HUD Handbook 4000.1 II.A.2 — Allowable Mortgage Parameters

hud-4000-1-ii-a-2

HUD Handbook 4000.1 Part II.A.2 (Allowable Mortgage Parameters) for Title II Insured Housing Programs Forward Mortgages. Covers basic creditworthiness/capacity/capital determination, maximum mortgage amounts under Nationwide Limits, LTV, Minimum Required Investment (MRI), and UFMIP/financing requirements.

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source:
  type: regulation
  id: hud-4000-1-ii-a-2
  authority: HUD Handbook 4000.1 II.A.2 — Allowable Mortgage Parameters
  description: |
    HUD Handbook 4000.1 Part II.A.2 (Allowable Mortgage Parameters) for
    Title II Insured Housing Programs Forward Mortgages. Covers basic
    creditworthiness/capacity/capital determination, maximum mortgage
    amounts under Nationwide Limits, LTV, Minimum Required Investment
    (MRI), and UFMIP/financing requirements.
obligations:
  - id: hud-4000-1-ii-a-2-creditworthiness-capacity-capital
    canonical_id: hud-4000-1-ii-a-2-creditworthiness-capacity-capital
    section: HUD Handbook 4000.1 II.A.2 — Underwriting Standard
    description: |
      When underwriting an FHA-insured Mortgage, [LENDER] must determine
      the Borrower's creditworthiness, capacity to repay, and available
      capital to support the Mortgage. [LENDER] must also examine the
      Property to ensure it provides sufficient collateral for the
      Mortgage.
    type: do
    audit_question: For every FHA-insured Mortgage [LENDER] underwrites, can [LENDER] evidence its determination of (a) Borrower creditworthiness, (b) Borrower capacity to repay, (c) Borrower available capital, and (d) sufficiency of Property as collateral?
    program_review: Do the P&Ps ensure underwriting determines Borrower creditworthiness, capacity to repay, and available capital, AND examines the Property for sufficient collateral?
    file_review: Review underwritten files; the compliance person judges whether the four-part determination (creditworthiness, capacity, capital, collateral sufficiency) is adequately supported.
    judgment: true
    feeds: []
    workflow_phase: underwriting
    owner_role: underwriter
    secondary_owner_role: compliance_officer
    cadence: per-loan
    consequence: Failure to perform the four-prong underwriting determination is a HUD finding and a foundational ATR/QM exposure.
    tags:
      - round-d
      - regulator-direct
      - fha
      - hud-4000-1
      - underwriting
      - capacity-to-repay
      - promoted
    primary_source:
      tier: 1
      authority: HUD Handbook 4000.1 II.A.2 — Underwriting Standard
      source_class: hud-handbook-4000-1
      source_url: https://www.hud.gov/sites/dfiles/OCHCO/documents/40001HSGH.pdf
      snapshot_id: 3bf33edadcf6461d
      fetched_at: '2026-05-25T14:10:11Z'
      content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
      paragraph_quote: Mortgagee must determine the Borrower’s creditworthiness, capacity to repay, and available
      drafter_attestation: |
        Copied verbatim from snapshot 3bf33edadcf6461d (HUD Handbook 4000.1
        Update 17, II.A.2). Apostrophe is U+2019 (curly).
    auditor_minimum_evidence:
      derivation: snapshot_extract
      derivation_source:
        snapshot_id: 3bf33edadcf6461d
        paragraph_quote: Mortgagee must determine the Borrower’s creditworthiness, capacity to repay, and available
        page_or_section: HUD Handbook 4000.1 II.A.2
        fetched_at: '2026-05-25T14:10:11Z'
      pathway_selection_kind: mutually_exclusive_by_facts
      pathways:
        - pathway_id: csh-amep-hud-ii-a-2-aus-accept
          name: TOTAL Scorecard ACCEPT/APPROVE — AUS-driven creditworthiness determination
          evidence_items:
            - evidence_id: csh-ev-hud-ii-a-2-total-accept-feedback
              kind: document
              description: TOTAL Scorecard Accept/Approve feedback certificate from the AUS for this loan.
              retention_rule_ref: hud-4000-1-iii-a-1
              examiner_question_ref: HUD Office of Inspector General / Mortgagee Review Board — FHA Title II oversight
              cite_verified: true
            - evidence_id: csh-ev-hud-ii-a-2-credit-cap-capital-summary
              kind: record
              description: Underwriter summary documenting credit reputation (FICO + tradelines reviewed), capacity to repay (DTI calculation + Effective Income), and available assets (reserves + funds to close).
              retention_rule_ref: hud-4000-1-iii-a-1
              examiner_question_ref: HUD Office of Inspector General / Mortgagee Review Board — FHA Title II oversight
              cite_verified: true
        - pathway_id: csh-amep-hud-ii-a-2-manual-uw
