Overview
Carrington Mortgage Services, LLC (CMS) is implementing the following guideline changes for third-party originated FHA loan submissions (excluding Streamline loans) when the qualifying FICO score is 640 or less.
These guideline changes are effective for Correspondent Delegated Seller loans registered or submitted to CMS dated on or after February 10, 2025.
All FHA loans with a qualifying FICO score of 640 or less, regardless of DU or LPA Accept findings, must meet FHA manual underwriting guidelines. This includes, but is not limited to, verification of housing history, explanations for derogatory credit, acceptable credit history, minimum reserves, maximum debt ratios and documenting acceptable compensating factors. The Comp factors below may be used to increase DTI, per existing FHA manual underwriting requirements.
Comp Factors
- Cash Reserves totaling 3 months for 1-2 units or 6 months for 3-4 units
- Significant Additional Income earned for at least 12 months that is not already included in Gross Effective Income (must bring ratio under 37/47)
- Maximum Increase in Housing Payment (less than 5% and less than $100 increase)
- No Discretionary Debt for the past 6 months (no revolving/installment debt)
- Residual Income exceeds Minimum standards (using VA standards by State and Family Size)
Pricing
No pricing exceptions or concessions are allowed for these loans.
Maximum Ratios Examples
|
Lowest Minimum Decision Credit Score
|
Maximum Qualifying Ratios (%) | Acceptable Compensating Factors |
| 500-579 or No Credit Score | 31/43 | Not applicable. Borrowers with Minimum Decision Credit Scores below 580, or with no credit score may not exceed 31/43 ratios.
Energy Efficient Homes may have stretch ratios of 33/45. |
| 580 and above | 31/43 | No compensating factors required.
Energy Efficient Homes may have stretch ratios of 33/45. |
| 580 and above | 37/47 | One of the following:
· Verified and documented Cash Reserves; · Minimal increase in housing payment; or · Residual income. |
| 580 and above | 40/40 | No discretionary debt. |
| 580 to 640* | 40/50 | Two of the following:
· Verified and documented Cash Reserves; · Minimal increase in housing payment; · Significant additional income not reflected in Effective Income; and/or · Residual income. |
*Please Note: for FICO scores of 641 and above, follow DU/AUS Findings.
Contacts
Please contact CorrespondentRM@carringtonms.com with any questions. Carrington thanks you for your business.
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2025
. Carrington Mortgage Services, LLC headquartered at 1600 South Douglass Road, Suites 110 & 200-A, Anaheim, CA 92806. NMLS ID # 2600. Toll Free # 800-561-4567. All rights reserved. Restrictions may apply. All loans are subject to credit, underwriting and property approval guidelines. Nationwide Mortgage Licensing System (NMLS) Consumer Access Web Site: