Articles Published in: 2013

April 22, 2013

FHA Loan Reader Questions: Credit Score Minimums and FHA Requirements

A reader asks, “We have been working for the last year to clean up our credit with the help of a credit repair company. We have made strides. We have been living in our home the last three years which we are purchasing on a land contract.” “It is now the end of the contract and we need to do the financing. I’m reading that the minimum credit FHA requires is 580, but I cannot find any place that will finance a person with less then a 640 credit score. Secondly, it is my understanding that we should be doing a refinance anyhow, but the places I have called are clueless. HELP! Our high score is right at 580 and we need to finish this financing NOW.” This is an | more...

April 19, 2013

FHA Loan Reader Questions: FHA Loans For Retired People

By Joe Wallace

A reader asks, “Have been trying to get my Freddie Mac loan reduced for 16 months with no good results. Can a retired person get an fha/obama loan if they have excellent credit, no debt and low income?” The answer to this question really depends on more information. The FHA itself does not have a minimum income requirement for FHA refinance loan approval. Instead, the FHA guidelines state that the borrower’s debt-to-income ratio would be a factor in some kinds of refinancing. The term “low income” itself is very relative–what might seem to be low income for some is perfectly acceptable in other cases. A borrower with good credit and a low debt-to-income ratio may be perfectly able to qualify for an FHA mortgage assuming other qualifying factors are also | more...

April 18, 2013

FHA Loan Forbearance and Refinance Relief: Hurricane Sandy and Beyond

By Joe Wallace

Recently the FHA modified its guidelines to lenders for borrowers struggling to recover in federally declared disaster zones such as the large areas affected by Hurricane Sandy. There are two very important aspects of this policy modification that borrowers should know–before, during, and after natural disaster. According to FHA Mortgagee Letter 2013-11, “FHA is expanding forbearance relief for affected borrowers. Under this policy: Borrowers may suspend up to 12 months’ worth of mortgage payments while they repair their homes; and After the forbearance period, borrowers may be eligible for an FHA streamlined loan modification to avoid large lump sum payments. Up to 285,922 borrowers in the Sandy-affected areas who were eligible for forbearance relief as of February 28, 2013, may be eligible for an FHA streamlined modification.” The Streamlined loan | more...

April 17, 2013

FHA Refinance Loans, Disaster Assistance, and Loan Forbearance

By Joe Wallace

The FHA has updated its disaster relief policies to help those recovering from the effects of Hurricane Sandy, but also natural disasters in a federally declared disaster area in general. One area that hasn’t gotten much attention until now is the FHA policy on refinance loans in such cases. What assistance is there for someone with an FHA insured refinance loan who is struggling in a federal disaster area? According to the new FHA mortgagee letter, 13-11, “In accordance with HUD Handbook 4155.1, Mortgage Credit Analysis for Mortgage Insurance One- to Four-Unit Mortgage Loans, for the purpose of determining the acceptability of the borrower’s payment history for any FHA refinance, when a borrower has withheld mortgage payments pursuant to either a Formal or Informal Forbearance drafted under this Mortgagee Letter, | more...

April 17, 2013

FHA Amends Guidance For Hurricane Sandy Disaster Assistance

By Joe Wallace

The FHA has issued a new mortgagee letter amending its guidance and policies for Hurricane Sandy disaster relief as well as general guidelines for disaster assistance related to FHA home loans, loan forbearance and related measures. Mortgagee Letter 13-11 states, “As indicated in Mortgagee Letter 2012-23, HUD requires a moratorium on foreclosures of properties in Presidentially-Declared Major Disaster Areas (PDMDAs) for a ninety (90) day period beginning on the date of each Disaster Area Declaration. The moratorium applies to the initiation of foreclosures AND foreclosures already in process. As necessary, HUD may communicate further specific guidance for extension of moratorium periods for individual disasters.” Additionally, “During foreclosure moratorium periods, HUD expects servicers to make every effort to communicate with and assist affected borrowers in rebuilding or repairing damaged properties, minimizing | more...

April 16, 2013

Coldwell Banker Settles In HUD Housing Discrimination Claim

By Joe Wallace

A press release on the FHA/HUD official site announced the recent settlement of a housing discrimination claim involving Coldwell Banker. According to HUDNo.13-051B, ” The U.S. Department of Housing and Urban Development (HUD) announced today a $90,000 Conciliation Agreement with Coldwell Banker Residential Brokerage and the seller of a home in Worcester, Massachusetts, settling allegations they violated the Fair Housing Act by preventing the sale of a house to be used as a group home for persons with disabilities.” Fair Housing Act laws forbid discrimination in both rental procedures and property sales–including discriminatory standards or requirements based on disability. In this particular case, the requirements included a housing covenant that prevented the property from being used as a group home for disabled persons. “HUD is committed to promoting housing opportunities | more...

April 15, 2013

FHA Loan Answers: FHA Loan Applications, Separation, and Divorce

By Joe Wallace

A reader asks, “I’m married, the current home is FHA loan under my husbands name only….can i buy a home for 120,000 under FHA to live in? If so, will they count my husbands debts against me getting the loan? We have agreed to live separate, stay married though, do they require legal separation?” This question doesn’t have a one-size-fits-all answer for one very important reason. FHA loan rules go hand-in-hand with state community property laws. What does this mean? If a borrower is divorced, separated, or still legally married in a community property state, each spouse may be liable for all debts incurred during the marriage. In such cases, the FHA lender may be required to include both spouses on the FHA mortgage, run credit checks, etc. on both | more...

April 12, 2013

FHA Loans, Credit, and the Future Of Mortgage Lending

By Joe Wallace

A recent article in American Banker notes that while the housing market is definitely trying to recover, many borrowers face a difficult time getting a mortgage because of high credit standards. But the FHA and the Department of Housing and Urban Development are trying to work out solutions to this problem, one that according to the American Banker article by Kate Berry titled, FHA Working On Plan to Increase Lending, Reduce Banks’ Risk, would, “potentially release banks and mortgage lenders from liability for minor defects on FHA loans that meet current guidelines even if they ultimately default”. One of the problems–one addressed publicly by both the HUD Secretary and the head of the FHA–is the need for financial institutions to expand access to home loans for borrowers with credit scores | more...

April 11, 2013

FHA Loan Requirements For Employment Verification

By Joe Wallace

When you apply for an FHA mortgage, you’re asked to fill out a variety of forms and authorizations giving the lender permission to verify your income, credit history and your employment record. But what is a lender looking for when it’s time to verify your employment? FHA loan rules instruct the lender to carry out a minimum employment review in addition to whatever policies are used by the financial institution. The FHA rules don’t override the bank’s standards, but they do establish a baseline for what must be done at a minimum. According to HUD 4155.1 Chapter One Section B, “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: • | more...

April 10, 2013

FHA Loan Answers: Is a Credit Check Required For FHA Loan Assumptions?

By Joe Wallace

FHA loans are assumable, which means that if you buy a home with an FHA mortgage and decide to do so later down the line, you could allow someone else to assume the loan–taking over responsibility for the mortgage rather than selling the home outright. A loan assumption means that the same mortgage you applied for is transferred to a new owner rather than going through a sale of the home, payoff of the original mortgage, and issuing a new loan to the new owner. Most homes today (except for mortgages closed before December 15 1989) purchased with an FHA home loan require a credit check for the person assuming the loan. There’s no such thing as a simple “hand-to-hand” transfer of an FHA mortgage from one person to another. | more...