Articles Published in: November 2012

November 19, 2012

Minimum Property Requirements: FHA Loan Reader Questions

A reader asks, “I have an appraisal prepared by FHA approved appraiser. This is a short sale and appraiser has made comment that carpet in master bedroom has been removed and has bare concrete floors.” “Yet does not pose a health hazard. She has done the appraisal “As Is” but stated floor covering is required. Question is does FHA accept the floor to be painted with a sealer. Borrower does not want to put carpet in until the property is in their name. Seller will not do anything as it is a short sale. Thanks.” FHA mortgagee letters have in the past indicated that “exposed sub-flooring” or missing carpet can be grounds for issuing a correction. In this question the reader states that the missing carpet does not pose a | more...

November 16, 2012

FHA Loan Refinancing: Subordinate Liens

By Joe Wallace

A reader asks, “My husband and I have a FHA mortgage. We have had the mortgage since 2005. A couple of year ago I lost my job and we got behind.” “FHA gave us a 2nd mortgage with no interest and we only had to pay it off when we paid off the loan. I am not sure if it was called a modification.” “Our rate is 6.50%. We have been only 1 x 30 since then and we are current now. Do you think a streamline would work for us and if so would FHA subordinate the 2nd as it is?” It’s impossible to comment on whether a loan “works” for an individual as so much about home loan refinancing depends on individual circumstances, but the subordinate lien question | more...

November 15, 2012

FHA Refinance Loans: A Reader Question

By Joe Wallace

A reader asks, “I am trying to refinance my house but have had no luck. I have been employed with the same company for several years.” “My credit score is low, During the time period from 2007-2009 I was laid off twice. The only debt we have is our mortgage and what is associated with the house. Can I qualify through FHA for a refinance?” The reader’s question includes a mention of low credit scores. Low credit scores can definitely affect a borrower’s ability to borrow, depending on circumstances, the actual FICO score number and other factors. While some refinance loans are intended to assist a borrower and help reduce monthly payments, interest rates, or both, the credit score issue can be a factor. But it’s not safe to assume | more...

November 14, 2012

FHA Appraisals: Are They As Strict As Conventional Loan Appraisals? A Reader Question

By Joe Wallace

A reader asks, “Are FHA appraisals generally more “strict” than traditional mortgage appraisals? I am questioning what types of repairs are generally required in advance of closing?” “Specifically, I am selling my owner-occupied home to buyers that are anticipating an FHA loan, but they have expressed concern about the appraisal process.” “There are cosmetic concerns at the house (rooms need paint, screen door should be replaced, missing shutter), but the well, septic, roof and furnace are all relatively new. Can you please clarify?” This question is difficult to answer for one simple reason–FHA appraisals require the home to live up to both FHA minimum property standards (MPRs) AND state/local building code. If FHA minimum standards are met, but local code compliance is not evident, FHA MPRs do NOT trump the | more...

November 13, 2012

FHA Loan Credit Scores: A Reader Question

By Joe Wallace

A reader asks, “I want to buy a home. I am renting a house that cost me $ 1300.00 plus lights and water bill. I filed bankruptcy almost 3 years ago and my credit score is bad. I am working at the same place for almost 7 years for about 42,000.00 yearly. Could I get a FHA loan to buy a house?” FHA loan rules, as described in HUD 4155.1 Chapter Four, explains what (from a lender’s point of view) is required when applying for an FHA home loan. Under the section of Chapter Four titled, “Hierarchy of Credit Review” we learn that FHA requires the lender to take several issues into account when evaluating credit: “Evaluating credit involves reviewing payment histories in the following order: first: previous housing expenses, | more...

November 12, 2012

In Honor of Veterans Day

By Joe Wallace

The observed Veterans Day holiday is today–Monday November 12. But yesterday on November 11, there was an important ceremony honoring those currently serving and those who have served before. According to the VA official site, “The Veterans Day National Ceremony is held each year on November 11th at Arlington National Cemetery . The ceremony commences precisely at 11:00 a.m. with a wreath laying at the Tomb of the Unknowns and continues inside the Memorial Amphitheater with a parade of colors by veterans’ organizations and remarks from dignitaries. The ceremony is intended to honor and thank all who served in the United States Armed Forces.” Veterans Day, like Memorial Day before it, is a time to remember, to reflect, and to thank our men and women in uniform. Today we pause | more...

November 9, 2012

FHA 203(k) and Streamlined 203(k) Loans

By Joe Wallace

The FHA offers a home loan program known as the 203(k), which the FHA/HUD official site describes as a home loan guaranty from the FHA for the purpose of helping “homebuyers and homeowners to finance both the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage or to finance the rehabilitation of their existing home.” The 203(k) program “fills a unique and important need for homebuyers. When buying a house that needs repair or modernization, homebuyers usually have to follow a complicated and costly process. The interim acquisition and improvement loans often have relatively high interest rates, short repayment terms and a balloon payment.” The FHA 203(k) option offers an alternative to this, featuring a single mortgage at a fixed or adjustable rate, | more...

November 8, 2012

FHA Relief For Rhode Island Storm Victims

By Joe Wallace

An FHA press release announces help for Rhode Island storm victims in the wake of Hurricane Sandy. According to the FHA/HUD press release HUDNo.12-169; “U.S. Housing and Urban Development Secretary Shaun Donovan…announced HUD will speed federal disaster assistance to the State of Rhode Island and provide support to homeowners and low-income renters forced from their homes due to Hurricane Sandy.” The help comes after a presidential declaration of a federal disaster area in Bristol, Newport and Washington Counties. “The President’s declaration allows HUD to offer foreclosure relief and other assistance to certain families living in these counties” according to the press release. “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 | more...

November 7, 2012

FHA Loan Rules For Flood and Hazard Insurance

By Joe Wallace

In the wake of Hurricane Sandy, it seems like a good time to review a recent FHA Mortgagee Letter which addresses issues regarding hazard and flood insurance payments. While not all FHA borrowers may be affected by either storm damage or the rules in this FHA mortgagee letter, those that are affected should know the latest FHA guidance. FHA mortgagee letter 2012-19, titled “Hazard and Flood Insurance Requirement Reminder” reminds lenders about the Department of Housing and Urban Development’s “existing servicing procedures as they pertain to releasing hazard insurance proceeds for damaged properties securing Federal Housing Administration (FHA) insured mortgage loans.” According to the letter, the FHA “standard mortgage document” requires that the mortgagee–the lender–is named as a “Loss Payee” on the hazard insurance policy issued in connection with an | more...

November 7, 2012

FHA Loan Reader Questions: Credit Rating Issues

By Joe Wallace

A reader asks, “My husband and I have been trying to get approved for a home loan since august and keep getting denied. His credit is OK but my score is in the high 5s. I believe we have more than enough income to afford a house but dint know what else to do. Please help with some information on how we can get approved or how.” Questions like these have tough answers for some borrowers because the answer is basically that a credit score in the “high fives”, which we interpret to mean a FICO score in the high 500 range, isn’t good enough for many lenders in the current lending climate. While FHA does have more lenient FICO score minimums, many lenders don’t observe those bare minimums. The | more...