Articles Published in: June 2012

June 29, 2012

Questions and Answers About Escrow Accounts and FHA Loans

The Department of Housing and Urban Development official site at www.hud.gov offers a large amount of valuable resources for first time home buyers interested in purchasing a home with an FHA guaranteed mortgage loan. Among those resources are details of the Real Estate Settlement Procedures Act (RESPA) which governs a variety of aspects of the home loan process. One of those aspects is the escrow account–something many lenders may require as a part of doing business in a home loan transaction. What does RESPA say about escrow accounts? For starters, the FHA does not require an escrow account as a condition of loan approval. Escrow accounts may be required by the lender, but no lender should be telling you it’s because of FHA requirements or RESPA laws. HUD does regulate | more...

June 28, 2012

FHA Loan Reader Question: Checking Credit Scores

By Joe Wallace

A reader asks, “I did have bad credit at one time but I would say I have good credit now. I found out I had 2 things against me but I have taken care of them, they were small amounts but they would be the only thing against me over the past 5 years. I have paid off a car that I paid for over 5 years and also several small loans.” “I am buying a mobile home through the owner but I want to build a house on some property that I own and I am not sure about my credit score and wanted to know if there is any way of finding out if I would be eligible for an FHA loan without applying for the loan and | more...

June 27, 2012

FHA 203(H) Home Loans For Disaster Victims

By Joe Wallace

There is much in the news about wildfires, tropical storms and hurricanes. Tropical Storm Debbie has brought large volumes of rain and flooding risks to Florida residents, and Colorado home owners are currently threatened by spreading fires. In presidentially-declared disaster areas, the FHA offers a program to help victims recover. The FHA 203(h) home loan for disaster victims is described on the FHA official site as

June 26, 2012

FHA Loan Rules For 203(K) Rehab Mortgages

By Joe Wallace

The FHA describes its 203(K) Rehab loan as, “the Department’s primary program for the rehabilitation and repair of single family properties. As such, it is an important tool for community and neighborhood revitalization and for expanding homeownership opportunities.” “Since these are the primary goals of HUD, the Department believes that Section 203(k) is an important program and we intend to continue to strongly support the program and the lenders that participate in it.” But what are the rules for an FHA 203(k)? There are some restrictions on the type of property that can be rehabbed under this program, as well as requirements for the condition of eligible properties. For example, “To be eligible, the property must be a one- to four-family dwelling that has been completed for at least one | more...

June 26, 2012

FHA Loan Reader Question: Non-Occupying Co-Borrowers

By Joe Wallace

A reader asks, “Hello, I am interested in getting an FHA 203K mortgage to buy a fixer-upper and add repair costs on top of the loan amount. In the conditions of the FHA 203K plan, there is a stipulation that requires the homeowner to occupy the house. Must all of the people listed on the mortgage/loan live in the home? Can just one person listed live there without violating the terms?” FHA loans do make provisions for non-occupying co-borrowers. However, there are limits which apply to these transactions that can affect the amount of the FHA home loan. In most cases an FHA loan with a non-occupying co-borrower has a limit–for qualified borrowers the loan would be approved for 75% of the loan-to-value ratio, rather than the maximum loan amount. | more...

June 25, 2012

FHA Home Loans and “Qualifying Ratios”

By Joe Wallace

One frequently asked question about FHA home loans goes something like this: “Why do different banks seem to have different standards for FHA home loans?” It’s a legitimate question–some lenders require different credit scores than others, some are stricter about certain types of credit issues or require longer wait times after bankruptcy or foreclosure. Why? The FHA loan rulebook for lenders, HUD 4155.1, has a section in Chapter Four called “Qualifying Ratios” which can help borrowers understand why some of these variances may occur. Every bank has its own set of standards, based on the need to effectively manage risks in lending while allowing credit access to the largest number of qualified borrowers the company can support. What do the FHA rules require a lender to take into consideration when | more...

June 22, 2012

FHA Loan Limits and Term Rules For Streamline Refinancing Loans

By Joe Wallace

FHA Streamline Refinancing Loans offer qualified borrowers a distinct advantage–there is reduced paperwork for FHA Streamline Loans, the borrower may in some cases be able to get the refinancing loan without an appraisal, and the result can be lower mortgage payments. FHA loan rules say of streamline loans, “Streamline refinances

June 21, 2012

FHA Loan Rules For Employment and Income

By Joe Wallace

FHA home loans require the borrower to submit employment information to the lender for verification. This is done for several reasons to include documenting the borrower’s income, stability of that income, and how long that income has been ongoing. FHA Loan rules, as described in HUD 4155.1 Chapter Four, Section D, state the following about income and employment: “To be eligible for a mortgage, FHA does not require a minimum length of time that a borrower must have held a position of employment. However, the lender must verify the borrower

June 20, 2012

FHA Loan Reader Question: Unpaid Debts and FHA Loan Applications

By Joe Wallace

A reader asks, “Can a I obtain an FHA loan with an unpaid charge-off reported on my credit report for over $10,000? I tried to pay/settle the debt, but the bank refuses to accept any payment because the account is in transition. The statute of limits has expired for the the bank to pursue debt collection; however, it has not been seven years for the account to be completely removed from my credit. I

June 19, 2012

Can I Buy a HUD Home With an FHA 203(k) Fixer-Upper Loan?

By Joe Wallace

The FHA official site has a special section for buyers interesting in purchasing HUD homes–properties that were once purchased with an FHA guaranteed mortgage but later foreclosed upon and now owned by FHA/HUD. According to the FHA page “About Buying HUD Homes”, these properties are single-family homes with one to four units, offered for sale to “recover the loss on the foreclosure claim.” Anyone can purchase a HUD home; “If you have the cash or can qualify for a loan (subject to certain restrictions) you may buy a HUD Home. HUD Homes are initially offered to owner-occupant purchasers (people who are buying the home as their primary residence). Following the priority period for owner occupants, unsold properties are available to all buyers, including investors.” Since HUD homes are foreclosed properties, | more...