Articles Published in: May 2011

May 11, 2011

Is There A Penalty For Pre-Paying On An FHA Home Loan?

It’s common knowledge that you should read a loan contract carefully, but when applying for a mortgage loan, many first time home buyers struggle to understand some of the fine print. It’s important to ask questions about any portion of an FHA or conventional loan agreement you don’t understand. For example, some buyers don’t fully grasp the implications of the penalties for “early payment” in a mortgage loan contract. Did you know some conventional loans can charge fees for early payoff of a home loan? FHA loan regulations don

May 10, 2011

How Does Chapter 13 Bankruptcy Affect My FHA Loan Application?

By Joe Wallace

In our last blog post we explored the FHA rules governing Chapter 7 bankruptcy and FHA mortgage loan applications. Having a Chapter 7 bankruptcy on your credit record does not automatically disqualify you from an FHA mortgage, but what about those who have Chapter 13 bankruptcy proceedings on their credit history? There are many similarities in the FHA rules for Chapter 13 bankruptcy and Chapter 7. The first is that having a Chapter 13 does not automatically mean a borrower will be rejected for the new FHA mortgage loan. Like Chapter 7 rules, the FHA requirements for Chapter 13, a record of on-time payments and improved credit habits is required. But unlike the FHA rules for Chapter 7, borrowers who filed Chapter 13 bankruptcy in the past have additional rules | more...

May 10, 2011

How Does Chapter 7 Bankruptcy Affect My FHA Loan Application?

By Joe Wallace

A common question for some FHA loan applicants has to do with previous bankruptcy filings and how having a bankruptcy on a credit record can affect a new application for an FHA home loan. There are two types of bankruptcy-Chapter 7 is a liquidation type bankruptcy, Chapter 13 is a reorganization process where outstanding debts are paid off over a period of up to five years. Chapter 7, where the borrower’s assets are liquidated in order to help pay off the debts owed, does not automatically mean an FHA loan applicant will be denied a mortgage loan. According to the FHA official site, “A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA mortgage if at least two years have elapsed since the date of the | more...

May 9, 2011

Can I Get an FHA Home Loan for a Second Home?

By Joe Wallace

In other blog posts we’ve written about the rules for FHA home loans, which include requirements that the property be used as a primary residence. That means an FHA borrower cannot take out a mortgage to purchase a summer home or vacation property–the rules forbid FHA loans for such “recreational use” purchases. Those rules aside, there are some instances where and FHA borrower could qualify to purchase a second home if certain conditions are met. The FHA describes such homes as “secondary residences”, stating “A secondary residence is a property the borrower occupies in addition to his or her principal residence.” These home loans are approved only when the FHA has evidence that “an undue hardship exists, meaning that affordable rental housing that meets the needs of the family is | more...

May 6, 2011

Refinancing to an FHA Mortgage From a Conventional Loan for Underwater Borrowers

By Joe Wallace

In a troubled housing market, many borrowers discover the property they’ve invested in has lost value, and the borrower may owe more on the home than they can reasonably expect to sell the property for. What does a borrower do in a situation where a potential loss on the home could occur through no fault of their own? For a limited time the FHA offers help to those in “negative equity positions” with an FHA refinancing loan option that moves the borrower from a conventional mortgage to an FHA-insured loan. The program was created specifically for homeowners with conventional loans owing more than the current value of the property. These “underwater” borrowers must meet specific FHA requirements, and lender participation in the program is voluntary, but qualified underwater home owners | more...

May 5, 2011

FHA Loans: How Important Is My Credit Record?

By Joe Wallace

FHA guidelines state that a loan applicant’s credit record is one of the most important indicators of how well the borrower might do with an FHA mortgage. On-time payments on past and present credit debt and other financial obligations tell the lender and FHA a lot about “a borrower’s attitude toward credit obligations and predicting a borrower’s future actions” according to the FHA official site. That said, the FHA instructs lenders to “examine the overall pattern of credit behavior, rather than isolated occurrences of unsatisfactory or slow payments”. That is a good indication of the FHA approach to credit history and approving FHA loan applications. According to the FHA, a borrower should not be penalized for one-time mistakes or situations that could otherwise be interpreted as “bad behavior” on a | more...

May 4, 2011

FHA Cash-Out Refinancing Facts (Part Two)

By Joe Wallace

In our previous blog post, we discussed the rules for FHA cash-out refinancing loans. The FHA allows cash-out refinancing for qualified borrowers. Those qualifications include a requirement for the existing mortgage to be current. FHA

May 4, 2011

FHA Cash Out Refinancing Facts

By Joe Wallace

House hunters who purchase a home with an FHA mortgage loan may eventually decide to refinance the home to get a better interest rate, lower payments or to take advantage of the equity built up in the home. Many borrowers are curious about FHA cash-out refinancing options–does the FHA allow a cash-out refinancing option? The answer is yes, but there are some conditions that apply. There are requirements on cash-out refinancing that may not apply to other types of refinancing loans. For example, a cash-out refinancing loan will be denied to borrowers who are delinquent on the mortgage or who have a record of delinquency within the last 12 months. Borrowers with less than six months of payment history on the current mortgage will be turned down for cash-out refinancing, | more...

May 3, 2011

FHA Mortgage Insurance Premiums–When Do They Stop?

By Joe Wallace

FHA loan applicants have many things to budget and plan for. Mortgage insurance is one of the costs associated with a home loan, and FHA loan applicants are required to pay an annual mortgage insurance premium. The reason for mortgage insurance is to protect the lender against a loss associated with a default/foreclosure on the home. An FHA borrower making a down payment of less than 20% is required to carry mortgage insurance. But borrowers should know that mortgage insurance isn’t required for the entire term of the loan. The insurance is automatically terminated based on the nature of the loan, the length of the loan term and the Loan to Value ratio or LTV. According to the FHA official site, for all FHA mortgages closed after January 1, 2001, | more...

May 3, 2011

FHA Loans, Appraisals and Refinancing

By Joe Wallace

FHA loan applicants who find a suitable home and want to buy it must wait out the required FHA appraisal process before a loan can be approved. The FHA appraiser’s job is to make sure the home meets minimum property requirements and to assign the fair market value. The fair market value establishes a baseline for the FHA loan amount and is a very important part of the process. That appraisal has an expiration date. According to FHA rules, ” Effective for all case numbers assigned on or after January 1, 2010 the validity period for all appraisals on existing, proposed, and under construction properties, including HUD REO appraisals that have an effective date of on or after April 1, 2010, will be 120 days.” That doesn’t give the borrower | more...