source:
  type: guide
  id: hud-4000-1-ii-a-credit-requirements-manual
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — a. Credit
    Requirements (Manual) (04/10/2025)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part II — a. Credit
    Requirements (Manual) (04/10/2025).
  coverage_tier: operative
obligations:
- id: hud-4000-1-ii-a-credit-requirements-manual-full
  canonical_id: hud-4000-1-ii-a-credit-requirements-manual-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part II — a. Credit Requirements
    (Manual) (04/10/2025)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — a. Credit
      Requirements (Manual) (04/10/2025)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'a. Credit Requirements (Manual) (04/10/2025) i. General Credit
      Requirements (Manual) FHA’s general credit policy requires Mortgagees to analyze
      the Borrower’s credit history, liabilities, and debts to determine creditworthiness.
      The Mortgagee must either obtain a Tri-Merged Credit Report (TRMCR) or a Residential
      Mortgage Credit Report (RMCR) from an independent consumer reporting agency.
      The Mortgagee must utilize the same credit report and credit scores sent to
      TOTAL. The Mortgagee must obtain a credit report for each Borrower who will
      be obligated on the mortgage Note. The Mortgagee may obtain a joint report for
      individuals with joint accounts. The Mortgagee must obtain a credit report for
      a non-borrowing spouse if the Borrower resides in a community property state,
      or if the subject Property is located in a community property state, except
      when excluded by state law. The credit report must indicate the non-borrowing
      spouse’s SSN, where an SSN exists, was matched with the SSA, or the Mortgagee
      must either provide separate documentation indicating that the SSN was matched
      with the SSA or provide a statement that the non-borrowing spouse does not have
      an SSN. Where an SSN does not exist for a non-borrowing spouse, the credit report
      must contain, at a minimum, the non-borrowing spouse’s full name, date of birth,
      and previous addresses for the last two years. The Mortgagee is not required
      to obtain a credit report for non-credit qualifying Streamline Refinance transactions.
      ii. Types of Credit History (Manual) If a traditional credit report is available,
      the Mortgagee must use a traditional credit report. However, if a traditional
      credit report is not available, the Mortgagee must develop the Borrower’s credit
      history using the requirements for Non-traditional and Insufficient Credit (Manual).
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing
      Programs Forward Mortgages 5. Manual Underwriting of the Borrower Handbook 4000.1
      280 Last Revised: 11/26/2025 (A) Traditional Credit (Manual) If the TRMCR or
      RMCR generates a credit score, the Mortgagee must utilize traditional credit
      history. (1) Requirements for the Credit Report Credit reports must obtain all
      information from at least two credit repositories pertaining to credit, residence
      history, and public records information; be in an easy to read and understandable
      format; and not require code translations. The credit report may not contain
      whiteouts, erasures, or alterations. The Mortgagee must retain copies of all
      credit reports. The credit report must include: • the name of the Mortgagee
      ordering the report; • the name, address, and telephone number of the consumer
      reporting agency; • the name and SSN of each Borrower; and • the primary repository
      from which any particular information was pulled, for each account listed. A
      truncated SSN is acceptable for FHA mortgage insurance purposes provided that
      the mortgage application captures the full nine-digit SSN. The credit report
      must also include: • all inquiries made within the last 90 Days; • all credit
      and legal information not considered obsolete under the Fair Credit Reporting
      Act (FCRA), including information for the last seven years, which consumer reporting
      agencies have reported as verified and currently accurate, regarding: o bankruptcies;
      o Judgments; o lawsuits; o foreclosures; and o tax liens; and • for each Borrower
      debt listed: o the date the account was opened; o high credit amount; o required
      monthly payment amount; o unpaid balance; and o payment history. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 5. Manual Underwriting of the Borrower Handbook 4000.1 281 Last Revised:
      11/26/2025 (2) Updated Credit Report or Supplement to the Credit Report The
      Mortgagee must obtain an updated credit report or supplement if the underwriter
      identifies inconsistencies between any information in the mortgage file and
      the original credit report. (3) Credit Information Not Listed on Credit Report
      A Mortgagee must develop credit information separately for any open debt listed
      on the mortgage application but not referenced in the credit report by using
      the procedures for Independent Verification of Non-traditional Credit Providers.