          name: Manual underwriting per HUD II.A.5 — three-prong creditworthiness analysis
          evidence_items:
            - evidence_id: csh-ev-hud-ii-a-2-manual-uw-record
              kind: record
              description: Manual underwriting decision record per II.A.5 with explicit creditworthiness / capacity / capital analysis, downgrade rationale if AUS REFER'd, and any compensating factors per II.A.5.b.
              retention_rule_ref: hud-4000-1-iii-a-1
              examiner_question_ref: HUD Office of Inspector General / Mortgagee Review Board — FHA Title II oversight
              cite_verified: true
            - evidence_id: csh-ev-hud-ii-a-2-manual-uw-residual-income
              kind: record
              description: Residual income calculation per II.A.5 manual-UW requirements with documented FHA county/family thresholds.
              retention_rule_ref: hud-4000-1-iii-a-1
              examiner_question_ref: HUD Office of Inspector General / Mortgagee Review Board — FHA Title II oversight
              cite_verified: true
      pathway_selection_logic: |
        Two pathways selected by underwriting method: A — TOTAL Scorecard returns Accept/Approve and lender relies on AUS-driven determination + supporting documentation; B — TOTAL Refer or AUS not used, lender performs full manual underwriting per II.A.5 with three-prong creditworthiness analysis and residual-income computation.
    promoted_at: '2026-05-25T17:33:50+00:00'
    promoted_from: hud-4000-1-ii-a-2-roundd-v1.yaml
  - id: hud-4000-1-ii-a-2-mri-determination
    canonical_id: hud-4000-1-ii-a-2-mri-determination
    section: HUD Handbook 4000.1 II.A.2 — Minimum Required Investment
    description: |
      [LENDER] must review the credit report to determine the Borrower's
      Minimum Required Investment (MRI) per FHA program requirements and
      ensure the Borrower contributes the required investment from
      acceptable sources.
    type: do
    audit_question: For every FHA-insured Mortgage, can [LENDER] evidence its review of the credit report and determination/verification of the Borrower's Minimum Required Investment, including the source of MRI funds?
    program_review: Do the P&Ps ensure the credit report is reviewed to determine the Borrower's Minimum Required Investment and that the MRI is contributed from acceptable sources?
    file_review: Pull files; confirm the MRI determination and that the MRI funds came from acceptable, documented sources.
    judgment: false
    feeds: []
    workflow_phase: underwriting
    owner_role: underwriter
    secondary_owner_role: loan_officer
    cadence: per-loan
    consequence: Insufficient or unverified MRI is a per-se FHA program violation.
    tags:
      - round-d
      - regulator-direct
      - fha
      - hud-4000-1
      - mri
      - underwriting
      - promoted
    primary_source:
      tier: 1
      authority: HUD Handbook 4000.1 II.A.2 — MRI
      source_class: hud-handbook-4000-1
      source_url: https://www.hud.gov/sites/dfiles/OCHCO/documents/40001HSGH.pdf
      snapshot_id: 3bf33edadcf6461d
      fetched_at: '2026-05-25T14:10:11Z'
      content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
      paragraph_quote: The Mortgagee must review the credit report to determine the Borrower’s Minimum
      drafter_attestation: |
        Copied verbatim from snapshot 3bf33edadcf6461d (HUD Handbook 4000.1
        Update 17, II.A.2). Apostrophe is U+2019 (curly).
    promoted_at: '2026-05-25T17:33:50+00:00'
    promoted_from: hud-4000-1-ii-a-2-roundd-v1.yaml
  - id: hud-4000-1-ii-a-2-lowest-applicable-ltv
    canonical_id: hud-4000-1-ii-a-2-lowest-applicable-ltv
    section: HUD Handbook 4000.1 II.A.2 — Maximum LTV
    description: |
      [LENDER] must apply the lowest applicable LTV percentage as
      determined under the FHA program for the specific transaction when
      calculating the maximum FHA-insured Mortgage amount.
    type: do
    audit_question: For every FHA-insured Mortgage, can [LENDER] evidence (in its underwriting calculations) that the lowest applicable LTV percentage was used in determining the maximum mortgage amount?
    program_review: Do the P&Ps ensure the lowest applicable LTV percentage for the specific transaction is used when calculating the maximum mortgage amount?
    file_review: Pull files; confirm the underwriting calculation used the lowest applicable LTV percentage.
    judgment: false
    feeds: []
    workflow_phase: underwriting
    owner_role: underwriter
    secondary_owner_role: compliance_officer
    cadence: per-loan
    consequence: Over-leveraging beyond the lowest applicable LTV is a HUD finding and may produce an uninsurable mortgage.
    tags:
      - round-d
      - regulator-direct
