Articles Published in: October 2013

October 21, 2013

FHA Loan Credit Requirements: Reader Questions

We have gotten a large number of reader questions lately about FHA FICO score requirements and other credit-related home loan issues. Here is a sampling of our most recent questions: “I have faced many credit issues, including filing Chapter 7 Bankruptcy, late payments, etc. I am about to now pay off all my outstanding debts to clear my credit report and only have my monthly bills…My credit score is in the mid 500′s. Would I be able to qualify for a FHA home loan based on these scenarios? What would be the best steps for me to qualify for a home loan in the next year?” and: “We are looking to purchase or first home. We are 3 years discharged from chapter 13 bankruptcy. We have established a car loan | more...

October 18, 2013

FHA Loans and Credit Disputes: A Reader Question

By Joe Wallace

A reader asks, “My plan is to buy the house I’m leasing, my 3 scores are 616, 621 and 619. Will I qualify for an FHA loan? I have a student loan that i haven’t paid on my credit report it states its on dispute, will this disqualify me from an FHA?” The answer to this question depends greatly on what is meant by the “unpaid” student loan. Does that mean the borrower has not made any payments? Or does that mean payments are being made but the loan hasn’t been paid in full? Are there missing or delinquent payments in dispute? When there are disputed items on a credit report, the lender is required to learn more in order to process the FHA loan application. FHA loan rules found | more...

October 17, 2013

FHA Loans and the Government Shutdown: A Reader Question

By Joe Wallace

*UPDATE** The government shutdown has ended for now as of Wednesday night October 16 2013, but the advice in this post is sound, regardless. There could easily be another government shutdown if conditions repeat themselves in the next round of negotiations over the Federal budget when the current plan expires next year. If there is another government shutdown, the advice in this post will be good to know for affected FHA borrowers. A reader asks, “I am a seller of a home that was suppose to close Oct 1. We still have not closed as of Oct 12. My buyer’s financial company is saying it is due to the government shutdown. Everything I read says it should not be held up. How does my buyer find out what is going | more...

October 17, 2013

Government Shutdown Ends, FHA Loans Continue

By Joe Wallace

The government shutdown is over, following votes in the House and the Senate on Wednesday and a signature by the President immediately following. But one thing overlooked by some during the shutdown crisis–FHA home loans did continue as normal during the crisis, even if some borrowers who needed IRS confirmation of certain tax documentation did experience some inconvenience while that issue was being sorted out. The IRS was a casualty of the shutdown, with only a small percentage of its work force available for duty under the partial shutdown. In other sectors, government buildings sometimes closed to the public but kept operating for behind-the-scenes work. But overall, FHA loans kept moving forward during the entire length of the shutdown. The reason we write about that here is because while the | more...

October 16, 2013

FHA Loan Rules For Non-Purchasing Spouses

By Joe Wallace

One common FHA loan question has to do with the status of a non-purchasing spouse. Can a married borrower apply for an FHA loan with a non-purchasing spouse? In such cases would the income or credit history of the non-purchasing spouse be considered as part of the loan application? The answer depends greatly on the state laws where you live, or the state laws in the area where the home is to be purchased. According to the FHA loan rules found in HUD 41551., Chapter Four: “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 that he/she is relinquishing all rights to the property. When the security instrument is | more...

October 15, 2013

FHA Loan Answers: No Cash Out Refinancing With Appraisals

By Joe Wallace

FHA refinancing loan options include the ability to apply for a no cash-out refinancing loan with an appraisal required. For these loans, the FHA loan rules as described in Chapter Three, Section B of HUD 4155.1, addresses a variety of issues including subordinate liens, refinancing to buy out an ex-spouse’s interest in the property, etc. One issue specifically mentioned in these rules is how the lender must handle a no cash out refinancing loan for homes that have been owned for less than one year before the FHA refinancing loan application. Are FHA refinance loans possible in this case? According to Chapter Three: “If the property was acquired less than one year before the loan application, and is not already FHA-insured, the original sales price of the property must be | more...

October 14, 2013

FHA Requests Lender Assistance For FHA Borrowers During Government Shutdown

By Joe Wallace

The FHA and HUD have issued a statement requesting that participating FHA lenders be “sensitive” to the plight of those borrowers with incomes affected by the government shutdown. According to HUDNo.13-152, “The Federal Housing Administration (FHA) today called on all approved mortgagees and lenders to be sensitive to the financial hardships faced by borrowers as a result of the shutdown, including those borrowers subject to furlough, layoff, or a reduction in income related to the shutdown.” The press release adds, “FHA expects all approved mortgagees and lenders to make every effort to communicate with and assist affected borrowers to the greatest extent possible by: extending informal forbearance plans to borrowers facing financial hardship as a result of the shutdown, and fully evaluating borrowers for available loss mitigation options to avoid | more...

October 11, 2013

FHA Loans Are Still Available During the Government Shutdown

By Joe Wallace

The FHA and HUD are still processing FHA loan paperwork during the government shutdown. While there may be some confusion about the FHA loan program since it is run by a federal agency, borrowers and potential FHA loan applicants should know that FHA loan applications are still being accepted and processed. The FHA and HUD issued guidance about how the FHA will operate during the shutdown. A document called the HUD Contingency Plan states, “All excepted staff will be performing functions associated with multi-year or no-year credit reform financing (“x-year”) appropriations, and are necessary to administer transactions for which a commitment has been made; administering the portfolio of FHA insured loans (collecting premiums, paying claims); or fulfilling obligations associated with Housing’s project-based rental assistance programs. In addition, “excepted” employees will | more...

October 10, 2013

FHA Loans For Building on the Borrower’s Own Land Part Two

By Joe Wallace

A reader asked us recently about FHA loans for building on land the borrower already owns: “…My end goal would be to demolish (the original) house and build a completely new one in its place for us to all reside in…what I am wondering is does this kind of demolish and rebuild qualify for FHA loans and with me having to move to do this what kind of eligibility would I have for FHA loans.” The rules for FHA loans where construction would happen on land the borrower already owns can be found in HUD 4155.1, Chapter Two. FHA loan rules allow new purchase loans for single family homes when the borrower wants to build on his or her own land. According to Chapter Two, “A borrower is eligible for | more...

October 10, 2013

FHA Loans For Building on the Borrower’s Own Land

By Joe Wallace

EDITOR’S NOTE: This article was written before changes to FHA loan rules made the old FHA Lender’s Handbook referenced in this article obsolete. The new FHA Single-Family Home Loan Rules are found in HUD 4000.1 and there have been many updates and changes to FHA home loans including One-Time Close Construction mortgage rules. Learn about the most up-to-date information on FHA Construction loans for borrowers who want to build on their own lot. ——- (The information below is no longer up-to-date, but we retain the original article here for archival purposes.) A reader asks, “I am looking to move back home, to where my grandma resides. her home of 45+ years is in disrepair. I filed bankruptcy two years ago, the one where you dont make trustee payments. My question | more...