Articles Published in: 2013

January 10, 2013

FHA Streamline Refinance Loans Without An Appraisal

FHA Streamline loans are described in the official rules (HUD 4155.1) as follows: “Streamline refinances • are designed to lower the monthly principal and interest payments on a current FHA-insured mortgage, and • must involve no cash back to the borrower, except for minor adjustments at closing, not to exceed $500.” The no-cash-out rule makes FHA Streamline Refinance loans different than cash-out refinances. Streamline loans may be done with or without an appraisal. According to FHA loan rules, when a Streamline Refinance is done without an appraisal, the following applies: “Generally, the streamline refinance mortgage amount may never exceed the statutory limits, except by the amount of any new upfront mortgage insurance premium (UFMIP). However, the maximum mortgage may exceed the statutory limits on certain specialty products.” Additionally, there are | more...

January 9, 2013

FHA Loan Reader Questions: Can Another Homeowner Co-Sign My Loan?

By Joe Wallace

A reader asks, “Can my mother co-sign an FHA mortgage for me even if she has a veteran’s loan for her home? Will they use my credit, or just hers, or both? I am confused. My credit is not so good but she is willing to help so I don’t know…” FHA loans require credit, income and employment data on all parties financially obligated on the mortgage. What specifically does the FHA require from co-signers or co-borrowers? Here’s some information from the FHA official site, which states: “Co- borrowers take title to the property and are obligated on the mortgage note and must also sign the security instrument. The co-borrower’s income, assets, liabilities, and credit history are considered in determining creditworthiness.” Additionally, “Co-signers do not hold ownership interest in a | more...

January 9, 2013

FHA Loan Rules For Self-Employed Borrowers: A Reader Question

By Joe Wallace

A reader asks, “Are there specific rules for applicants who are self-employed or independent contractors and receive a 1099 instead of a W-2?” Yes. Self-employed borrowers and independent contractors must have their income verified the same as more traditionally employed borrowers. For self-employed FHA loan applicants this may include additional paperwork; tax statements, proft-and-loss sheets, even business plans or other related documentation depending on the lender’s requirements. Self-employed and contract workers have specific criteria that must be observed. What defines “self employed” as opposed to “contract”? You may be considered self-employed if you have a 25% or greater controlling interest in a business. The lender has to determine your level of ownership in a company. A contract employee may not be required to submit the same documentation as a self-employed | more...

January 8, 2013

FHA Loan Reader Questions: Manufactured Home Rules

By Joe Wallace

A reader asks, “What requirements does a factory built home (manufactured or modular)have to meet to qualify for FHA financing? I am particularly interested in any “age” limitations/recognitions/requirements/etc.” It’s true that there are FHA loans for certain types of mobile homes/manufactured homes, modular homes, etc. During the housing crisis, these loans were more difficult to come by; many lenders were not willing to underwrite FHA loans on these types of properties. But with a recovering housing market and rising property values, some borrowers are finding their lenders willing to consider these types of FHA loans once more. To answer the reader’s question, it was necessary to reference the Department of Housing and Urban Development’s Frequently Asked Questions database, which states; “To determine basic eligibility for FHA mortgage insurance, all manufactured | more...

January 7, 2013

Adding Repair Costs To An FHA Home Loan

By Joe Wallace

When you want to purchase a home with an FHA guaranteed home loan, the property you want to buy must be appraised to determine its eligibility for the loan. A home that does not meet FHA minimum property requirements may not necessarily be ruled out for an FHA loan–an appraiser may note certain corrections that should be made to bring the home up to standard. In such cases, the loan may be approved contingent on those corrections being made. But can the expense of those corrections, when not paid by the seller, be included in the FHA loan amount? FHA loan rules provide for this, stating under what circumstances repair or improvement costs can indeed be added to the loan. According to HUD 4155.1 Chapter Two, “Repairs and improvements may | more...

January 4, 2013

Bank Of America Settles In FHA Sexual Orientation Discrimination Case

By Joe Wallace

A press release issued on January 2, 2013 announces a settlement between the Department of Housing and Urban Development and Bank of America regarding a discrimination case filed by the government. According to HUDNo.13-001, “The U.S. Department of Housing and Urban Development today announced an agreement with Bank of America (BOA) to settle a claim that the mortgage lender refused to provide financing to a lesbian couple. The agreement is the first enforcement action taken against a lender involving HUD’s recent rule ensuring that the Department’s core housing programs be open to all eligible persons, regardless of sexual orientation, gender identity, or marital status.” The case involves alleged violations of the HUD rule “Equal Access to Housing in HUD Programs Regardless of Sexual Orientation or Gender Identity” which prohibits lenders from | more...

January 3, 2013

Canceling An FHA Case Number: A Reader Question (Part Two)

By Joe Wallace

In our previous blog post, we addressed a question from a reader who asked, “Is it possible for the previous lender to cancel the FHA Case Number?” FHA case numbers may be canceled–there are rules that govern how this procedure is to be handled by the lender. The case number must be canceled in writing according to the procedure spelled out on the FHA/HUD official site. “The lender must notify the appropriate FHA Homeownership Center in writing to close outstanding files and cancel the FHA case number if the origination and closing of a loan will not be completed or if FHA mortgage insurance endorsement will not be sought.” The rules also remind lenders, “Please note that you cannot request a case number cancellation for an endorsed (insured) loan or | more...

January 3, 2013

FHA Case Number Cancellation: A Reader Question

By Joe Wallace

A reader asks, “Is it possible for the previous lender to cancel the FHA Case Number?” There is a bit of detail missing from this question that makes it a bit difficult to answer properly–is the reader asking whether a lender may cancel an FHA case number (or should) when the loan is transferred from one bank to another? Is the question simply asking whether it’s possible to cancel an FHA case number as opposed to letting it expire? Assuming this question involves a borrower who tried one lender, but decided to go with another, what do the FHA and HUD have to say about FHA case number cancellation? The rules are clear–lenders do not cancel FHA case numbers in these cases, they are expected to cooperate in the transfer | more...

January 2, 2013

FHA Loan Questions: Appraised Value Versus Buyer Offer

By Joe Wallace

Our very first reader question of 2013! A reader asks, “We had a property under-contract for sale at an attractive price in exchange for a 12/31 close…but they were unable to close. The property appraised at the sales price. Now we have an offer at a higher price…also using FHA financing. Will the previous lower appraised value be a problem for us?” Not to be deliberately vague, but it really depends on how you define “problem”. According to FHA loan rules, “The maximum mortgage amount that FHA will insure on a purchase is calculated by multiplying the appropriate loan-to-value (LTV) factor by the lesser of the property’s sales price, subject to certain required adjustments, or appraised value. In order for FHA to insure this maximum loan amount, the borrower must | more...

January 1, 2013

Happy New Year!

By Joe Wallace

2013 is here! We look forward to helping you learn more about your FHA loan options, refinancing and related topics in the new year. Thank you very much for reading, for submitting your questions, and your replies. We wish you a safe and prosperous new year. Banks, stock markets, the U.S. post office and many other services are closed for the holiday…as are we. We’ll be back tomorrow for more answers to your questions and discussion of the issues. Happy New Year!