Collateral is referred to the value of your home. A licensed FHA appraiser must appraiser the property and the appraisal must be no older than 90 days from the date of closing. The value that the appraiser asses’ to your property will determine the loan amount and the loan to value of your new loan. A second appraisal is required on any loan amount over 417k, at 95%, and is in a declining market (all of the United States is presently in a declining market). On a 1 family home a drive by is required on any other property type a full appraisal is required as second appraisal.
Compensating factors are best described as that little extra that can make a difference between an FHA first time home buyer loan, FHA purchase loan, FHA refinance loan or FHA loan or FHA loans being approved or denied. They are no absolutes and may be interpreted differently by different underwrites and how much they may weight them in their overall decision making process.
How many compensating factors you need is also subject to an underwriter’s discretion. Obviously the more you have the better you chances are on getting approved if you loan is one that is a close call.
More guidelines to read
- FHA Programs
- Credit History
- Capacity to Repay
- Salaries, Wages and Other Forms of Effective Income
- Cash to close