      - fha
      - hud-4000-1
      - ltv
      - underwriting
      - promoted
    primary_source:
      tier: 1
      authority: HUD Handbook 4000.1 II.A.2 — LTV
      source_class: hud-handbook-4000-1
      source_url: https://www.hud.gov/sites/dfiles/OCHCO/documents/40001HSGH.pdf
      snapshot_id: 3bf33edadcf6461d
      fetched_at: '2026-05-25T14:10:11Z'
      content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
      paragraph_quote: The Mortgagee must apply the lowest applicable LTV percentage as determined under the
      drafter_attestation: |
        Copied verbatim from snapshot 3bf33edadcf6461d (HUD Handbook 4000.1
        Update 17, II.A.2).
    promoted_at: '2026-05-25T17:33:51+00:00'
    promoted_from: hud-4000-1-ii-a-2-roundd-v1.yaml
  - id: hud-4000-1-ii-a-2-ufmip-handling
    canonical_id: hud-4000-1-ii-a-2-ufmip-handling
    section: HUD Handbook 4000.1 II.A.2 — UFMIP
    description: |
      The Upfront Mortgage Insurance Premium (UFMIP) on an FHA-insured
      Mortgage must be entirely financed into the Mortgage or paid
      entirely in cash. Partial financing of the UFMIP is not permitted.
    type: do
    audit_question: For every FHA-insured Mortgage, can [LENDER] evidence that the UFMIP was either fully financed into the Mortgage or paid entirely in cash, with no partial financing?
    program_review: Do the P&Ps ensure UFMIP is either entirely financed into the Mortgage or paid entirely in cash, with no partial financing?
    file_review: Pull files; confirm UFMIP was fully financed or fully paid in cash.
    judgment: false
    feeds: []
    workflow_phase: closing
    owner_role: closer
    secondary_owner_role: underwriter
    cadence: per-loan
    consequence: Partial UFMIP financing renders the Mortgage uninsurable by FHA.
    tags:
      - round-d
      - regulator-direct
      - fha
      - hud-4000-1
      - ufmip
      - closing
      - promoted
    primary_source:
      tier: 1
      authority: HUD Handbook 4000.1 II.A.2 — UFMIP
      source_class: hud-handbook-4000-1
      source_url: https://www.hud.gov/sites/dfiles/OCHCO/documents/40001HSGH.pdf
      snapshot_id: 3bf33edadcf6461d
      fetched_at: '2026-05-25T14:10:11Z'
      content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
      paragraph_quote: The UFMIP must be entirely financed into the Mortgage or paid entirely in cash. Any
      drafter_attestation: |
        Copied verbatim from snapshot 3bf33edadcf6461d (HUD Handbook 4000.1
        Update 17, II.A.2).
    promoted_at: '2026-05-25T17:33:51+00:00'
    promoted_from: hud-4000-1-ii-a-2-roundd-v1.yaml
  - id: hud-4000-1-ii-a-2-mortgage-amount-rounding
    canonical_id: hud-4000-1-ii-a-2-mortgage-amount-rounding
    section: HUD Handbook 4000.1 II.A.2 — Mortgage Amount Rounding
    description: |
      [LENDER] must round the FHA-insured mortgage amount down to the
      nearest whole dollar amount in computing the principal balance for
      Title II forward mortgages.
    type: do
    audit_question: For every FHA-insured Mortgage, can [LENDER] evidence that the principal mortgage amount was rounded down to the nearest whole dollar?
    program_review: Do the P&Ps ensure the Title II forward mortgage principal is rounded down to the nearest whole dollar?
    file_review: Pull files; confirm the principal mortgage amount was rounded down to the nearest whole dollar.
    judgment: false
    feeds: []
    workflow_phase: closing
    owner_role: closer
    secondary_owner_role: underwriter
    cadence: per-loan
    consequence: Incorrect rounding produces a non-conforming mortgage amount and may be cited on HUD post-endorsement review.
    tags:
      - round-d
      - regulator-direct
      - fha
      - hud-4000-1
      - mortgage-amount
      - closing
      - promoted
    primary_source:
      tier: 1
      authority: HUD Handbook 4000.1 II.A.2 — Mortgage Amount Rounding
      source_class: hud-handbook-4000-1
      source_url: https://www.hud.gov/sites/dfiles/OCHCO/documents/40001HSGH.pdf
      snapshot_id: 3bf33edadcf6461d
      fetched_at: '2026-05-25T14:10:11Z'
      content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
      paragraph_quote: The mortgage amount must be rounded down to the nearest whole dollar amount,
      drafter_attestation: |
        Copied verbatim from snapshot 3bf33edadcf6461d (HUD Handbook 4000.1
        Update 17, II.A.2).
    promoted_at: '2026-05-25T17:33:51+00:00'
    promoted_from: hud-4000-1-ii-a-2-roundd-v1.yaml
_promotion_history:
  - promoted_at: '2026-05-25T17:33:51+00:00'
    candidate_path: obligations\_remediation\round-d-investor-guides\hud-4000-1-ii-a-2-roundd-v1.yaml
    candidates_promoted: 5
    candidates_skipped_existing: 0

