Articles Published in: May 2013

May 21, 2013

FHA Loan Reader Questions: Foreclosure and the Three-Year Waiting Period

A reader asks, “I had a home that Foreclosed in 2009. The Sheriff Sale was completed in December 2009, however according to the FHA office the claim on my home was not closed out until a little over a year later on January 14, 2011.” “Which means that instead of being in a position for another FHA Loan in 2012 we have to wait until January 2014, which is considered to be over 4 years since the Sheriff Sale. Why would it take so long between the Sale and the actual closing of the claim on the house? Is there anything I can do other than wait until 2014?” While we can’t address why it takes so long between a foreclosure and the sheriff sale, we can address the portion | more...

May 20, 2013

Can Veterans Apply For FHA Home Loans?

By Joe Wallace

There are many reasons why a veteran might not want to apply for a VA home loan and choose an FHA mortgage instead. One such reason involves eligibility issues–a borrower who has purchased a home with a VA mortgage in the past may have complications that hold up getting eligibility restored. Others might have a personal preference depending on the circumstances–but regardless of the reasons why a veteran decides to investigate FHA loan options, they are definitely open to those who serve. What do FHA loan rules say about veterans who want to apply for an FHA mortgage? According to HUD 4155.1, “Military personnel are considered occupant-owners, and are eligible for maximum financing if a member of the immediate family will occupy the subject property as his/her principal residence, whether | more...

May 16, 2013

FHA Reader Question: FHA Loans For Second-Time Home Buyers

By Joe Wallace

There are many myths and misconceptions about FHA home loans. One of them is brought up in our latest reader question in the comments section. A reader asks, “Do we have to be first time home buyers to qualify for an FHA loan?” The simple fact of the matter is, anyone who meets the financial qualifications can apply for an FHA home loan. You do NOT have to be a first time home buyer to qualify, and the financial qualifications include having a steady, dependable income that is likely to continue. Your debt-to-income ratio plays a part in loan approval, so potential borrowers who worry their bills are too high to qualify should contact the FHA or the loan officer about the rules covering debt/income ratios. Borrowers who are second-time | more...

May 16, 2013

FHA Loan Questions: Identity Of Interest Transactions

By Joe Wallace

One common question about FHA home loans involves the FHA rules about who can sell to whom. When it comes to a home owner selling property to someone they do not know, the rules are simple. FHA guidelines don’t allow a home owner with an “identity of interest” in the outcome of the sale to sell to an FHA borrower AND be a co-signer or co-borrower on the mortgage. What does that mean? According to HUD 4155.1 Chapter Four Section A, “A party who has a financial interest in the mortgage loan transaction, such as the seller, builder, or real estate agent, may not be a coborrower or a cosigner.” You can’t be both the buyer AND the seller. But what about in cases where the seller is a relative? | more...

May 15, 2013

FHA Loan Reader Questions: Unethical Practices?

By Joe Wallace

A reader asks, “I bought my home through FHA nearly 4 years ago. I now am selling and a buyer called and we agreed to sell to them. They are going with an FHA loan as well. At first they had my agent representing them. They somehow got their brother in law, who also is a real estate agent, to do the whole house inspection. He said that the stairs were wrong (10″ risers, no railing) He also stated that the roof in the garage needed to be jacked up and have more joists or whatever they are called and that he would do it.” “He isn’t a certified inspector with FHA and I don’t know if he is even a true inspector. He didn’t report it, the buyers came | more...

May 15, 2013

FHA Loan Questions: Well Water

By Joe Wallace

A reader asks, “Purchasing an existing home in rural county in Oklahoma. What are the FHA guidelines on water system? No rural water at property. It’s well water. Would FHA loan on that water supply?” It’s important to point out that the FHA does not loan money–the FHA guarantees the loan issued by a private lender. That out of the way, let’s examine what FHA loan rules say about wells in 4150.2, Property Analysis. In the section titled, “Individual Water Supply and Sewage Disposal Systems” we find the following: “If water and sewer systems are not connected to public systems, the water well and/or septic system must meet the requirements of the local health authority with jurisdiction.” That means the FHA won’t guaranty a loan for a property that has | more...

May 14, 2013

FHA Loans: Where Your Down Payment Comes From

By Joe Wallace

New purchase FHA home loans require a “minimum cash investment” of at least 3.5% of the appraised value of the home or the sales price, whichever is lower. But where can this down payment come from? FHA loan rules require the lender to verify the source of the down payment to insure it comes from what the FHA terms “acceptable sources”. HUD 4155.1 Chapter Five states, “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. Additionally, the borrower must have sufficient funds to cover borrower-paid closing costs and fees at the time of settlement. Funds used to cover the required minimum downpayment, as well as | more...

May 13, 2013

FHA Energy Efficient Mortgage Rules For Streamline Refinance Loans

By Joe Wallace

The FHA Energy-Efficient Mortgage (EEM) option is available for borrowers who want to apply for additional money to be used for energy-efficient upgrades on the home being purchased or refinanced with an FHA mortgage. An FHA EEM is subject to certain rules and requirements, especially when paired with a Streamline Refinance. For example, one of the requirements of a Streamline Loan is that the borrower must get a benefit from the refinance–usually in the form of lower interest or monthly payments. But with some FHA EEMs, the payments may actually go up. Is this permitted under the rules? HUD 4155.1 spells out when those higher payments may be allowed–the guidence is found in Chapter Six, Section D. Under “Streamline Refinance Transactions with EEM” where you’ll find the following: “For a | more...

May 10, 2013

Distressed FHA Mortgages Up For Auction In June

By Joe Wallace

A press release issued by the FHA and HUD announces an auction of delinquent FHA mortgage loans in June of 2013. According to HUDNo.13-066, the move is intended as a form of relief in distressed areas and as a part of, “a broader effort to address the housing market’s shadow inventory and to target relief to areas experiencing high foreclosure activity” according to the release. The press release also adds, “This summer, HUD will sell approximately 20,000 distressed loans through its expanded Distressed Asset Stabilization Program (DASP) to increase recoveries to FHA’s Mutual Mortgage Insurance (MMI) Fund from non-performing FHA-insured loans, while contributing to stabilization and recovery in some of the nation’s communities hit hardest by the housing crisis.” The auction will proceed in a manner similar to past note | more...

May 9, 2013

HUD Settlement Reached In Housing Discrimination Cases

By Joe Wallace

The FHA and HUD have issued a press release concerning two cases of alleged housing discrimination where settlements have been reached. According to HUDNo.13-067, two conciliation agreements have been reached between the Department of Housing and Urban Development and SunTrust Mortgage Inc. “settling allegations that the Richmond, VA-based lender denied mortgage loans to a couple in Port St. Lucie, FL, and another couple in Ashland, VA, because the women were on maternity leave.” As the press release states, Fair Housing Act laws make it “unlawful to discriminate in residential real estate-related transactions based on race, color, national origin, religion, sex, disability, or familial status.” Lenders cannot, under the Fair Housing Act, deny a loan application because a person is pregnant, or deny a loan because the borrower has taken maternity | more...