Articles Published in: August 2012

August 21, 2012

FHA Streamline Refinancing: the Net Tangible Benefit Rule

FHA Streamline Refinancing loans have a set of requirements regarding the streamline loan’s benefit to the borrower–requirements that directly affect the borrower’s eligibility for such loans. According to the FHA loan rulebook, there must be a “net tangible benefit” to the borrower as a result of the streamline refinancing loan. The Federal Housing Administration has a specific definition of this term which must be met (with certain exceptions allowed). From HUD 4155.1 Chapter Six, Section C: “The lender must determine that there is a net tangible benefit to the borrower as a result of the streamline refinance transaction, with or without an appraisal. Net tangible benefit is defined as:

August 20, 2012

FHA Announces Disaster Relief for Montana, Maryland, Wisconsin

By Joe Wallace

The FHA and HUD have issued press releases announcing disaster relief for victims of fires and storms across three states. FHA relief programs are now available for residents of federal disaster areas in Montana affected by wildfires there, plus storm victims in Maryland and Wisconsin. FHA relief is available to homeowners in federally declared disaster areas once such declarations are officially made. U.S. Housing and Urban Development Secretary Shaun Donovan said in recent press releases, “Families who may have been forced from their homes need to know that help is available to begin the rebuilding process,” said Donovan. “Whether it’s foreclosure relief for FHA-insured families or helping these counties to recover, HUD stands ready to help in any way we can.” FHA help for those in the affected areas includes | more...

August 17, 2012

FHA Loans and Employment Verification

By Joe Wallace

When you apply for an FHA mortgage loan, you’re required to list your employment history so it can be verified before loan approval. For borrowers who have had steady jobs with the same employer for two years or more, this isn’t a great cause for concern. Borrowers who have changed jobs more frequently than that may be worried that their job history might work against them on the FHA loan application. Is this fear grounded in reality? Or does the FHA make provisions for borrowers with recent job changes, a history of seasonal employment or other issues? According to the FHA loan rules found in HUD 4155.1, these issues are circumstantial and must be reviewed on a case-by-case basis to avoid discriminating against legitimate, qualified FHA borrowers who happen to | more...

August 16, 2012

Why Was I Denied an FHA Home Loan?

By Joe Wallace

Borrowers applying for an FHA home loan for the first time should know about the FHA rules that apply when a lender denies the loan application. Did you know FHA rules say the borrower cannot be left in the dark about the reasons for the denial? FHA loan rules, as described in HUD 4155.1 Chapter One, Section A, include a heading titled Borrower Rejection Based on Credit Report Information. That section says, “When a borrower is rejected for unacceptable credit characteristics on the basis of information contained in his/her credit report, he/she must be notified and given the name, address, and where available, the telephone number of the credit reporting agency.” This is an important rule for many reasons, but the most important one is it empowers the borrower to | more...

August 15, 2012

FHA ARM Loans: Basic Rules For Interest Rates and Disclosure

By Joe Wallace

Did you know the FHA offers Adjustable Rate Mortgages (ARM loans) for qualified borrowers? These loans feature lower introductory rates for at least one year, with interest rate adjustments specified over a period of time agreed upon between the borrower and lender. FHA ARM loans may feature an introductory rate fixed for one year or up to as many as 10 years depending on the terms of the loan. When the introductory period is over, the loan’s interest rate may be adjusted between one and two interest rate points with an interest rate cap over the lifetime of the loan of up to six points, depending on the loan. According to FHA.gov, “The lender and borrower negotiate the initial interest rate and margin. The margin must be constant for the | more...

August 14, 2012

FHA Loan Reader Question: Short Sales and FHA Loan Eligibility

By Joe Wallace

A reader asks, “My husband and I had a short sale in Dec. 2011, we qualify for the FHA loan with credit, income, and debt ratio. We are within the guidelines for a FHA loan. If we put the 3.5 down, do we have a waiting period because of the short sale?” This is a frequently asked question. The typical answer is that borrowers should expect to wait three years before being able to apply for an FHA home loan following a short sale. This rule is subject to certain conditions, some of which are described below–but it’s important to note that FHA minimums are just that. Your lender may have additional requirements. FHA loan rules do allow borrowers to apply for a new loan following a short sale if | more...

August 14, 2012

Proposed New Rules For Home Loans May Affect FHA Mortgages

By Joe Wallace

The Washington Post and Bloomberg News are reporting on a set of proposed rule changes by the Consumer Finance Protection Bureau that will, if implemented, change the way banks and customers interact on FHA loans, conventional mortgages and VA guaranteed loans. According to an article on WashingtonPost.com, the proposed regulations would “go beyond the standards for mortgage servicing that state attorneys general wrote into a court settlement reached with major banks on March 12” and the measures would also modify existing rules in the Real Estate Settlement Procedures Act (RESPA). At the Consumer Finance Protection Bureau (CFPB) official site, you’ll find a list of proposed changes which includes a requirement for monthly mortgage statements with clear details on loan amounts, the amount due, and how payments are applied to the | more...

August 13, 2012

FHA Loan Rules: Co-Borrowers

By Joe Wallace

Some first-time home buyers looking for a home to buy with an FHA mortgage don’t come to the bargaining table alone. The choice to include a co-borrower or co-signer is an important one, and FHA loan rules have guidelines when a co-borrower or co-signer is present. FHA loan rules make a distinction between a co-borrower and a co-signer. What’s the difference? According to FHA loan rules in HUD 4155.1, Chapter Four: “Both occupying and non-occupying borrowers and coborrowers take title to the property at settlement, are obligated on the mortgage note, and must sign all security instruments.” But the rules also say cosigners “do not hold ownership interest in a property”, and while they are obligated on the mortgage note, “have no liability for repaying the obligation, and must complete | more...

August 10, 2012

FHA Loans, Delinquencies and Federal Debt

By Joe Wallace

What can make a borrower ineligible for an FHA guaranteed home loan? Many things–a credit score that is too low, a lack of verifiable income or employment, and according to HUD 4155.1 Chapter Four Section A, delinquent federal debts. Instructions to the lender in HUD 4155.1 state, “If, after checking public records, credit information or CAIVRS, a borrower is found to be presently delinquent on any Federal debt or has had a lien (including taxes) placed against his/her property for a debt owed to the Federal government, he/she is not eligible for an FHA mortgage until –the delinquent account is brought current, paid, or otherwise satisfied, or –a satisfactory repayment plan is established between the borrower and the Federal agency owed, which is verified in writing. Tax liens may remain | more...

August 9, 2012

FHA Vs. VA Loans: Occupancy

By Joe Wallace

While many eligible veteran borrowers choose the VA home loans program over the FHA loan program, others decide to pursue an FHA mortgage for their own reasons. In some cases, the borrower picks an FHA guaranteed mortgage over the VA loan program because they don’t have enough VA loan entitlement left to get a full VA guaranty. In other cases the borrower may simply prefer the FHA loan program for one reason or another. Borrowers who choose the FHA mortgage loan option learn there is a big difference in occupancy requirements. While VA loan rules state that only the borrower or the spouse of the borrower may live in the home to satisfy the occupancy rule, FHA loans state, “Military personnel are considered occupant-owners, and are eligible for maximum financing | more...