      (4) Specific Requirements for Residential Mortgage Credit Report In addition
      to meeting the general credit report requirements, the RMCR must: • provide
      a detailed account of the Borrower’s employment history; • verify each Borrower’s
      current employment and income through an interview with the Borrower’s employer
      or explain why such an interview was not completed; • contain a statement attesting
      to the certification of employment for each Borrower and the date the information
      was verified; and • report a credit history for each trade line within 90 Days
      of the credit report for each account with a balance. (B) Non-traditional and
      Insufficient Credit (Manual) For Borrowers without a credit score, the Mortgagee
      must either obtain a Non- Traditional Mortgage Credit Report (NTMCR) from a
      credit reporting company or independently develop the Borrower’s credit history
      using the requirements outlined below. (1) Non-Traditional Mortgage Credit Report
      (a) Definition A Non-Traditional Mortgage Credit Report (NTMCR) refers to a
      type of credit report designed to access the credit history of a Borrower who
      does not have the types of trade references that appear on a traditional credit
      report. (b) Standard An NTMCR is used either as: • a substitute for a TRMCR
      or an RMCR; or • a supplement to a traditional credit report that has an insufficient
      number of trade items reported to generate a credit score. II. ORIGINATION THROUGH
      POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages
      5. Manual Underwriting of the Borrower Handbook 4000.1 282 Last Revised: 11/26/2025
      Mortgagees may use an NTMCR developed by a credit reporting agency that verifies
      the following information for all non-traditional credit references: • the existence
      of the credit providers; • that the credit was actually extended to the Borrower;
      and • the creditor has a published address or telephone number. The NTMCR must
      not include subjective statements such as “satisfactory” or “acceptable,” must
      be formatted in a similar fashion to traditional references, and provide the:
      • creditor’s name; • date of opening; • high credit; • current status of the
      account; • 12-month history of the account; • required monthly payment; • unpaid
      balance; and • payment history in the delinquency categories (for example, 0x30
      and 0x60). (2) Independent Verification of Non-traditional Credit Providers
      The Mortgagee may independently verify the Borrower’s credit references by documenting
      the existence of the credit provider and that the provider extended credit to
      the Borrower. a. To verify the existence of each credit provider, the Mortgagee
      must review public records from the state, county, or city or other documents
      providing a similar level of objective information. b. To verify credit information,
      the Mortgagee must: • use a published address or telephone number for the credit
      provider and not rely solely on information provided by the applicant; and •
      obtain the most recent 12 months of canceled checks, or equivalent proof of
      payment, demonstrating the timing of payment to the credit provider. c. To verify
      the Borrower’s rental payment history, the Mortgagee must obtain a rental reference
      from the appropriate rental management company, provided the Borrower is not
      renting from a Family Member, demonstrating the timing of payment of the most
      recent 12 months in lieu of 12 months of canceled checks or equivalent proof
      of payment. (3) Sufficiency of Credit References To be sufficient to establish
      the Borrower’s credit, the credit history must include three credit references,
      including at least one of the following: • rental housing payments (subject
      to independent verification if the Borrower is a renter); II. ORIGINATION THROUGH
      POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages
      5. Manual Underwriting of the Borrower Handbook 4000.1 283 Last Revised: 11/26/2025
      • telephone service; or • utility company reference (if not included in the
      rental housing payment), including: o gas; o electricity; o water; o television
      service; or o internet service. If the Mortgagee cannot obtain all three credit
      references from the list above, the Mortgagee may use the following sources
      of unreported recurring debt: • insurance premiums not payroll deducted (for
      example, medical, auto, life, renter’s insurance); • payment to child care providers
      made to businesses that provide such services; • school tuition; • retail store
      credit cards (for example, from department, furniture, appliance stores, or
      specialty stores); • rent-to-own (for example, furniture, appliances); • payment
      of that part of medical bills not covered by insurance; • a documented 12-month
      history of savings evidenced by regular deposits resulting in an increased balance
      to the account that: o were made at least quarterly; o were not payroll deducted,
      and; o caused no Insufficient Funds (NSF) checks; • an automobile lease; • a
      personal loan from an individual with repayment terms in writing and supported
      by canceled checks to document the payments; or • a documented 12-month history
      of payment by the Borrower on an account for which the Borrower is an authorized
      user. iii. Evaluating Credit History (Manual) (A) General Credit (Manual) The
      underwriter must examine the Borrower’s overall pattern of credit behavior,
      not just isolated unsatisfactory or slow payments, to determine the Borrower’s
      creditworthiness. The Mortgagee must not consider the credit history of a non-borrowing
      spouse. (B) Types of Payment Histories (Manual) The underwriter must evaluate
      the Borrower’s payment histories in the following order: (1) previous housing
      expenses and related expenses, including utilities; (2) installment debts; and
      (3) Revolving Charge Accounts. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 5. Manual Underwriting
      of the Borrower Handbook 4000.1 284 Last Revised: 11/26/2025 (1) Satisfactory
      Credit The underwriter may consider a Borrower to have an acceptable payment
      history if the Borrower has made all housing and installment debt payments on
      time for the previous 12 months and has no more than two 30-Day late Mortgage
      Payments or installment payments in the previous 24 months. The underwriter
      may approve the Borrower with an acceptable payment history if the Borrower
      has no major derogatory credit on Revolving Charge Accounts in the previous
      12 months. Major derogatory credit on Revolving Charge Accounts must 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. (2) Payment History Requiring Additional
      Analysis If a Borrower’s credit history does not reflect satisfactory credit
      as stated above, the Borrower’s payment history requires additional analysis.
