Articles Published in: February 2013

February 28, 2013

FHA Loan Requirements and Your Personal Data

We sometimes get questions about certain practices required to verify and approve the information given on a borrowers FHA home loan application. Borrowers are rightly concerned about protecting their privacy and personal data; what do FHA loan rules say about lenders who ask for account numbers, Social Security information and other private information? FHA loan applicants should know that the FHA does require these types of personal data in order to properly verify and approve the loan. According to FHA loan rules as described in HUD4155.1: “The lender may ask the borrower to sign a general authorization form that gives the lender blanket authority to verify information needed to process the mortgage loan application, such as • past and present employment records • bank accounts and • stock holdings.” FHA | more...

February 27, 2013

Will Sequestration Affect FHA Home Loans?

By Joe Wallace

On March 1, 2013, unless lawmakers act to prevent the process known as sequestration, major budget cuts, furloughs and staffing changes will go into effect across a variety of government agencies. These cuts have the potential to be quite disruptive, and many wonder whether FHA home loans, refinance loans and other programs might be negatively affected. According to HUD Secretary Shaun Donovan, the answer is yes. Donovan’s February testimony before the Senate Committee on Appropriations included some revealing comments about sequestration and its impact on the FHA/HUD. “Sequestration would result in 75,000 fewer households receiving foreclosure prevention, pre-purchase, rental or other counseling though HUD housing counseling grants. This counseling is crucial for middle class and other families who have been harmed by the housing crisis from which we are still | more...

February 26, 2013

Reader Questions: FHA Loan Down Payments

By Joe Wallace

A reader asks, “I am thinking about purchasing a home. I’ve been to many open houses (any where I see a signs posted). If a house costs $250,000 is it possible to be approved for a home loan with no money down, if not how much down payment do I need to be approved?” FHA guaranteed home loans sometimes get confused with the VA loan program. VA loans, available to qualified military members and veterans, are offered with a no money down option. But this is not true in the case of FHA home loans, which have a minimum down payment of 3.5%. There is no specific, set dollar amount for the required minimum down payment, since the 3.5% is a percentage of the contract sales price of the home. | more...

February 25, 2013

FHA Loans, Prepayments and Due-On-Sale Clauses

By Joe Wallace

When shopping for a home, some borrowers come into the house hunt with a strategy that includes paying or pre-paying a chunk of the mortgage loan up front. This isn’ necessarily a down payment per se, but it is something to consider when setting a budget for a home loan and the anticipated mortgage loan payments. Does the FHA allow such a strategy? Can borrowers pay down the loan principal? FHA home loans do feature the ability to pre-pay a portion of the loan. This can be helpful for many reasons including lowering mortgage payments and saving money over the lifetime of the loan by reducing the principal and the amount of interest paid on that principal. According to HUD 4155.2 Chapter Three, Section A, “A borrower may prepay a | more...

February 22, 2013

FHA Loan Limits For High Cost Counties: FHA Loan Questions

By Joe Wallace

Many borrowers want to know why FHA home loans are available for the same size and type of properties, but in larger or smaller amounts depending on the market. Why aren’t FHA loan amounts standardized? The basic answer to this is that all housing markets are different, and the costs in one market are not necessarily the same for another. A two-bedroom home with a garage in Bangor, Maine might not cost the same to build or finance as a similar home in Cleveland, Ohio. The same goes for properties located on either coast—how much would that two-bedroom home build and sell for in Los Angeles or New York? To address these issues, the FHA has created a table that lists the FHA loan limits for counties where the costs | more...

February 22, 2013

FHA Loan Reader Questions: What Is Needed To Qualify?

By Joe Wallace

A reader asks, “What is needed to qualify for a FHA loan?” That is a very general question–almost too general, but there is one very important starting point borrowers should know about when getting started with the FHA home loan process. Credit history is a major part of any home loan and some types of FHA refinancing loans. Without a solid record of on-time bill payments for at least one year or more, a lender is hard-pressed to justify approving a mortgage credit application. Let’s examine with the FHA loan rulebook says about credit. According to HUD 4155.1, Chapter One, Section A, the home loan underwriting process pays a lot of attention to credit issues. “The purpose of underwriting is to determine a borrower’s ability and willingness to repay a | more...

February 21, 2013

FHA Refinance Loan Questions: Credit Requirements

By Joe Wallace

A reader asks, “My divorce was final last March. My ex got the house. He’s suppose to be getting it refinanced but has been turned down twice for the Streamline. What are we missing? It was “transferred” to him through divorce, he has all documents showing he’s made the payments since we bought the house 5 years ago to present. And what’s the “non-credit” qualifying requirement? From what I’ve read, he should be good to go with that but the lenders, or lack thereof, keep turning him down due to debt/income ratio.” Reader questions like these are common; unfortunately there are too many variables that could affect a refinance loan application to answer this reader’s query specifically. What variables could be at work in situations like these? Any number of | more...

February 20, 2013

FHA Loans and Closing Costs–What You Should Know

By Joe Wallace

FHA loans require a minimum down payment, but those funds are not the only money needed at closing time. Borrowers should know and budget for a variety of expenses that are due on or before closing time. That’s one reason why finance experts recommend taking a year or more to prepare for any type of home loan–saving for these expenses can make things financially easier once the home buying process begins. But what are the costs and expenses a borrower will need to close the deal? Fortunately the FHA loan rulebook spells out the items needed at closing time–these must be paid for on or before the deal closes. The FHA Loan rulebook, HUD 4144.1, says, “In addition to the minimum downpayment requirement described in HUD 4155.1 5.B.1.a, additional borrower | more...

February 19, 2013

The New FHA MIP Rules

By Joe Wallace

We’ve written more than one blog post recently on the changes to the FHA mortgage insurance policy. Because of the potential for confusion over these changes, we’re attempting to explain these changes one important detail at a time. When the FHA announced its changes and made them official, it issued a mortgagee letter which includes the following information: “For loans with FHA case numbers assigned on or after June 3, 2013, FHA will collect the annual MIP for the maximum duration permitted under statute. For all mortgages regardless of their amortization terms, any mortgage involving an original principal obligation (excluding financed Up-Front MIP (UFMIP)) less than or equal to 90 percent LTV, the annual MIP will be assessed until the end of the mortgage term or for the first 11 | more...

February 18, 2013

FHA Loan Questions: When Do The New FHA Mortgage Insurance Premiums Take Effect?

By Joe Wallace

A recent FHA press release announced changes to the FHA mortgage insurance policy, including higher MIP and other changes. According to the FHA official site. “FHA will increase its annual mortgage insurance premium (MIP) for most new mortgages by 10 basis points or by 0.10 percent. FHA will increase premiums on jumbo mortgages ($625,500 or larger) by 5 basis points or 0.05 percent, to the maximum authorized annual mortgage insurance premium. These premium increases exclude certain streamline refinance transactions. FHA will also require most FHA borrowers to continue paying annual premiums for the life of their mortgage loan.” Those are significant changes to the FHA loan program, but who is affected by these changes and when do they take effect? Some borrowers who already have FHA home loans are concerned | more...