Articles Published in: June 2013

June 28, 2013

FHA/HUD Announce Relief For Alaska Flood Victims

The FHA and HUD have issued a press release announcing relief for victims of recent flooding in Alaska. According to HUDNo.13-100, released Thursday June 27, 2013, “U.S. Housing and Urban Development Secretary Shaun Donovan today announced HUD will speed federal disaster assistance to the State of Alaska and provide support to homeowners and low-income renters forced from their homes due to recent flooding.” This assistance came after the President made an announcement declaring parts of Alaska affected by the flooding to be federal disaster areas. According to the press release, “President Obama issued a disaster declaration for Alaska Gateway Regional Educational Attendance Area, Copper River Regional Educational Attendance Area, Lower Yukon Regional Educational Attendance Area, Yukon Flats Regional Educational Attendance Area and Yukon Koyukuk Regional Educational Attendance Area.” The federal | more...

June 27, 2013

FHA Loan Questions: Seasoning Periods On FHA Streamline Refinance Loans

By Joe Wallace

A reader asks, “Is there a cutoff date for when the original mortgage (FHA) was started? I have been getting letters that I am prequalified and I finally called one lender today. After giving them all of my information so they could check my credit, they said I was not in the house long enough. From the info on this website and the FHA website I don’t see anything about the length of time.” The FHA issued guidance on this issue in 2011 with Mortgagee Letter 2011-11, which was a policy update on a variety of requirements for FHA refinance loan transactions in general, but specifically addressing issues such as the “seasoning period” for FHA loans before a borrower can apply for FHA refinancing. According to FHA Mortgagee Letter 2011-11, | more...

June 27, 2013

FHA Loan Reader Questions: FICO Score Minimum Requirements

By Joe Wallace

A reader asks, “Hello, my husband score is 623 and my score is 738, is there a FHA loan out there that would allow us to get a loan? I have read that some companies have stated that both parties must have at least a 650 or above.” Credit score questions are some of the most frequently asked when it comes to a new purchase FHA home loan. While it’s true that the FHA does have a set of minimum FICO scores listed (see below) there is one very important thing ALL borrowers should know about the FHA loan rules for minimum credit scores–they are the FHA’s minimums ONLY. A lender is free to require higher credit scores as long as such higher standards are consistently applied and in accordance | more...

June 26, 2013

FHA Loan Rules For Down Payments: Gift Funds and Approved Sources of Those Funds

By Joe Wallace

In a recent post we examined the FHA loan policy about down payments for new purchase home loans. FHA loan rules require all new purchase loans for single family residences to include a minimum cash investment from the borrower of 3.5%. That 3.5% must come from an approved source including the borrower’s own cash reserves, cashed-in investments, savings bonds or other holdings. The required down payment cannot come from what the FHA labels “non-collateralized loans” such as a payday loan, credit card cash advance, etc. The down payment money is permitted to come from a third party as a bona fide gift, as long as the source of that gift is acceptable under FHA loan rules. What are considered acceptable sources of gift funds for down payments? Before we can | more...

June 25, 2013

FHA Loan Answers: All About Seller Concessions

By Joe Wallace

Seller concessions are a commonly asked-about topic related to FHA home loans. FHA loan rules permit a seller (or a “third party”) to contribute up to six percent of the sales price or appraised value of the property toward closing costs, discount points or “other financing concessions” according to the FHA official site. The six percent limit would be the lesser of the two amounts–the sale price or appraised value. What specifically can the seller or third party contribute? According to FHA loan rules spelled out in Chapter Two of HUD 4155.1, that six percent limit may include: third party payment for permanent and temporary interest rate buydowns, and other payment supplements payments of mortgage interest for fixed rate mortgages mortgage payment protection insurance, and payment of the upfront mortgage | more...

June 24, 2013

FHA Loan Reader Questions: Down Payment Assistance

By Joe Wallace

A reader asks, “I want to move and was qualified for an FHA but needed to know if there is any programs to help assist with the down payment. I know there is an option for sellers to offer 6% sellers assist but is there any else to cover the rest?” The FHA itself does not offer any type of down payment assistance program. In the past there have been down payment assistance programs offered on a state or local level, but some federal laws have banned certain types of down payment assistance. Others not banned by federal law would be obliged to meet FHA loan rules as to the source of down payment money (see below). What does this mean? FHA loan rules require all borrowers to make a | more...

June 21, 2013

FHA Loan Rules: Maximum Loan Amounts and Down Payments

By Joe Wallace

FHA loan rules include guidance for lenders and borrowers about maximum loan amounts and down payment requirements. There’s a myth about today’s FHA home loans that some still repeat–variations on the idea that there may be no down payment required for first-time home buyers. What’s the reality? FHA loans do require a down payment. It’s much lower than the required down payment for many conventional loans, which is why some might believe that the FHA down payment requirement is reduced or eliminated for first-time borrowers. The minimum down payment amount for an FHA new purchase loan is 3.5%. No closing costs can be used to meet this requirement–the down payment is a separate amount from what are called “non-recurring” costs, prepaid expenses, discount points, etc. The down payment amount is | more...

June 20, 2013

FHA Loan Reader Questions: FHA Decision Credit Scores

By Joe Wallace

A reader asks, “Do all three credit scores on my credit report have to be in the 640 range in order to qualify for an FHA home loan?” FHA loan rules include a minimum credit score. Borrowers who have credit scores below this minimum are not eligible for FHA loan financing. But the minimums found in the FHA loan rules are not necessarily the minimums a financial institution will impose–and the bank is free to require a general higher standard applied equally to all borrowers according to Fair Housing laws. FHA loan FICO score minimums are as follows, as found on the FHA official site: However, many lenders will require a minimum credit score of 640. The reader wants to know if all his or her credit scores need to | more...

June 19, 2013

FHA Loan Rules for Non-Purchasing Spouses

By Joe Wallace

One of the most commonly asked questions about FHA home loans is whether or not a spouse is required to sign, co-sign, or otherwise be committed to an FHA home loan. Can one spouse by a home with an FHA insured mortgage without participation of the other? That depends greatly on state law. FHA loan rules cannot and do not override state laws, but there are clauses found in the FHA loan rules written in HUD 4155.1 that address this issue. These items are found in Chapter Four, Section A under a section titled Non-Purchasing Spouses. It says in part; “If required by state law in order to perfect a valid and enforceable first lien, a non-purchasing spouse may be required to sign either the security instrument or documentation indicating | more...

June 18, 2013

FHA Loan Approval or Rejection: The Rules

By Joe Wallace

FHA loan rules cover a lot of ground, including specific procedures that are supposed to happen when an FHA single-family mortgage loan is approved or denied. Did you know the FHA loan rules, listed in HUD 4155.1, give instructions on how approvals and rejections are handled? Those rules are found in Chapter One, Section A of HUD 4155.1. When an FHA loan application is approved, the rules instruct the lender: “When a borrower is approved, the Direct Endorsement (DE) underwriter • records the results of the credit analysis on the HUD-92900-LT, FHA Loan Underwriting and Transmittal Summary • enters any modification of the mortgage amount or approval conditions under “Underwriter Comments” on the form, and • approves the borrower and authorizes closing, if the case is a DE case.” The | more...