      The Mortgagee must analyze the Borrower’s delinquent accounts to determine whether
      late payments were based on a disregard for financial obligations, an inability
      to manage debt, or extenuating circumstances. The Mortgagee must document this
      analysis in the mortgage file. Any explanation or documentation of delinquent
      accounts must be consistent with other information in the file. The underwriter
      may only approve a Borrower with a credit history not meeting the satisfactory
      credit history above if the underwriter has documented the delinquency was related
      to extenuating circumstances. (C) Housing Obligations/Mortgage Payment History
      (Manual) (1) Definition Housing Obligation/Mortgage Payment refers to the monthly
      payment due for rental or Properties owned. (2) Standard A Mortgage Payment
      is considered delinquent if not paid within the month due. A Borrower who was
      granted a mortgage payment forbearance and continues to make payments as agreed
      under the terms of the original Note is not considered delinquent or late and
      shall be treated as if not in forbearance provided the Forbearance Plan is terminated
      at or prior to closing. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A.
      Title II Insured Housing Programs Forward Mortgages 5. Manual Underwriting of
      the Borrower Handbook 4000.1 285 Last Revised: 11/26/2025 The Mortgagee must
      determine the Borrower’s Housing Obligation payment history through: • the credit
      report; • verification of rent received directly from the landlord (for landlords
      with no Identity of Interest with the Borrower); • verification of Mortgage
      received directly from the Servicer; or • a review of canceled checks that cover
      the most recent 12-month period. The Mortgagee must verify and document the
      previous 12 months’ housing history. For Borrowers who indicate they are living
      rent-free, the Mortgagee must obtain verification from the property owner where
      they are residing that the Borrower has been living rent-free and the amount
      of time the Borrower has been living rent free. For both purchase and no cash-out
      refinance transactions, a Mortgage that has been modified must utilize the payment
      history in accordance with the modification agreement for the time period of
      modification in determining late housing payments. In addition, where a Mortgage
      has been modified, the Borrower must have made at least six payments under the
      modification agreement to be eligible for a no-cash out refinance. A Mortgage
      that was subject to mortgage payment forbearance must utilize the Mortgage Payment
      history in accordance with the Forbearance Plan for the time period of the forbearance
      in determining late housing payments. Any Borrower who is granted a forbearance
      and is otherwise performing under the terms of the Forbearance Plan is not considered
      to be delinquent for purposes of credit underwriting. (3) Required Documentation
      Where a Mortgage reflects payments under a modification or Forbearance Plan
      within the 12 months prior to case number assignment, the Mortgagee must obtain:
      • a copy of the modification or Forbearance Plan; and • evidence of the payment
      amount and date of payments during the forbearance term. A Forbearance Plan
      is not required if the forbearance was due to the impacts of the COVID-19 National
      Emergency. (D) Collection Accounts (Manual) (1) Definition A Collection Account
      is a Borrower’s loan or debt that has been submitted to a collection agency
      through a creditor. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title
      II Insured Housing Programs Forward Mortgages 5. Manual Underwriting of the
      Borrower Handbook 4000.1 286 Last Revised: 11/26/2025 (2) Standard The Mortgagee
      must determine if collection accounts were a result of: • the Borrower’s disregard
      for financial obligations; • the Borrower’s inability to manage debt; or • extenuating
      circumstances. (3) Required Documentation The Mortgagee must document reasons
      for approving a Mortgage when the Borrower has any collection accounts. The
      Borrower must provide a letter of explanation, which is supported by documentation,
      for each outstanding collection account. The explanation and supporting documentation
      must be consistent with other credit information in the file. (E) Charge Off
      Accounts (Manual) (1) Definition Charge Off Account refers to a Borrower’s loan
      or debt that has been written off by the creditor. (2) Standard The Mortgagee
      must determine if Charge Off Accounts were a result of: • the Borrower’s disregard
      for financial obligations; • the Borrower’s inability to manage debt; or • extenuating
      circumstances. (3) Required Documentation The Mortgagee must document reasons
      for approving a Mortgage when the Borrower has any Charge Off Accounts. The
      Borrower must provide a letter of explanation, which is supported by documentation,
      for each outstanding Charge Off Account. The explanation and supporting documentation
      must be consistent with other credit information in the file. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 5. Manual Underwriting of the Borrower Handbook 4000.1 287 Last Revised:
      11/26/2025 (F) Disputed Derogatory Credit Accounts (Manual) (1) Definition Disputed
      Derogatory Credit Account refers to disputed Charge Off Accounts, disputed collection
      accounts, and disputed accounts with late payments in the last 24 months. (2)
      Standard The Mortgagee must analyze the documentation provided for consistency
