Articles Published in: 2012

January 10, 2012

FHA Home Loan Interest Rates

The FHA loan rulebook provides lenders with a set of guidelines and requirements for FHA loans. One important section of those rules, as found in HUDdoc 4155.1, has to do with interest rates and something called interest rate lock-in periods. The government does not set the interest rates for FHA loans. According to the FHA loan rules, “Under all currently active FHA single family mortgage insurance programs, the borrower and the lender negotiate the interest rate and any discount points.” But the fact that those rates and points are negotiable does not mean interest rates are not regulated by FHA loan rules–once those rates are agreed upon, the lender must abide by the rules for the FHA loan program. For example, the amount of time the lender is bound to | more...

January 10, 2012

FHA Loans and Your Verifiable Income

By Joe Wallace

Filling out the FHA loan application is the first official step on the road to an FHA guaranteed mortgage. All the preparation a borrower should be doing prior to the loan application including the review of your own personal credit data, making a budget, closing unneeded lines of credit, and other steps are just the preliminaries. The application is what sets you on the path to home ownership. But what does your lender do with the application data once you’ve handed it over? FHA loans are issued by private banks and mortgage companies, not the government. Participating FHA lenders must insure the credit they issue is not a risky investment, and the details on your credit application are not just reviewed, they are also verified to make sure they give | more...

January 9, 2012

Reader Question: Preparing for an FHA Home Loan

By Joe Wallace

When it’s time to apply for an FHA home loan, your credit score is an important part of the application. Participating FHA lenders examine your credit history and the score you currently have to make a determination about your creditworthiness and what kind of risk you make. Credit experts recommend preparing for any kind of major loan in advance, and when it comes to a home loan, you should take at least a year to get your credit ready–starting with a good look at your credit report. Today’s question comes from a reader concerned about credit, but it’s clear from the question the reader has the right idea–taking at least a year to get ready for the FHA loan application is the best approach possible. This question came to us | more...

January 6, 2012

FHA Loans: What Is The Ideal Credit Score?

By Joe Wallace

Many readers write us asking questions about FHA loans. We field questions about bankruptcy, foreclosure, loan default, and many others. We also get plenty of questions about credit scores, qualifying for FHA home loans in general, and what it takes to qualify. Credit is the topic of many of our most frequently asked questions. Many borrowers want to know what the FHA is looking for in a credit report, what the minimums are, but the FHA’s “ideal credit score” is seldom discussed. Please note: this score is NOT the FHA minimum, it’s what the FHA considers to be an “ideal” score. Something to live up to, rather than basic qualifying criteria. What does the FHA consider to be an optimal credit score? According to the FHA official site at FHA.gov,

January 5, 2012

Limitations on FHA Loan Amounts

By Joe Wallace

FHA loans do not have a set dollar amount limit across the board. Instead, FHA loans have a limit established yearly on a by-county basis. There is an average FHA loan limit, and varying amounts for high-cost counties. These amounts are subject to change through legislation, FHA policy or other factors. Regardless of the FHA loan limit per county, there may be other restrictions on the maximum amount an FHA mortgage applicant may borrow. For example, a borrower may not qualify for the maximum financing available due to credit issues or other factors. In some cases the lender may approve an FHA insured loan, but not the maximum. The borrower may be required to place a larger down payment in these instances. Another limiting factor that can affect the loan | more...

January 4, 2012

Qualifying For An FHA Mortgage

By Joe Wallace

When you apply for an FHA mortgage, the lender is, according to the rules, responsible for reviewing and analyzing your application data. FHA loan rules state the lender must insure you’re a good risk before approving the loan application. According to the FHA official site, “This responsibility includes using qualifying ratios and compensating factors when qualifying a borrower.

January 3, 2012

FHA Loan Credit Guidelines

By Joe Wallace

We get many reader comments and questions about qualifying for FHA guaranteed home loans. Borrowers new to the home buying process are often concerned that they may not qualify for an FHA mortgage loan because of student loans, past mistakes with credit or other factors. While the FHA does have rules and regulations concerning these areas, borrowers should know that the rules can be more forgiving than some might assume. In its instructions to lenders in HUD 4155.1, FHA loan rules state: “Past credit performance is the most useful guide to

January 3, 2012

Reader Question: Qualifying For an FHA Home Loan

By Joe Wallace

We get plenty of reader questions in the FHANewsBlog.com comment section, which we’re always happy to answer as best we can. One of the most recent questions was about basic qualifications for an FHA guaranteed loan: “My girlfriend and I have lived together for about 9 and a half yrs in a rural area 15824 of Penn…She has a low paying job as a waitress but, has worked there since she graduated high school. Ive been at my current position for a little under a year and make a little more than she does.” “The only debt we have is my school loan. I do not know my current credit score and she has good credit. I feel that as a couple we might be able to afford a home | more...

January 2, 2012

Reader Question: FHA Up Front Mortgage Insurance Premiums

By Joe Wallace

A reader question about FHA mortgage insurance premiums came in over the weekend, asking about how the FHA calculates MIP. The reader asks, “Is there some way to calculate how much the FHA insurance will cost based on the price of the home?” The technical answer to this question is that there’s no way to base the FHA Mortgage Insurance Premium on the price of the home alone–the loan amount (more specifically, the loan-to-value percentage) is used to determine the MIP, and the loan amount could include other items such as permissible closing costs, etc. That aside, when it comes to how to calculate the MIP, there’s more than one answer because of the nature of FHA mortgage insurance premiums. The FHA loan Up Front Mortgage Insurance Premium, or UPMIP, | more...