Verbatim regulatory text (5)

Verbatim provisions from HUD Handbook 4000.1 II.A.2 — Allowable Mortgage Parameters — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.

HUD Handbook 4000.1 II.A.2 — Underwriting Standard

Mortgagee must determine the Borrower’s creditworthiness, capacity to repay, and available

Source: HUD Handbook 4000.1 II.A.2 — Underwriting Standard · source URL · snapshot 3bf33edadcf6461d

HUD Handbook 4000.1 II.A.2 — Minimum Required Investment

The Mortgagee must review the credit report to determine the Borrower’s Minimum

Source: HUD Handbook 4000.1 II.A.2 — MRI · source URL · snapshot 3bf33edadcf6461d

HUD Handbook 4000.1 II.A.2 — Maximum LTV

The Mortgagee must apply the lowest applicable LTV percentage as determined under the

Source: HUD Handbook 4000.1 II.A.2 — LTV · source URL · snapshot 3bf33edadcf6461d

HUD Handbook 4000.1 II.A.2 — UFMIP

The UFMIP must be entirely financed into the Mortgage or paid entirely in cash. Any

Source: HUD Handbook 4000.1 II.A.2 — UFMIP · source URL · snapshot 3bf33edadcf6461d

HUD Handbook 4000.1 II.A.2 — Mortgage Amount Rounding

The mortgage amount must be rounded down to the nearest whole dollar amount,

Source: HUD Handbook 4000.1 II.A.2 — Mortgage Amount Rounding · source URL · snapshot 3bf33edadcf6461d