      with other credit information to determine if the derogatory credit account
      should be considered in the underwriting analysis. The following items may be
      excluded from consideration in the underwriting analysis: • disputed medical
      accounts; and • disputed derogatory credit resulting from identity theft, credit
      card theft or unauthorized use provided the Mortgagee includes a copy of the
      police report or other documentation from the creditor to support the status
      of the account in the mortgage file. (3) Required Documentation If the credit
      report indicates that the Borrower is disputing derogatory credit accounts,
      the Borrower must provide a letter of explanation and documentation supporting
      the basis of the dispute. If the disputed derogatory credit resulted from identity
      theft, credit card theft or unauthorized use balances, the Mortgagee must obtain
      a copy of the police report or other documentation from the creditor to support
      the status of the accounts. (G) Judgments (Manual) (1) Definition Judgment refers
      to any debt or monetary liability of the Borrower, and the Borrower’s spouse
      in a community property state unless excluded by state law, created by a court,
      or other adjudicating body. (2) Standard The Mortgagee must verify that court-ordered
      Judgments are resolved or paid off prior to or at closing. Judgments of a non-borrowing
      spouse in a community property state must be resolved or paid in full, with
      the exception of obligations excluded by state law. II. ORIGINATION THROUGH
      POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages
      5. Manual Underwriting of the Borrower Handbook 4000.1 288 Last Revised: 11/26/2025
      Regardless of the amount of outstanding Judgments, the Mortgagee must determine
      if the Judgment was a result of: • the Borrower’s disregard for financial obligations;
      • the Borrower’s inability to manage debt; or • extenuating circumstances. Exception
      A Judgment is considered resolved if the Borrower has entered into a valid agreement
      with the creditor to make regular payments on the debt, the Borrower has made
      timely payments for at least three months of scheduled payments and the Judgment
      will not supersede the FHA-insured mortgage lien. The Borrower cannot prepay
      scheduled payments in order to meet the required minimum of three months of
      payments. The Mortgagee must include the payment amount in the agreement in
      the calculation of the Borrower’s Debt-to-Income (DTI) ratio. The Mortgagee
      must obtain a copy of the agreement and evidence that payments were made on
      time in accordance with the agreement. (3) Required Documentation The Mortgagee
      must provide the following documentation: • evidence of payment in full, if
      paid prior to settlement; • the payoff statement, if paid at settlement; or
      • the payment arrangement with creditor, if not paid prior to or at settlement,
      and a subordination agreement for any liens existing on title. (H) Bankruptcy
      (Manual) (1) Standard: Chapter 7 A Chapter 7 bankruptcy (liquidation) does not
      disqualify a Borrower from obtaining an FHA-insured Mortgage if, at the time
      of case number assignment, at least two years have elapsed since the date of
      the bankruptcy discharge. During the most recent two years, the Borrower must
      have: • reestablished good credit; or • chosen not to incur new credit obligations.
      An elapsed period of less than two years, but not less than 12 months, may be
      acceptable, if the Borrower: • can show that the bankruptcy was caused by extenuating
      circumstances beyond the Borrower’s control; and • has since exhibited a documented
      ability to manage their financial affairs in a responsible manner. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 5. Manual Underwriting of the Borrower Handbook 4000.1 289 Last Revised:
      11/26/2025 (2) Standard: Chapter 13 A Chapter 13 bankruptcy does not disqualify
      a Borrower from obtaining an FHA- insured Mortgage, if at the time of case number
      assignment at least 12 months of the payout period under the bankruptcy has
      elapsed. The Mortgagee must determine that during the most recent 12 months,
      the Borrower’s payment performance has been satisfactory and all required payments
      have been made on time; and the Borrower has received written permission from
      bankruptcy court to enter into the mortgage transaction. (3) Required Documentation
      If the credit report does not verify the discharge date or additional documentation
      is necessary to determine if any liabilities were discharged in the bankruptcy,
      the Mortgagee must obtain the bankruptcy and discharge documents. The Mortgagee
      must also document that the Borrower’s current situation indicates that the
      events which led to the bankruptcy are not likely to recur. (I) Foreclosure
      and Deed-in-Lieu of Foreclosure (Manual) (1) Definition A Deed-in-Lieu (DIL)
      of Foreclosure is a loss mitigation home disposition option in which a Borrower
      voluntarily offers the deed to the Note holder in exchange for a release from
      all obligations under the Mortgage. (2) Standard A Borrower is generally not
      eligible for a new FHA-insured Mortgage if the Borrower had a foreclosure or
      a DIL of Foreclosure in the three-year period prior to the date of case number
      assignment. This three-year period begins on the date of the DIL or the date
      that the Borrower transferred ownership of the Property to the foreclosing entity/designee.
