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Articles Published in: 2012

February 14, 2012

FHA Loan Questions: Debt-To-Income Ratios

By Joe Wallace

When you apply for an FHA home loan, you’re required to list all current debts and other financial obligations. This helps the lender calculate the debt-to-income ratio, which must fall within the FHA required percentage. Borrowers should know what the FHA and HUD.gov say about the debt-to-income ratio percentages; “…monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, 4 should total no more than 41% of income. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.” Borrowers should be concerned with the amount of debt they currently have before applying for an FHA home loan. Paying off credit cards and closing unneeded open lines of credit should | more...

 

February 13, 2012

FHA Loan Reader Question: Home Loan Income Requirements

By Joe Wallace

The FHA rules for income verification include a requirement that the lender verify all income sources listed on the FHA loan application. According to the rules for lenders participating in the FHA home loan program, income cannot be counted for purposes of calculating the FHA mortgage loan if it is not stable, verifiable, and likely to continue. One reader asks; “Can a retired person qualify for an FHA mortgage? I recently retired, am in the process of selling my current home, after which I will be relocating to another state. Without employment, my source of income is Social Security and withdrawals from a retirement account. Will these qualify?” Federal housing laws forbid lenders from discriminating against home loan applicants based on age and related factors. The only qualifying data permitted | more...

 

February 10, 2012

FHA Loans and Employment History

By Joe Wallace

We fielded a reader question about FHA loans and employment history recently. The reader asked; “Hi. Is it possible to file for a loan with one year of employment with great credit score?” This is a question that is more complex than it might seem on the surface. Does the reader mean one year of employment with a single employer? Or does this question refer to one year of total employment experience? According to the FHA loan rules, “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

 

February 9, 2012

FHA Loans and Inducements To Purchase

By Joe Wallace

Recently we got a reader question about seller concessions and FHA home loans. Under the rules for an FHA mortgage, the seller is allowed to contribute certain concessions (interest rate buydowns and other contributions) as long as the concessions don’t exceed the FHA’s maximum rate. According to FHA loan rules at the time of this writing, “The seller and/or third party may contribute up to six percent of the lesser of the property

 

February 8, 2012

FHA Loans: Is a Down Payment Always Required?

By Joe Wallace

We get many questions about FHA home loans from our readers; some of the most frequently asked include questions about FHA loan down payment issues and the acceptable sources of down payment funds. It’s true that all FHA new purchase home loans require at least a 3.5% down payment. That amount–the 3.5%–is current at the time of this writing. If that FHA mortgage down payment requirement changes, your lender should let you know before you commit to the mortgage in writing. In Chapter 5 of HUD4155.1, the rules state clearly; “Under most FHA programs, the borrower is required to make a minimum downpayment into the transaction of at least 3.5% of the lesser of the appraised value of the property or the sales price.” The reason the FHA requires the | more...

 

February 7, 2012

FHA Loan Standards: Exceptions to the Rules?

By Joe Wallace

The FHA has standards for qualifying for an FHA insured mortgage including income, employment, credit score and other factors. In most cases, borrowers who don’t meet the minimum required credit score or debt-to-income rations can’t qualify for an FHA loan. But are there exceptions? For example, could a borrower who has a debt-to-income ratio that’s too high still get an FHA loan approved? And why would the FHA approve a loan when the applicant doesn’t meet FHA loan standards? FHA loans include an option for lenders to review any “compensating factors” the borrower might bring to the bargaining table. For example, one such factor has to do with the borrower’s ability to pay–and a history of being able to pay–even though the debt-to-income ratio might exceed FHA standards. According to | more...

 

February 7, 2012

Can Repair Costs Be Added to the FHA Loan Amount?

By Joe Wallace

The FHA has strict rules about how a loan may be calculated. There’s the minimum cash investment required of the borrower, there are FHA loan limits, and there are rules covering what kinds of incentives a seller may provide in the form of interest rate buydowns and other financial contributions. Did you know that in some cases, the cost of home repairs on a sale property can be included in the sale price of the home for FHA loan purposes? According to Chapter Two of HUD4155.1, “Repairs and improvements may be added to the sales price before calculating the mortgage amount when…the repairs and improvements are required by the appraiser as essential for property eligibility”. These costs must be paid by the borrower, and

 

February 3, 2012

Reader Question: Can I Get an FHA Debt Consolidation Loan?

By Joe Wallace

A reader asks, “Is it possible to get an FHA loan and consolidate my house and credit card?” According to FHA loan rules, new purchase FHA loan amounts are limited to the statutory loan limit for the area, or “a percentage of the lesser of the appraised value, or sales price.” This would preclude getting cash back on the deal unless the borrower was owed a refund of some kind–FHA loans also require at least a 3.5% minimum down payment. The borrower must provide funds to close the deal. But FHA refinancing loans do feature a cash-out refinancing loan option. FHA rules do technically permit FHA cash-out refinancing for debt consolidation, but advises lenders, “Cash out refinancing for debt consolidation represents considerable risk, especially if the borrowers have not had | more...