FHA 203k

[tcovington]

Also, I appreciate all your assistance and responses to my dumb questions. 

[ShanetheMortgageMan]

---

@tcovington wrote:

I don't quite understand manual underwriting. Wouldn't it be better to be manually underwritten?

cool beans. I'm just it paying it down. Might put Hulu or something on it to keep it open  and used. Read that's the best way to do it. 

---

Manual underwriting is for people who can't get approved via automated underwriting - it's a backup option.  Overall it's tougher on credit than automated underwriting is, doesn't allow for as high of debt-to-income ratios, and you are required to have a certain amount of reserves (although most people just need 1 month of the proposed PITI payment in reserves, but it can be as high as 3 months worth).  The underwriter also exercises a lot more judgment over credit history & the reasons for delinquencies.  Generally you want to avoid having your loan manually underwritten, but many people still are able to qualify that way.

[tcovington]

PITI is the principal and interest payment correct? And as long as I have it or the 3 months or whatever they ask for when I close I'm ok? 
Another question, if you don't mind. Can you use potential rental income as income? I asked my loan officer and she just said it depends/maybe. 

[ShanetheMortgageMan]

PITI = principal, interest, taxes & insurance (+ HOA dues, if any) payment.  

The reserve requirements for manual underwriting vary depending on your DTI.  The least amount required is 1 month, but for higher debt ratios 3 months can be needed.

Rental income from subject property can be used if it's 2-4 units.  75% of the lower of leases with current tenants or the appraiser's estimated of fair market rent is used.  It's added to your monthly qualifying income.

[tcovington]

You are an amazing fountain of information and I truly thank you for your time, patience, and advice. I have one more question about the rental thing. Is it a unit property if the owner occupies one? It's a single family, but I'm finishing the basement into a 1-bedroom apartment. But it technically won't be classified with the county as an apartment because I'm not going for the special exception to have a stove and will instead have a cooktop, convection oven, and microwave. Not sure if all of that matters to a lender though. But again, thank you!

[ShanetheMortgageMan]

You're welcome.  Rent from a 1-unit property that you are occupying is called "boarder income".  To use it to qualify, you'd need a 2-year history of reporting that type of income on your tax return along with the current lease with the tenant you're boarding.

[tcovington]

Interesting. So I can't use it, but if I do it anyway, then if rates go down in two years I could when I refinance? Cool beans. You've been amazing! I truly appreciate the information and feedback. Have a great day. 

[ShanetheMortgageMan]

---

@tcovington wrote:

Interesting. So I can't use it, but if I do it anyway, then if rates go down in two years I could when I refinance? Cool beans. You've been amazing! I truly appreciate the information and feedback. Have a great day. 

---

You're welcome and correct, it's possible you can use it on a future refinance.