      Exceptions The Mortgagee may grant an exception to the three-year requirement
      if the foreclosure was the result of documented extenuating circumstances that
      were beyond the control of the Borrower, such as a serious illness or death
      of a wage earner, and the Borrower has reestablished good credit since the foreclosure.
      Divorce is not considered an extenuating circumstance. An exception may, however,
      be granted where a Borrower’s Mortgage was current at the time of the II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 5. Manual Underwriting of the Borrower Handbook 4000.1 290 Last Revised:
      11/26/2025 Borrower’s divorce, the ex-spouse received the Property, and the
      Mortgage was later foreclosed. The inability to sell the Property due to a job
      transfer or relocation to another area does not qualify as an extenuating circumstance.
      (3) Required Documentation If the credit report does not indicate the date of
      the foreclosure or DIL of Foreclosure, the Mortgagee must obtain the Closing
      Disclosure, deed or other legal documents evidencing the date of property transfer.
      If the foreclosure or DIL of Foreclosure was the result of a circumstance beyond
      the Borrower’s control, the Mortgagee must obtain an explanation of the circumstance
      and document that the circumstance was beyond the Borrower’s control. (J) Pre-Foreclosure
      Sales (Short Sales) (Manual) (1) Definition Pre-Foreclosure Sales, also known
      as Short Sales, refer to the sales of real estate that generate proceeds that
      are less than the amount owed on the Property and the lien holders agree to
      release their liens and forgive the deficiency balance on the real estate. (2)
      Standard A Borrower is generally not eligible for a new FHA-insured Mortgage
      if they relinquished a Property through a Short Sale within three years from
      the date of case number assignment. This three-year period begins on the date
      of transfer of title by Short Sale. (a) Exception for Borrower Current at the
      Time of Short Sale A Borrower is considered eligible for a new FHA-insured Mortgage
      if, from the date of case number assignment for the new Mortgage: • all Mortgage
      Payments on the prior Mortgage were made within the month due for the 12-month
      period preceding the Short Sale; and • installment debt payments for the same
      time period were also made within the month due. (b) Exception for Extenuating
      Circumstances The Mortgagee may grant an exception to the three-year requirement
      if the Short Sale was the result of documented extenuating circumstances that
      were II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing
      Programs Forward Mortgages 5. Manual Underwriting of the Borrower Handbook 4000.1
      291 Last Revised: 11/26/2025 beyond the control of the Borrower, such as a serious
      illness or death of a wage earner, and the Borrower has reestablished good credit
      since the Short Sale. Divorce is not considered an extenuating circumstance.
      An exception may, however, be granted where a Borrower’s Mortgage was current
      at the time of the Borrower’s divorce, the ex-spouse received the Property,
      and there was a subsequent Short Sale. The inability to sell the Property due
      to a job transfer or relocation to another area does not qualify as an extenuating
      circumstance. (3) Required Documentation If the credit report does not indicate
      the date of the Short Sale, the Mortgagee must obtain the Closing Disclosure,
      deed or other legal documents evidencing the date of property transfer. If the
      Short Sale was the result of a circumstance beyond the Borrower’s control, the
      Mortgagee must obtain an explanation of the circumstance and document that the
      circumstance was beyond the Borrower’s control. (K) Credit Counseling/Payment
      Plan Participating in a consumer credit counseling program does not disqualify
      a Borrower from obtaining an FHA-insured Mortgage, provided the Mortgagee documents
      that: • one year of the payout period has elapsed under the plan; • the Borrower’s
      payment performance has been satisfactory and all required payments have been
      made on time; and • the Borrower has received written permission from the counseling
      agency to enter into the mortgage transaction. iv. Evaluating Liabilities and
      Debts (Manual) (A) General Liabilities and Debts (Manual) (1) Standard The Mortgagee
      must determine the Borrower’s monthly liabilities by reviewing all debts listed
      on the credit report, Fannie Mae Form 1003/Freddie Mac Form 65, Uniform Residential
      Loan Application (URLA), and required documentation. All applicable monthly
      liabilities must be included in the qualifying ratio. Closed- end debts do not
      have to be included if they will be paid off within 10 months from the date
      of closing 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 10-month requirement. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 5. Manual Underwriting of the Borrower Handbook 4000.1 292 Last Revised:
      11/26/2025 Accounts for which the Borrower is an authorized user must be included
      in a Borrower’s DTI ratio unless the Mortgagee 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. Negative income must be subtracted from the Borrower’s gross monthly income,
      and not treated as a recurring monthly liability unless otherwise noted. 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. (2) Required
      Documentation 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. (B) Undisclosed Debt and
