Articles Published in: August 2013

August 8, 2013

FHA Loan Reader Questions: Minimum Employment Rules

A reader asks, “My son-in law has been employed for the past two years, but only 19 months with the current employer. He is paid on a 1099. Another job opportunity has been offered by a different company, and different industry, but he will be making more money with this second company. He also will be paid via a 1099. Will he meet the employment requirement under these circumstances?” FHA loan rules for employment verification are found in HUD 4155.1. This document gives instructions to the lender for verifying employment, among many other things. According to HUD 4155.1, “The lender is required to verify the applicant’s employment history for the previous two years. However, direct verification is not required if all of the following conditions are met: the current employer | more...

August 7, 2013

FHA Mortgage Insurance Rules

By Joe Wallace

FHA mortgage insurance rules changed earlier this year–there were a variety of alterations that included a “lifetime of the loan” mortgage insurance premium requirement. Starting in June of 2013, all FHA with case numbers assigned on or after June 3 will be charged annual mortgage insurance premiums “for the maximum duration permitted under statute.” In FHA Mortgagee Letter 2013-04, the new rules state, “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 years of the mortgage term, whichever occurs first.” Additionally, “For any mortgage involving an original principal obligation (excluding financed UFMIP) with | more...

August 6, 2013

FHA Loan Questions: Is It Ever “Impossible” To Deny An FHA Loan Application?

By Joe Wallace

A reader asks, “I was awarded permanent disability on June 2011; with a ‘long term re-evaluation’ in 5 to 7 years per SS; will the lender under FHA loan qualifications, not be able to decline loan because of said re-evaluation?” Assuming we understand this reader’s question properly, it seems the issue at hand is whether or not the FHA loan is “guaranteed” to be approved because of Social Security income status. FHA loan rules as written in HUD 4155.1 Chapter Four Section D state that one requirement of FHA loan approval is an examination of income and how likely that income is to continue. “The lender must analyze the income of each borrower who will be obligated for the mortgage debt to determine whether the borrower’s income level can be | more...

August 5, 2013

FHA Loan Questions: Outstanding Judgments

By Joe Wallace

A reader asks, “I have an outstanding judgment in the amount of $8000. Can I still get a loan?” There are two very important considerations in situations like this, where the loan applicant has concerns about a credit issue blocking his or her approval for an FHA mortgage loan. One consideration is the FHA loan program’s rules and regulations. The other is the lending standards and requirements of the participating FHA lender. The FHA loan program is voluntary–that is to say that not all lenders choose to participate, and the ones that do have to abide by FHA minimum requirements. But lenders are not prevented from requiring higher standards as long as those standards are applied fairly and in accordance with Fair Housing laws. We can’t comment on what an | more...

August 2, 2013

FHA Reverse Mortgage Program To Get Changes

By Joe Wallace

A recent article published by American Banker observes that lawmakers in Washington D.C. have passed legislation authorizing the FHA and HUD to make changes to the FHA Home Equity Conversion Mortgage program, also known as FHA HECM. The changes have not yet been signed into law by President Obama. But according to the Reverse Mortgage Stabilization Act passed by the House in June 2013 and now by the Senate in July 2013, “the agency can make certain changes by mortgagee letter, such as requiring financial assessments of a borrower’s budget and limiting the amount borrowers can take out as a lump sum up front” according to the American Banker article, titled Congress Passes Narrow Bill to Fix Reverse Mortgages at FHA. “Carol Galante, the agency’s commissioner, implored lawmakers on | more...

August 2, 2013

FHA Loan Reader Questions: Does My FICO Score Qualify Me For An FHA Mortgage?

By Joe Wallace

A reader asks, “My credit score is 595 would I qualify to get an FHA loan?” This question comes up quite often. Technically speaking, FHA standards for borrowers with FICO scores between 500 and 579 allow the lender to approve a loan for 90% of the maximum financing limit on that transaction–that means FHA standards would require a 10% down payment. Borrowers with FICO scores below 500 are NOT eligible for FHA loans according to the FHA official site. But one thing that’s very important to remember about FHA loan standards for FICO scores is that A) your credit scores are NOT the only criteria used for loan approval and B) the lender is free to require higher FICO standards. Borrowers may be hard pressed to find a lender willing | more...

August 1, 2013

FHA No Cash Out Refinancing Loans With An Appraisal

By Joe Wallace

FHA refinance loans include an option described in the FHA loan rules as a No Cash-Out Refinancing Loan With An Appraisal. These loans have rules that govern all aspects of the loan from the amount of the maximum mortgage amount (see below) and how much a borrower can receive in cash at the closing of the loan (the borrower may not receive cash back in excess of $500 at closing according to HUD 4155.1 Chapter Three Section B). How much is the maximum FHA loan amount for no cash-out refinancing loans? According to HUD 4155.1, “The maximum mortgage for a no cash out refinance with an appraisal (credit qualifying) is the lesser of the 97.75% Loan-To-Value (LTV) factor applied to the appraised value of the property, or existing debt.” Additionally, | more...