Articles Published in: May 2011

May 31, 2011

What Disaster Relief is Available For FHA Borrowers?

Recent headlines all across America have told of floods, tornadoes and other natural disasters, all of which affect FHA borrowers, their homes and their mortgages. When an area is declared a major disaster area by the President of the United States, FHA borrowers should know there are programs that can help them in the wake of the disaster, provide help and forbearance on FHA loans, and even temporarily stop foreclosure proceedings. FHA officials urge borrowers to contact the FHA and the lender as soon as possible in the wake of a disaster as there are many steps that need to be taken in order to get help, advice and work on repairing a home damaged in the disaster area. But even before those calls are made, the FHA has begun | more...

May 30, 2011

FHA Minimum Property Requirements (Part Two)

By Joe Wallace

In our last blog post we discussed FHA minimum property requirements. Any home a buyer wants to make a serious offer on with an FHA insured loan must live up to the FHA’s minimum property standards or the loan cannot be approved. That doesn’t mean the home must be 100% in compliance when the appraiser comes to review the property, but it does mean that any deficiencies found must be corrected prior to the loan being closed upon. The FHA has three basic principles that guide an FHA appraiser when examining the home–it must be safe, sound, and secure. There are specific requirements in each area. For example, a home must not have stairways that aren’t equipped with hand rails, there must be no exposed wiring in the home, and | more...

May 30, 2011

FHA Loans: Minimum Property Requirements

By Joe Wallace

First-time applicants for an FHA mortgage learn soon learn about the FHA’s list of minimum property requirements, which any property bought with an FHA insured loan must live up to in order to get loan approval. The FHA has three guiding principles that inform its list of minimum property requirements, defined by what some appraisers call “the three S’s” which include safety, soundness and security. An FHA appraiser will come to inspect the property a borrower wants to buy, looking at the home to make sure it meets the FHA standards in each of these three areas. When it comes to safety, the FHA tells its appraisers, “Deficiencies or a lack of functioning components of plumbing, electrical or heating and cooling systems may create hazards that could be considered health | more...

May 27, 2011

Can I Assume an FHA Loan?

By Joe Wallace

There was a recent question in the comments section of this blog about FHA loan assumptions, so we thought it would be a good time to review the basics. Assumption of an FHA loan is a process where, according to the FHA official site, “the responsibility of the mortgage is acquired by another person through either Simple or Creditworthiness process.” This means that a potential borrower could take over the FHA mortgage of another borrower, but in some cases the process varies depending on when the FHA insured loan was originated. The “Simple” assumption process is only for FHA loans originated before December 1, 1986. Loans after that date may also be assumed, but the FHA requires a “creditworthiness assumption process”. Simple assumptions allow the borrower and lender to agree | more...

May 26, 2011

FHA Loans And Your Credit–What Is The Lender Looking For?

By Joe Wallace

In our last blog post, we discussed FHA loans and credit history. Many people are afraid to apply for a home loan because of past credit mistakes, but it’s easy to assume the worst about credit reporting, your history with credit, and what an FHA approved lender is looking for when reviewing an FHA loan application. In some cases, those assumptions also apply to a lack of credit history. An FHA lender must investigate the applicant’s credit reports. A few late credit card payments or other minor issues in the past aren’t enough to condemn the borrower or have an application rejected. The FHA rules don’t have a chart for counting credit issues and a cut-off number for how many late payments are too many. Instead, the FHA rules state, | more...

May 26, 2011

FHA Loans and Your Credit History

By Joe Wallace

A home loan is a major investment. Many borrowers are nervous about the credit qualifying portion of an FHA home loan application because they’ve made mistakes in the past with credit, have collection judgements in their record or have experienced bankruptcy. Those who have been through foreclosure sometimes assume they can never get their credit rating repaired enough to qualify for a home loan. But in many cases such fears are not warranted–at least where FHA loans are concerned. Conventional loans are more difficult to get in the wake of housing market woes, a bad economy and other factors, but borrowers trying for an FHA mortgage soon learn there are more options available than one might assume. According to the FHA rules, getting access to those options means having a | more...

May 24, 2011

FHA HECM Loans and Fees For Required Counseling

By Joe Wallace

An FHA Home Equity Conversion Mortgage or HECM loan lets qualified borrowers age 62 or older get a loan on their home which is not paid back in any way until the borrower dies or sells the property. Borrowers can get a line of credit or cash payments (or combinations of the two) depending on how the loan is set up. There are specific rules and requirements for HECM loans, and borrowers must get mandatory HECM loan counseling through an FHA-approved agency before the loan will be approved. The FHA is strict about the counseling requirements–an informed borrower is able to make the right choices for their circumstances. But HECM counseling is not free, and the counseling agencies are not government entities. Because the borrower is required to pay a | more...

May 23, 2011

FHA Loans: The Difference Between a Co-Borrower and a Co-Signer

By Joe Wallace

When applying for an FHA home loan, a borrower does not have to share the financial responsibility for the mortgage all by themselves. FHA rules allow a co-borrower or co-signer to apply alongside the borrower. In some cases this can improve the FHA loan applicant’s chances of getting a loan approved, and it’s also a way for a borrower with established credit to help a co-borrower become a home owner under the proper circumstances. It’s easy to assume a co-signer and co-borrower are the same thing, but in the eyes of the FHA and the lender, these are two separate terms. Co-signers don’t have the same benefits as co-borrowers, though they may share the same responsibilities in many cases. According to the FHA, “Co- borrowers take title to the property | more...

May 20, 2011

FHA Loans: Ineligible Properties For HECM Purchase Loans

By Joe Wallace

The FHA Home Equity Conversion Mortgage, also known as a reverse mortgage, is for borrowers age 62 or older who want to borrow against the equity built up in their homes. There are a variety of requirements for this unique FHA loan product which allows eligible borrowers to make no mortgage payments, collect cash against the equity in the home or get a line of credit. The loan is paid off when the borrower dies or sells the property. There is a variation of the HECM loan known as a HECM Purchase loan. According to the FHA, HECM Purchase Loans allow “seniors, age 62 or older, to purchase a new principal residence using loan proceeds from the reverse mortgage.” FHA HECM loan requirements include using the home as the primary | more...

May 20, 2011

FHA Loans and Non-Taxable Income

By Bruce Reichstein

FHA applicants come from a wide range of backgrounds, and no two house hunters have exactly the same circumstances. Some borrowers bring a large down payment to the transaction, while others may need down payment assistance (as permitted by FHA guidelines) and help finding just the right type of FHA mortgage. When it comes to verifiable income, it’s the same–borrowers come to the FHA loan application process with a diverse range of income sources. A common question about FHA loans and effective income sources has to do with the nature of that income. Can a potential FHA borrower list money from public assistance, foster care, disability payments or other types of non-taxable income? Will an FHA-approved lender be able to use this income in calculating the borrower’s debt-to-income ratio? As | more...