the debt is being paid by the Borrower’s business, •Is the debt in the cash flow analysis of the Borrower’s business.

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BUSINESS DEBT IN BORROWER’S NAME •Is the debt is considered in the cash flow analysis where the Borrower’s business tax returns reflect a business expense related to the obligation, equal to or greater than the amount of payments documented as paid out of company funds.

•Where the Borrower’s business tax returns show an interest expense related to the obligation, only the interest portion of the debt is considered in the cash flow analysis.

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Debt & Obligations

PART VI

DEROGATORY CREDIT CAN’T STOP YOU! COLLECTIONS, CHARGE OFFS, JUDGEMENTS, TAX LIENS AND LATE PAYMENTS CANNOT STOP YOU FROM BUYING NOW

10 PART SERIES