      Inquiries (Manual) (1) Standard When a debt or obligation is revealed during
      the application process that was not listed on the mortgage application and/or
      credit report, the Mortgagee must: • verify the actual monthly payment amount;
      • include the payment amount in the agreement in the Borrower’s monthly liabilities
      and debt; and • determine that any unsecured funds borrowed were not/will not
      be used for the Borrower’s MRI. The Mortgagee must obtain a written explanation
      from the Borrower for all inquiries shown on the credit report that were made
      in the last 90 Days. (2) Required Documentation The Mortgagee must document
      all undisclosed debt and support for its analysis of the Borrower’s debt. (C)
      Federal Debt (Manual) (1) Definition Federal Debt refers to debt owed to the
      federal government for which regular payments are being made. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 5. Manual Underwriting of the Borrower Handbook 4000.1 293 Last Revised:
      11/26/2025 (2) Standard The Mortgagee must include the debt. The amount of the
      required payment must be included in the calculation of the Borrower’s total
      debt to income. (3) Required Documentation The Mortgagee must include documentation
      from the federal agency evidencing the repayment agreement and verification
      of payments made, if applicable. (D) Alimony, Child Support, and Maintenance
      (Manual) (1) Definition Alimony, Child Support, and Maintenance are court-ordered
      or otherwise agreed upon payments. (2) Standard 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 verify
      and include the monthly obligation in its 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. (3) Required Documentation The Mortgagee must obtain the official
      signed divorce decree, separation agreement, maintenance agreement, or other
      legal order. The Mortgagee 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.
      (4) Calculation of Monthly Obligation The Mortgagee must calculate the Borrower’s
      monthly obligation from the greater of: • the amount shown on the most recent
      decree or agreement establishing the Borrower’s payment obligation; or • the
      monthly amount of the garnishment. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 5. Manual Underwriting
      of the Borrower Handbook 4000.1 294 Last Revised: 11/26/2025 (E) Non-Borrowing
      Spouse Debt in Community Property States (Manual) (1) Definition Non-Borrowing
      Spouse Debt refers to debts owed by a spouse that are not owed by, or in the
      name of the Borrower. (2) Standard If the Borrower resides in a community property
      state or the Property being insured is located in a community property state,
      debts of the non-borrowing spouse must be included in the Borrower’s qualifying
      ratios, except for obligations specifically excluded by state law. The non-borrowing
      spouse’s credit history is not considered a reason to deny a mortgage application.
      (3) Required Documentation The Mortgagee must verify and document the debt of
      the non-borrowing spouse, except for obligations specifically excluded by state
      law. The Mortgagee must make a note in the file referencing the specific state
      law that justifies the exclusion of any debt from consideration. If the Borrower
      resides in a community property state or the Property being insured is located
      in a community property state, and non-borrowing spouse obligations are not
      excluded by state law, the Mortgagee must obtain a credit report for the non-borrowing
      spouse to determine the debt-to-income ratio of the Borrower. The credit report
      for the non-borrowing spouse may be traditional or nontraditional. (F) Deferred
      Obligations (Manual) (1) Definition Deferred Obligations (excluding Student
      Loans) refer to liabilities that have been incurred but where payment is deferred
      or has not yet commenced, including accounts in forbearance. (2) Standard The
      Mortgagee must verify and include deferred obligations in the calculation of
      the Borrower’s liabilities. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 5. Manual Underwriting
      of the Borrower Handbook 4000.1 295 Last Revised: 11/26/2025 (3) Required Documentation
      The Mortgagee must obtain written documentation of the deferral of the liability
      from the creditor and evidence of the outstanding balance and terms of the deferred
      liability. The Mortgagee must obtain evidence of the actual monthly payment
      obligation, if available. (4) Calculation of Monthly Obligation The Mortgagee
      must use the actual monthly payment to be paid on a deferred liability, whenever
      available. If the actual monthly payment is not available for installment debt,
      the Mortgagee must utilize the terms of the debt or 5 percent of the outstanding
      balance to establish the monthly payment. (G) Student Loans (Manual) (1) Definition
      Student Loan refers to liabilities incurred for educational purposes. (2) Standard
      The Mortgagee must include all Student Loans in the Borrower’s liabilities,
      regardless of the payment type or status of payments. (3) Required Documentation
      If the payment used for the monthly obligation is less than the monthly payment
      reported on the Borrower’s credit report, the Mortgagee must obtain written
      documentation of the actual monthly payment, the payment status, and evidence
      of the outstanding balance and terms from the creditor or student loan servicer.
