Articles Published in: November 2013

November 19, 2013

Credit Qualifying Information For FHA Loans: What Your Lender Needs

It’s good to understand the process of FHA loan approval. Knowing what your lender is looking for on your credit application is an important part of being ready for an FHA mortgage application. When you fill out your credit forms, what does your lender do with all that data? When it comes to your credit information, the lender doesn’t just rely on what’s provided on your paperwork; FHA loan rules listed in HUD 4155.1 say the lender must request a credit report that consists of information from the three major credit reporting agencies in something called a Three Repository Merged Credit Report or TMCR. That data must include: –all inquiries made within the last 90 days –all credit and legal information not considered obsolete under the Fair Credit Reporting Act (FCRA), | more...

November 17, 2013

FHA Single-Family Loan Rules For More Than One Loan

By Joe Wallace

FHA loan rules for single-family homes are designed to prevent investors from using these loans to buy more investment properties. An FHA borrower applying for a single-family home loan under the FHA program is required to use that home as the principle residence, and cannot buy, then turn around and vacate the property in order to rent it out. According to FHA loan rules found in HUD 4155.1, “To prevent circumvention of the restrictions on making FHA-insured mortgages to investors, FHA generally will not insure more than one principal residence mortgage for any borrower. FHA will not insure a mortgage if it is determined that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties, even if the property to be insured will | more...

November 15, 2013

FHA Loans and Residency Status

By Joe Wallace

One not-so-common, but very important question for some potential FHA borrowers revolves around citizenship status. Does a borrower have to be a citizen of the United States in order to apply for an FHA home loan? Let’s examine what the FHA loan rules published in HUD 4155.1 Chapter Four Section A say about this question. According to Chapter Four, “U.S. citizenship is not required for mortgage eligibility. The lender must determine the residency status of the borrower, based on information provided on the loan application, and other applicable documentation. “ That is good news for people in a variety of circumstances including legal resident aliens, those who are taking citizenship tests or who are in the process of relocating to this country under certain conditions. Chapter Four adds, “FHA insures | more...

November 14, 2013

Looking For An FHA Loan In Another Part Of The Country? A New HUD Tool Could Help

By Joe Wallace

Not everyone looking for a home with an FHA loan has the luxury of being able to drive through a lot of neighborhoods to look at all the “for sale” signs. Some are forced to look for a new home out of necessity–a job relocates to a new city, a new promotion requires a change of address, sometimes even natural disasters can urge a house hunter to look elsewhere. A lot of people feel at a disadvantage when it comes to looking for homes in a city other than their own, which is why the Department of Housing and Urban Development has created a new tool to help FHA loan applicants and anyone else looking for a home loan. According to a recent FHA/HUD press release, U.S. Housing and Urban | more...

November 13, 2013

FHA Loans and Bankruptcy Requirements: A Reader Question

By Joe Wallace

A reader asks, “My bankruptcy was discharged December 7 2011. Prior to filing I had very good credit, but was forced to retire because of cutbacks. I currently have a Fannie Mae insured mortgage through a local bank and want to go to a small house and sell my current one. Since filing discharge my wife and I have a good credit record. When I called the bank they now tell me FHA requirement is 3 years. Previously I was told 2 years. Who is right and what can I send the bank to show them the answer.” FHA standards say different things depending on the type of bankruptcy and the circumstances surrounding it, but in any case borrowers should know that lender requirements may exceed the FHA minimums–the bank | more...

November 12, 2013

Current FHA Loan Rules For Applying For A New Loan After a Short Sale

By Joe Wallace

Mortgage loan rules can change over time for a variety of reasons. Borrowers who researched their loan options a year or more ago may be surprised to learn that the rules that applied at the time they explored their options may have changed due to regulatory requirements, financial institution policies, or FHA program rule updates. With that in mind, here is the current FHA guidance regarding a borrower’s options for applying for a new FHA mortgage loan following a short sale. FHA loan rules published in HUD 4155.1 state that while having a short sale on your financial record is not grounds in itself for disqualifying a borrower, certain requirements and restrictions may apply. “A borrower is not eligible for a new FHA-insured mortgage if he/she pursued a short sale | more...

November 11, 2013

Happy Veterans Day!

By Joe Wallace

Today we pause from our usual discussions of FHA loans and answering reader questions to observe Veterans Day. Everyone reading this blog probably knows someone in uniform, or is a veteran or currently serving themselves, and we say THANK YOU to our men and women in uniform. You deserve far more than one special day a year for all your sacrifices and dedication. To those who know veterans, today is a great day to thank them for what they do or have done. We owe them all a great deal. Happy Veterans Day! Our regularly scheduled posts will resume tomorrow.

November 8, 2013

FHA HECM Loans

By Joe Wallace

FHA Reverse Mortgages, also known as Home Equity Conversion Mortgages or HECM loans, are designed for qualified borrowers aged 62 or older who own their home or have very few payments left on the home. There are three basic types of FHA HECM loans: Traditional (Equity in current property used to obtain a new HECM loan) Purchase (HECM loan proceeds used to purchase a principal residence) Refinance (Refinance of an existing HECM loan with a new HECM loan) The FHA loan rulebook, HUD 4155.1, says of HECM loans that the following properties can be used to secure the reverse mortgage/HECM: 1 Unit (Single Family Residence) 2-4 Unit with one unit occupied by the borrower HUD-approved Condominium Project Manufactured home built after June 15, 1976 Borrowers who are age-eligible to | more...

November 7, 2013

FHA Loan Reader Questions: Buying a Home After Chapter 7

By Joe Wallace

A reader asks, “We filed Chapter 7 with a house 1 1/2 years ago. How long after bankruptcy do you have to wait I have been told 1 yr then 2 years now 3 years? I would like to buy a home again and I am trying to find out what I must do I was told by one lender that I must rent a home for one year and reapply for credit for also one year before I can apply for a mortgage is there any truth in this? Should I just try to apply for a pre-approval and see what happens and if I do will that hurt my credit score?” The basic question about applying for an FHA home loan after a Chapter 7 bankruptcy has a | more...

November 7, 2013

FHA Clarifies Foreclosure Rules

By Joe Wallace

The FHA has updated its loss mitigation rules for the foreclosure process. FHA Mortgagee Letter 13-40, which supersedes or overrules previous or contradictory FHA foreclosure rules, has a collection of guidance for lenders. Some of that guidance is very important for borrowers who may be facing foreclosure on FHA mortgages to understand fully. According to the publication, “Effective loss mitigation is essential to stabilizing communities affected by natural disasters, poor housing market conditions, etc. Therefore, servicers are reminded that participation in FHA’s Loss Mitigation Program is not optional, they are to inform borrowers of and evaluate them for each loss mitigation retention and non-retention option1 in a timely manner.” The clarified loss mitigation procedures include direct instructions to the lender on when and how foreclosure proceedings may take place. “Pursuant | more...