Articles Published in: 2011

July 14, 2011

FHA Loan Debt-To-Income Ratios: What’s Not Counted As ‘Debt’

Getting approved for an FHA home loan means submitting a lot of personal information to the lender which is used to calculate a potential borrower’s ability to repay the loan. Your lender will ask for information on your current debts, credit lines, loans and other details. All of that information is compiled and compared to the amount of money the borrower gets from income sources the lender can verify. Once those details form a complete financial picture, the lender can make an educated decision on whether or not to approve an FHA home loan. The FHA allows 29% of your total monthly income to be used for housing costs and 41% towards housing expenses and other long-term debt. Getting that “debt picture” can be tricky–some income sources are not considered | more...

July 13, 2011

FHA Loan Amounts for Loans With Non-Occupying Co-Borrowers

By Joe Wallace

FHA loans permit a buyer to apply for the mortgage with a non-occupying co-borrower, which is defined as someone financially obligated on the mortgage and required to sign all legal paperwork to that effect, but who is not living on the property purchased with the FHA loan as their principal residence. In these cases, FHA rules state that the loan amount is limited to a 75% LTV, which means the borrowers must provide the remaining 25% of the purchase price. Some borrowers may read that feeling defeated before they start if that remaining 25% is too much to come up with, but FHA loan applicants should keep in mind an exception on this 75% LTV requirement for non-occupying co-borrowers who are also related to the occupying borrower. Specifically, FHA requirements | more...

July 12, 2011

FHA Loan Rules For Co-Signers, Co-Borrowers

By Joe Wallace

When a borrower applies for an FHA insured mortgage, he or she has the option of bringing a co-signer or co-borrower to the deal. It may be easy to assume the two terms are interchangeable, but they aren’t. Co-signers and co-borrowers have different rights and responsibilities under FHA regulations and it’s important to know which is which–especially if you’re the co-signer or co-borrower. The major difference between the two is that a co-borrower “takes title to the property”, meaning that there is shared ownership between co-borrowers. Co-signers sign the legal paperwork and are obligated to pay on the mortgage. Regardless of what financial arrangements have been made privately between the co-borrowers, on paper co-borrowers share responsibility for the mortgage payment. Co-borrowers must qualify for the VA loan together. Compare those | more...

July 12, 2011

Fidelity National Financial to Pay 4.5 Million in RESPA Kickback Settlement

By Joe Wallace

FHA borrowers come to the bargaining table with a set of consumer protections on their side in the form of the Real Estate Settlement Procedures Act, or RESPA for short. One of those protections is a policy that lenders may not get any financial compensation for referring business to third parties such as home warranties, insurance, etc. This rule prevents a conflict of interest in the real estate industry; RESPA laws are designed to keep buyers from being steered towards goods and services based on hidden relationships between lenders and third parties. HUD recently issued a press release announcing a settlement involving Fidelity National Financial, which was found to have engaged in illegal kickbacks and referral payments. The press release says Fidelity National Financial, “engaged in a widespread and years-long | more...

July 11, 2011

More Information on the FHA Loss Mitigation Program for Unemployed Borrowers

By Joe Wallace

The FHA offers help for those in trouble on their FHA mortgages in the form of the Loss Mitigation Program. The FHA recently sent out additional guidance aimed to specifically help homeowners who struggle to pay on their FHA loans during period of unemployment. The FHA’s “Unemployment Special Forbearance” was temporarily amended and clarified to further help prevent unemployed homeowners from going into default and foreclosure. “In Mortgagee Letter 2000-05, FHA provided mortgagees with additional guidance concerning the Loss Mitigation Program that all mortgagees must follow, when applicable, to reduce FHA insurance losses in those circumstances, as determined by the mortgagee, where delinquent mortgagors might be able to find an alternative to foreclosure.” Previous changes to the program as described in past FHA Mortgagee Letters permitted FHA lenders to “offer | more...

July 8, 2011

FHA Loans: Extended Mortgage Relief For Unemployed Homeowners

By Joe Wallace

An FHA press release, HUDNo. 11-139, has announced changes to FHA loan rules which require lenders to extend the loan forbearance period for unemployed FHA borrowers under the Special Forbearance Program. The new forbearance period for that program is now 12 months, a significant change from the previous requirement. The FHA press release says the Obama administration “also intends to require servicers participating in the Making Home Affordable Program (MHA) to extend the minimum forbearance period to 12 months wherever possible under regulator and investor guidelines.” According to the FHA, “The changes to FHA

July 7, 2011

FHA Loans: What’s The Minimum Credit Score?

By Joe Wallace

Applying for a home loan can be daunting; some people feel intimidated by the home loan process because of past credit mistakes they’ve made and assume they aren’t eligible for a home loan because of those mistakes. But is it safe to assume that a few problems in the past will keep you from becoming a home owner? Not necessarily. According to FHA rules, what makes a borrower eligible for an FHA mortgage is a combination of credit history, steady employment and your debt-to-income ratio, and the record of reliable payments in the last 12 to 24 months. The more reliable you are as a bill payer, the better chance you have of being approved for an FHA home loan. What do the FHA loan rules say about credit scores | more...

July 7, 2011

FHA Loans: What The Lender Looks For In Your Credit Report

By Joe Wallace

When a borrower fills out an FHA loan application, there is a requirement to submit a variety of information including proof of income, residency information, and financial details including all currently open lines of credit. The lender will verify all this information, including credit history. The lender must order credit reports from the three major agencies–Equifax, TransUnion, and Experian. These reports cannot be furnished by the borrower, they must come directly from the credit reporting agencies and must contain no erasures or alterations to the physical report itself. Corrections or deletions of any erroneous information must be made by the borrower through the credit reporting company’s official channels. When the lender gets your credit reports, he or she is looking for a standard set of information as spelled out in | more...

July 6, 2011

FHA Loan Residency Requirements

By Joe Wallace

One of the unique features of FHA home loans is the occupancy or residency requirement. According to FHA rules, borrowers must certify that the home being purchased with an FHA insured mortgage must be the primary or principal residence. How does the FHA define “principal residence”? According to the FHA official site, “A principal residence is a property that will be occupied by the borrower for the majority of the calendar year.” This means that summer homes, vacation properties, time shares and similar property types are ineligible for FHA new purchase home loans. The part-time nature of these homes excludes them from the FHA mortgage loan program. This issue is easy enough to understand for a single borrower, but what do the rules say when more than one FHA loan | more...

July 5, 2011

Can I Be Turned Down For an FHA Loan Even Though I Have Good Credit?

By Joe Wallace

FHA home loans depend on several factors for loan approval. An FHA borrower must have a history of reliable payments, dependable income that is likely to continue into the future, and the right amount of income versus money paid out for monthly financial obligations. That amount, called the debt-to-income ratio, is one of the most important factors in determining whether or not to approve or deny an FHA mortgage loan application. There’s no minimum or maximum income limit for an FHA loan. The FHA looks at the debt-to-income ratio instead, using that as the yardstick which measures the applicant’s ability to pay the monthly FHA mortgage payment along with all other financial obligations. That’s why the government and your lender requires a full accounting of your current debts, including insurance | more...