      The Mortgagee may exclude the payment amount from the monthly debt calculation
      where written documentation from the student loan program, creditor, or student
      loan servicer indicates that the loan balance has been forgiven, canceled, discharged,
      or otherwise paid in full. (4) Calculation of Monthly Obligation For outstanding
      Student Loans, regardless of the payment status, the Mortgagee must use: • the
      payment amount reported on the credit report or the actual documented payment,
      when the payment amount is above zero; or • 0.5 percent of the outstanding loan
      balance, when the monthly payment reported on the Borrower’s credit report is
      zero. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing
      Programs Forward Mortgages 5. Manual Underwriting of the Borrower Handbook 4000.1
      296 Last Revised: 11/26/2025 Exception Where a student loan payment has been
      suspended in accordance with COVID-19 emergency relief, the Mortgagee may use
      the payment amount reported on the credit report or the actual documented payment
      prior to suspension, when that payment amount is above $0. (H) Installment Loans
      (Manual) (1) Definition Installment Loans (excluding Student Loans) refer to
      loans, not secured by real estate, that require the periodic payment of P&I.
      A loan secured by an interest in a timeshare must be considered an Installment
      Loan. (2) Standard The Mortgagee must include the monthly payment shown on the
      credit report, loan agreement or payment statement to calculate the Borrower’s
      liabilities. If the credit report does not include a monthly payment for the
      loan, the Mortgagee must use the amount of the monthly payment shown in the
      loan agreement or payment statement. (3) Required Documentation If the monthly
      payment shown on the credit report is utilized to calculate the monthly debts,
      no further documentation is required. If the credit report does not include
      a monthly payment for the loan, or the payment reported on the credit report
      is greater than the payment on the loan agreement or payment statement, the
      Mortgagee must use the loan agreement or payment statement to document the amount
      of the monthly payment. If the credit report, loan agreement or payment statement
      shows a deferred payment arrangement for an Installment Loan, refer to the Deferred
      Obligations (Manual) section. (I) Revolving Charge Accounts (Manual) (1) Definition
      A Revolving Charge Account refers to a credit arrangement that requires the
      Borrower to make periodic payments but does not require full repayment by a
      specified point of time. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A.
      Title II Insured Housing Programs Forward Mortgages 5. Manual Underwriting of
      the Borrower Handbook 4000.1 297 Last Revised: 11/26/2025 (2) Standard The Mortgagee
      must include the monthly payment shown on the credit report for the Revolving
      Charge Account. Where the credit report does not include a monthly payment for
      the account, the Mortgagee must use the payment shown on the current account
      statement or 5 percent of the outstanding balance. (3) Required Documentation
      The Mortgagee must use the credit report to document the terms, balance and
      payment amount on the account, if available. Where the credit report does not
      reflect the necessary information on the charge account, the Mortgagee must
      obtain a copy of the most recent charge account statement or use 5 percent of
      the outstanding balance to document the monthly payment. (J) 30-Day Accounts
      (Manual) (1) Definition A 30-Day Account refers to a credit arrangement that
      requires the Borrower to pay off the outstanding balance on the account every
      month. (2) Standard The Mortgagee 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. (3) Required Documentation The Mortgagee must
      use the credit report to document that the Borrower has paid the balance on
      the account monthly for the previous 12 months. The Mortgagee must use the credit
      report to document the balance and must document that funds are available to
      pay off the balance, in excess of the funds and Reserves required to close the
      Mortgage. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured
      Housing Programs Forward Mortgages 5. Manual Underwriting of the Borrower Handbook
      4000.1 298 Last Revised: 11/26/2025 (K) Business Debt in Borrower’s Name (Manual)
      (1) Definition Business Debt in Borrower’s Name refers to liabilities reported
      on the Borrower’s personal credit report, but payment for the debt is attributed
      to the Borrower’s business. (2) Standard When business debt is reported on the
      Borrower’s personal credit report, the debt must be included in the DTI calculation,
      unless the Mortgagee can document that the debt is being paid by the Borrower’s
      business, and the debt was considered in the cash flow analysis of the Borrower’s
      business. 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. (3) Required Documentation When a self-employed Borrower
      states debt appearing on their personal credit report is being paid by their
      business, the Mortgagee must obtain documentation that the debt is paid out
      of company funds and that the debt was considered in the cash flow analysis
      of the Borrower’s business. (L) Disputed Derogatory Credit Accounts (Manual)
      (1) Definition Disputed Derogatory Credit Accounts refer to disputed Charge
      Off Accounts, disputed collection accounts, and disputed accounts with late
      payments in the last 24 months. (2) Standard If the Borrower has $1,000 or more
      collectively in Disputed Derogatory Credit Accounts, the Mortgagee must include
      a monthly payment in the Borrower’s debt calculation. The following items are
      excluded from the cumulative balance: • disputed medical accounts; and • disputed
      derogatory credit resulting from identity theft, credit card theft or unauthorized
      use. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing
      Programs Forward Mortgages 5. Manual Underwriting of the Borrower Handbook 4000.1
      299 Last Revised: 11/26/2025 Disputed Derogatory Credit Accounts of a non-borrowing
      spouse in a community property state are not included in the cumulative balance.
