Articles Published in: 2011

October 21, 2011

Getting Ready For An FHA Home Loan

Buying a home is a big decision. There are many factors to consider when trying to prepare for the commitment of home ownership, and an FHA loan applicant can learn a great deal by examining an FHA loan application and using an FHA mortgage calculator to learn what kind of financial details come into play. FHA loan pre-qualifying questions at sites like FHA.com (a private company, not a government website) ask some very important starter questions you can use to begin your research. For example, do you know how much you’re willing to spend on the home? Many borrowers at the beginning of the research process have a hard time judging what prices are fair for homes in their area and which ones might need some negotiation. Anyone who feels | more...

October 20, 2011

Does the FHA Provide Down Payment Assistance?

By Joe Wallace

Recently we posted about FHA rules for down payments. For all FHA new purchase home loans, there is a minimum down payment of 3.5%. Borrowers are required to make this down payment above and beyond any closing costs and related fees that may be required to be paid up front. Some borrowers may have a difficult time coming up with cash to make down payments, and while the FHA does allow loan applicants to borrow money for a down payment, it must come from a third party with no financial interest in the FHA insured loan transaction and must be secured by “real property” rather than a credit card cash advance or signature loan. Some borrowers ask if the FHA also offers a down payment assistance program to help borrowers | more...

October 20, 2011

Can I Add A Borrower To My FHA Home Loan?

By Joe Wallace

One common question about FHA home loans involves adding borrowers to the loan. Some house hunters begin their search for a home by themselves, but along the way decide they wish to co-borrow with someone else. The reasons vary–some borrowers get engaged to be married, others decide they’d rather share the expense of buying and owning a home with someone else, others want to purchase property with a family member. Whatever the reasons, adding someone to an FHA loan depends greatly on where a borrower is in the application process. FHA loan rules state that all borrowers must submit loan application data. No one can be added to an FHA loan without submitting their credit and employment details and other required information the same as the primary borrower. Lenders must | more...

October 19, 2011

FHA Loan Down Payments

By Joe Wallace

All FHA home loans require a down payment. In lender-speak, this is known as a “minimum required investment” from the borrower. The absolute minimum down payment for an FHA new purchase home loan is “not less than 3.5 percent of the appraised value of the property” according to FHA Mortgagee Letter 2008-23. But what if the borrower cannot afford to pay the down payment out of pocket? FHA rules prohibit the down payment from being included in the mortgage, so what is a borrower to do in cases where they don’t have enough funds available for the minimum required investment? According to FHA loan rules, “The borrower may obtain a loan for the total required investment, as long as satisfactory evidence is provided that the loan is fully secured by | more...

October 18, 2011

FHA Loans: Can I Use a Power of Attorney to Close?

By Joe Wallace

The FHA loan process can be a long and winding road before getting to the closing date, and not every transaction goes as smoothly as hoped. While many FHA borrowers fully anticipate showing up on closing day to sign final paperwork, render any payments due and take possession of the property, sometimes life gets in the way and prevents the borrower from being there in person. Sometimes that’s because of work requirements, family emergencies, health problems or other factors, but regardless of the cause, something is preventing the borrower from being physically present to sign his or her name and take ownership of the home. If a borrower cannot be present in person to close the deal, do FHA rules allow a third party to act on the borrower’s behalf | more...

October 18, 2011

FHA Loans and Required Repairs

By Joe Wallace

When an FHA loan applicant finds a home they are serious about purchasing, an offer is made for the property and a process is set in motion that leads to the FHA loan being approved or denied. When the loan is approved, it means the property has been appraised by an FHA-approved appraiser. In some cases a home may pass the appraisal process with few or no required improvements or repairs. In other cases a home may be rejected as unsuitable because of the condition of the property, but in many other cases a home may be approved for an FHA mortgage provided certain repairs or improvements are made as a condition of the sale. In such cases, depending on the repairs, the borrower or seller may be required to | more...

October 17, 2011

FHA Property Appraisals Vs. Home Inspections

By Joe Wallace

A recent reader question came in about FHA appraisals. “How do I file a complaint about a lemon home? It was inspected by an FHA approved inspector.” This question raises two very important issues. Does the FHA “inspect” properties? If not, who does? The FHA requires an appraisal before an FHA loan will be approved and can move to closing. The appraisal is designed to insure the property meets minimum standards, is safe and livable, and the appraisal also establishes a fair market value. But an FHA appraiser is not an inspector. The FHA appraisal process is not designed to guarantee the home is free from defects or problems. The appraisal process does not guarantee your home is problem-free. Before a borrower commits to purchasing the home, or as a | more...

October 14, 2011

HUD Suspends Former Lend America President Michael Primeau

By Joe Wallace

The FHA and HUD have announced the suspension of Michael Primeau, former President of Lend America, following Primeau’s guilty plea in a loan fraud scheme. Primeau is no longer permitted to conduct business with the FHA or HUD. According to a press release at FHA.gov, “The U.S. Department of Housing and Urban Development (HUD) today announced it is immediately suspending Michael Primeau, former President of Lend America, from doing any business with HUD following his admission that he engaged in a wide-scale mortgage fraud scheme.” “Specifically, Primeau pled guilty to charges he directed employees of Lend America, a former FHA-approved lender, to divert mortgage funds intended to pay off borrowers

October 13, 2011

FHA Title I Home Improvement Loans

By Joe Wallace

If you explore FHA home loan options, you’ll find a variety of them–there are loans for new purchase mortgages, but also options for energy efficient mortgages, home equity conversion loans, rehab loans, and something called the FHA Title I Home Improvement loan. Title I loans are used for repair, alteration, or site improvements and can be used together with a 203k Rehabilitation Mortgage if needed. Title I loans for a single family home can be approved for amounts up to $25,000 for qualified borrowers. Applicants aren’t required to ask for the maximum amount; according to the FHA official site, “Both large and small improvements can be financed.” FHA rules also state, “Any loan over $7,500 must be secured by a mortgage or deed of trust on the property.” As with | more...

October 12, 2011

FHA Loan Applicants With Little Or No Credit History

By Joe Wallace

A reader sent in a question about credit history, asking if a lack of credit was grounds for disqualifying an FHA home loan application. It would be easy to assume the answer to that questions is “Yes”, but a quick check of FHA loan requirements reveals an answer that may surprise you. According to the FHA rules for lenders found in Handbook 4155.1, the lack of credit history cannot be used as the basis for rejecting an FHA loan application. That answer leads many to wonder how the lender can tell whether a borrower is a good credit risk or not. How does the FHA approach situations where the borrower has no previous credit? According to the official site, “FHA permits mortgage lenders to establish a borrower