Articles Published in: 2011

October 12, 2011

FHA Loans: For U.S. Citizens Only?

A recent reader question raised an interesting issue; does an FHA loan applicant have to be a U.S. citizen in order to qualify for the loan? According to FHA rules, “Permanent Resident Aliens are eligible for an FHA-insured mortgage under the same terms as US citizens.” The FHA also adds, “ Non-Permanent Resident Aliens are eligible for FHA-insured mortgages provided the property will be the borrower’s principal residence, they have a valid social security number, and the borrower is eligible to work in the US.” How does the lender get evidence showing that a borrower is able to be approved for an FHA mortgage in these cases? The FHA rules say “Evidence of residency and work status should be obtained from the U.S. Citizenship Immigration Services (USCIS). Eligibility to work | more...

October 11, 2011

HUD Charges New York Real Estate Company With Fair Housing Act Violations

By Joe Wallace

On occasion you’ll find reports here about the latest actions brought by HUD against those in the housing industry suspected of violating the Fair Housing Act, RESPA, and other federal anti-discrimination laws. We write about these things for two reasons–one is to raise awareness of the issues, but the other is to remind FHA loan applicants and borrowers that there is recourse when anti-discrimination laws are violated. One of the reasons the FHA and HUD are able to bring legal actions against those who break these laws is because the victims file a complaint–the victim is often the first line of defense against those who discriminate. Without reporting the problem, the FHA and HUD have a much tougher time preventing housing discrimination. Many of the headlines we report have to | more...

October 10, 2011

FHA Loans and the Debt-To-Income Ratio

By Joe Wallace

The debt-to-income ratio is an important calculation all home buyers need to understand. To qualify for an FHA home loan, potential borrowers should have a debt-to-income ratio of 43%. But what does that mean? According to the FHA, that means that the total mortgage payment plus all monthly financial obligations cannot exceed 43% of the borrower’s “gross effective income”. It’s important to point out that the debt-to-income ratio does include the mortgage payment–not the amount of the borrower’s current financial obligations alone at the time of the FHA loan application. Knowing the debt-to-income requirements can help a future borrower prepare for the FHA loan application because it’s as simple as doing the math on your income/expenses and set financial goals accordingly. If you know a year in advance that your | more...

October 7, 2011

Buying a Fixer-Upper With an FHA Loan

By Joe Wallace

The FHA fixer-upper loan, technically called an FHA 203(k) mortgage, is for those who want to purchase property which is in need of repair. The borrower purchases the property with the understanding that it must be renovated or repaired by the purchaser (with funds from the loan) as part of the loan agreement. Borrowers apply for this type of home loan in a different manner than for new purchase loans where the property must be in acceptable condition–the loans known as FHA 203(b) mortgages. For the fixer-upper or 203(k) loan, the borrower applies for a loan and agrees to make a down payment for at least 3.5% of the purchase price and repair costs of the property. According to FHA loan rules, the buyer finds the right home and gets | more...

October 6, 2011

What Do I Need To Know About FHA Loans?

By Joe Wallace

First time home buyers interested in FHA home loan options often have plenty of questions about the basics of FHA mortgages. What does it take to qualify for an FHA home loan? How much down payment do I need? Can I get a no-money down FHA loan? Some basics of FHA loans include the following: A typical FHA mortgage for a single-family property is guaranteed under a program called the FHA 203(b). Some borrowers get a little confused (at first) by the complete name of this FHA program, which is called FHA 203(b) Mortgage Insurance. The FHA does not provide loan money, it insures the loan for a borrower applying for the FHA mortgage at a participating lender. The government cannot force a bank or financial institution to participate in | more...

October 5, 2011

FHA Loans and the Borrower’s Rights

By Joe Wallace

FHA mortgages have a number of features which make them more advantageous for qualified borrowers than many conventional loans. A low down payment requirement is one of those advantages, as is more forgiving requirements for credit history. Contrary to what some believe, there is also no maximum income limit for a typical single-family FHA home loan. In addition to these advantages, there are also a list of rights all borrowers have that protect them in the loan application and purchasing process. Did you know all borrowers have the right to know which fees are refundable and which are not should the loan agreement be canceled? You have the right to have these fees explained to you before you commit. Home buyers also have the right to be fully informed when | more...

October 5, 2011

FHA Loans: What is a Residential Mortgage Credit Report?

By Joe Wallace

Borrowers who seek FHA insured home loans are required to submit credit, employment and income information to the lender in order to be approved for the loan. The borrower’s information is reviewed by the lender, but must also be verified to insure the information is current and accurate. In addition to verifying the information submitted, the lender is also required to get credit reports on the borrower. But what happens when the borrower disputes information on a credit report? For example, if a credit report states that a collection action is outstanding, but the borrower claims the bill has been paid, the lender may be required to use something called a Residential Mortgage Credit Report (RMCR) instead of the standard credit report known as a three repository merged credit report | more...

October 4, 2011

FHA Loans: Do They Require a Background Check?

By Joe Wallace

Newcomers to FHA loans and home buying in general often wonder how extensive the credit check might be; some wonder if the lender goes beyond examining credit scores and employment history. Given the amount of detail lenders require in order to process FHA home loan applications, it’s not unreasonable to wonder if a background check is part of the application process. FHA requirements for FHA insured mortgage loans do state a credit check is needed that includes residency information, employment history and other details to give an accurate picture of an applicant’s background. The borrower is not “investigated” for details outside of the information needed to determine whether he or she is a good credit risk, but a 2010 law does require additional steps for some types of refinancing loans | more...

October 3, 2011

FHA Mortgage Insurance Premiums

By Joe Wallace

Earlier in 2011 we reported a change to FHA Mortgage Insurance Premiums–according to FHA Mortgagee Letter 11-10, a scheduled increase in Annual Mortgage Insurance Premiums took effect for all FHA loan case numbers dated on or after April 18th 2011. The change was an increase in the annual premium for FHA loan terms of: –Greater than 15 years–Equal to or less than 15 years For FHA mortgage loans with greater than 15 year terms, the new MIP amount depends on the down payment. If the down payment is equal to or greater than 5%, the new Annual Premium is 110 basis points (bps). If the down payment is less than 5%, the new Annual Premium is 115 basis points (bps). FHA instructions for loans equal to or less than 15 | more...

September 30, 2011

FHA Loans: Approved and Non-Approved Properties

By Joe Wallace

FHA loans for single family, new purchase properties have a set of requirements and regulations covering the types of homes that can be purchased with an FHA insured mortgage. Many people envision a traditional suburban home when thinking of buying property with an FHA mortgage, but FHA-approved condo projects, town homes, row houses, and even detached (or semi-detached) housing can be approved for an FHA loan if the property meets the right standards. Sometimes the phrase “single-family home” misleads a potential FHA borrower into thinking they can only purchase single unit properties. But according to the official site, “FHA’s single family programs are limited to one- to four-family properties that are owner-occupied principal residences. The key to being able to purchase a multi-unit property (capable of housing up to four | more...