      (M) Non-derogatory Disputed Account and Disputed Accounts Not Indicated on the
      Credit Report (Manual) (1) Definition Non-derogatory Disputed Accounts include
      the following types of accounts: • disputed accounts with zero balance; • disputed
      accounts with late payments aged 24 months or greater; or • disputed accounts
      that are current and paid as agreed. (2) Standard If a Borrower is disputing
      non-derogatory accounts, or is disputing accounts which are not indicated on
      the credit report as being disputed, the Mortgagee must analyze the effect of
      the disputed accounts on the Borrower’s ability to repay the loan. If the dispute
      results in the Borrower’s monthly debt payments utilized in computing the DTI
      ratio being less than the amount indicated on the credit report, the Borrower
      must provide documentation of the lower payments. (N) Contingent Liabilities
      (Manual) (1) Definition A Contingent Liability is a liability that may result
      in the obligation to repay only where 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 Co- signer liabilities and liabilities resulting
      from a mortgage assumption without release of liability. (2) Standard The Mortgagee
      must include monthly payments on contingent liabilities in the calculation of
      the Borrower’s monthly obligations unless the Mortgagee verifies 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. When a contingent liability is created
      by a divorce decree or other court order, evidence that the other legally obligated
      party has made 12 months of timely payments is not required. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 5. Manual Underwriting of the Borrower Handbook 4000.1 300 Last Revised:
      11/26/2025 (3) Required Documentation (a) Mortgage Assumptions The Mortgagee
      must obtain the agreement creating the contingent liability or assumption agreement
      and deed showing transfer of title out of the Borrower’s name. (b) Cosigned
      Liabilities If the cosigned liability is not included in the monthly obligation,
      the Mortgagee must obtain documentation to evidence that the other party to
      the debt has been making regular on-time payments during the previous 12 months.
      (c) Court-Ordered Divorce Decree or Other Court Order The Mortgagee must obtain
      a copy of the divorce decree or other court order ordering the spouse or other
      legally obligated party to make payments. (4) Calculation of Monthly Obligation
      The Mortgagee must calculate the monthly payment on the contingent liability
      based on the terms of the agreement creating the contingent liability. (O) Collection
      Accounts (Manual) (1) Definition A Collection Account refers to a Borrower’s
      loan or debt that has been submitted to a collection agency by a creditor. (2)
      Standard If the credit reports used in the analysis show cumulative outstanding
      collection account balances of $2,000 or greater, the Mortgagee must: • verify
      that the debt is paid in full at the time of or prior to settlement using an
      acceptable source of funds; • verify that the Borrower has made payment arrangements
      with the creditor; or • if a payment arrangement is not available, calculate
      the monthly payment using 5 percent of the outstanding balance of each collection
      and include the monthly payment in the Borrower’s DTI ratio. Collection accounts
      of a non-borrowing spouse in a community property state must be included in
      the $2,000 cumulative balance and analyzed as part of the II. ORIGINATION THROUGH
      POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages
      5. Manual Underwriting of the Borrower Handbook 4000.1 301 Last Revised: 11/26/2025
      Borrower’s ability to pay all collection accounts, unless specifically excluded
      by state law. (3) Required Documentation The Mortgagee must provide the following
      documentation: • evidence of payment in full, if paid prior to settlement; •
      the payoff statement, if paid at settlement; or • the payment arrangement with
      creditor, if not paid prior to or at settlement. If the Mortgagee uses 5 percent
      of the outstanding balance, no documentation is required. (P) Charge Off Accounts
      (Manual) (1) Definition Charge Off Account refers to a Borrower’s loan or debt
      that has been written off by the creditor. (2) Standard Charge Off Accounts
      do not need to be included in the Borrower’s liabilities or debt. (Q) Private
      Savings Clubs (Manual) (1) Definition Private Savings Club refers to a non-traditional
      method of saving by making deposits into a member-managed resource pool. (2)
      Standard If the Borrower is obligated to continue making ongoing contributions
      under the pooled savings agreement, this obligation must be counted in the Borrowers’
      total debt. The Mortgagee must verify and document the establishment and duration
      of the Borrower’s membership in the club and the amount of the Borrower’s required
      contribution to the club. (3) Required Documentation The Mortgagee must also
      obtain the club’s account ledgers and receipts, and verification from the club
      treasurer that the club is still active. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 5. Manual Underwriting
      of the Borrower Handbook 4000.1 302 Last Revised: 11/26/2025 (R) Obligations
      Not Considered Debt Obligations not considered debt include: • medical collections
      • federal, state, and local taxes, if not delinquent and no payments 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 • 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'
  judgment: false
