Articles Published in: November 2013

November 29, 2013

FHA Loans and Lack of Credit History

Can a borrower be turned down for an FHA loan because of a lack of credit history? Recently we fielded a reader question about FHA loans that included the following line: “I do have older doctor bills that are outstanding but everything else I have saved and payed cash for, therefore making it unnecessary to have a credit card.” Would this lack of a credit card work against the FHA loan applicant? Before answering, it’s important to point out that a borrower’s credit activity, regardless of the type of credit (utility bills, rent payments, student loans, etc) must reflect a general pattern of reliability. A borrower that cannot show at least one year of on-time payments to all creditors in the time leading up to the new loan application may | more...

November 29, 2013

FHA Credit and Downpayment Requirements: A Reader Question

By Joe Wallace

A reader asks, “I have checked my credit report before and it came back insufficient. I do have older doctor bills that are outstanding but everything else I have saved and payed cash for, therefore making it unnecessary to have a credit card.” “If I had a portion of money for a down payment on a house would I be able to receive an FHA loan? And I would also like to know what the first step of buying a house is, because I would be a first time home buyer and have no idea what the process is.” Having the required minimum 3.5% cash investment is only one requirement for FHA loan approval, so the simple availability of the down payment wouldn’t be enough. A borrower is required to | more...

November 28, 2013

Happy Thanksgiving!

By Joe Wallace

From all of us, have a safe and happy holiday weekend! We’ll return with our regular posts tomorrow. Thanks for reading!

November 27, 2013

FHA Loans and Minor Credit Mistakes

By Joe Wallace

When some borrowers apply for an FHA loan for the first time, they may worry that past minor credit mistakes could hurt their chances at loan approval. Do these minor credit problems affect a borrower’s chances at an FHA mortgage? Or can the lender ignore certain minor credit issues if the borrower’s overall pattern of repayment and credit management is good? There is no simple answer to this question since the answer depends on the specifics of the borrower’s situation, but FHA loan rules in HUD 4155.1 do offer a few clues as to what you can expect in these cases. Any delinquent account must be investigated by the lender, even if in the end it doesn’t affect the application. According to FHA loan rules, “The lender must document the | more...

November 26, 2013

FHA Loans and Employment Verification

By Joe Wallace

One common misconception about FHA home loans is that the FHA requires a minimum time on the job in order for you to qualify for a FHA guaranteed mortgage loan. Specifically, some think that the FHA requires you to work for the same employer for at least two years, or some variation of this idea. This confusion might come from a misreading of the rules of FHA loans, which state that the lender is required to verify an FHA loan applicant’s work history for the past two years. That does not mean, “insure the applicant has worked for the same company for at least two years.” What does it mean? It simply means the lender must document the borrower’s work history over the last 24 months. In some cases, it | more...

November 25, 2013

Are Tax Documents Required For An FHA Loan Application? A Reader Question

By Joe Wallace

A reader asks, “Does FHA use your tax returns in determining your eligibility for qualifying for a loan?” There are many reasons why a participating FHA lender may request your income tax returns as part of the FHA loan application process. FHA loan rules in HUD 4155.1 start, “All borrowers, including United States (U.S.) citizens, must have a valid Social Security Number (SSN) and must provide evidence of that SSN to the lender.” The rules say the lender is responsible for documenting and validating the Social Security Number for each applicant and may do so through a variety of means including income tax paperwork. Specifically, HUD 4155.1 Chapter One Section B states, “The lender is responsible for documenting an SSN for each borrower, coborrower, or cosigner on the mortgage | more...

November 22, 2013

FHA Refinancing Loans With an Appraisal

By Joe Wallace

Borrowers interested in a non-streamline, credit-qualifying FHA refinance loan that features no cash back to the borrower will be interested in knowing some of the basics of this option including the maximum mortgage loan possible and details of the Up Front Mortgage Insurance Premium requirements. The rules that govern these types of refinancing loans are found in HUD 4155.1 in Chapter Three. Borrowers should note that there is no fixed single dollar amount limit for an FHA loan–your loan amount is determined by the fair market value of the home (which is determined by an appraisal) and your loan amount can be affected by the FHA loan guaranty limits in your county, plus any approved add-ons to the mortgage. When it comes to percentages, however, there are specific numbers. According | more...

November 21, 2013

Basic Information on FHA Refinance Loans

By Joe Wallace

When it’s time to refinance a home loan with an FHA loan, borrowers may wonder whether their situation qualifies for an FHA refinance, whether that’s a Streamline Refinance or a Cash-Out refinance loan. Obviously an homeowner with an existing FHA mortgage wouldn’t have a problem getting a streamline refinance loan, but what about those who have conventional or even VA loans? What do FHA loan rules say it takes to qualify for an FHA refinance? FHA loan rules on this subject are found in HUD 4155.1 Chapter Three Section A, under the heading, “General Information on Refinance Transactions”. It says in part: “A refinance transaction is used to pay off an existing real estate debt with the proceeds of a new mortgage for borrower(s) with legal title, and on the | more...

November 21, 2013

FHA Loans and “Non-Occupying Borrowers”

By Joe Wallace

We’ve gotten a variety of questions lately about the FHA loan rules for occupancy related to buying a single-family home. FHA loan rules state that a borrower must occupy the home purchased with a single-family FHA mortgage as his/her personal residence. But what about when two or more people are obligated on the FHA home loan? Are both required to meet this occupancy rule? FHA loan rules in HUD 4155.1 state that at least one person obligated on the FHA loan must live in the home as the primary residence. In cases where not all the borrowers will do so, the loan is classified differently and there are different rules that may affect the mortgage. According to HUD 4155.1, Chapter 2 Section B, “A non-occupying borrower transaction involves two or | more...

November 20, 2013

FHA Loan Occupancy Requirements: A Reader Question

By Joe Wallace

A reader asks, “My mother works in Florida and wants to finance a home in Kentucky. Can she get a FHA loan? I’ll be the co-owner of the home, but not the co-borrower on the loan. I’ll be at he home all the time.” FHA loan rules for single family home loans require the borrower to certify that he or she will purchase the home for “personal occupancy”. The borrower is required to certify in writing that he or she will occupy the home within a specific amount of time after the loan closes. These rules are found in HUD 4155.1, Chapter Four Section B. It states, “At least one borrower must occupy the property and sign the security instrument and the mortgage note in order for the property to | more...