Articles Published in: February 2014

February 28, 2014

FHA Loans And Credit Scores: More Lenient Now?

Are FHA home loans getting easier to come by? According to one report in the L.A. Times, the answer is yes. Several sources are reporting that average credit scores on FHA mortgages has “declined steadily”. Combine that with a trend towards higher debt-to-income ratios among borrowers and you have indications that lenders in general may be easing their standards. For many years, the minimum credit score many lenders would need to approve an FHA loan was between 620 and 640. But with reports of some financial institutions approving FHA mortgages with scores at 600–still well within the FHA guidelines for loan approval–it seems the lending environment has gotten friendlier to borrowers with credit scores in this range. According to the L.A. Times report, “The FHA theoretically allows credit scores as | more...

February 28, 2014

FHA Loans For Single Parents

By Joe Wallace

There are many FHA home loan options available for qualified borrowers, but one question about the program common enough to warrant attention from the FHA official site itself is whether there is home buying assistance available for single parents looking to purchase a home with an FHA mortgage loan. According to the FHA official site, help for single parents IS available, but one important thing to remember about such homebuyer assistance programs is that they are not administered by the FHA. According to FHA.gov, “There is help available. Start by becoming familiar with the homebuying process and pick a good real estate broker.” The site points out that while single parents won’t have the advantage of two incomes when it’s time to financially qualify for an FHA mortgage, getting pre-qualified | more...

February 27, 2014

FHA Loan Rules: A Reader Question About Earnest Money

By Joe Wallace

A reader asks, “A buyer made an application for a FHA loan to purchase a property. The buyer was not able to obtain FHA loan approval by close of escrow and rather than to cancel the contract and receive the earnest money back the buyer and seller agreed in writing to extend the contract’s close of escrow provided the earnest money become unrefundable if the buyer could not close escrow for any reason.” “The buyer was not approved for FHA financing and cancelled the contract yet is claiming FHA overrides the written contract and FHA states the earnest money must be returned to the buyer when the buyer is denied aFHA loan. Does FHA have some sort of rule or authority over a legal contract between buyers and sellers for | more...

February 26, 2014

FHA Loan Reader Questions: Roof Requirements

By Joe Wallace

A reader asks, “For an FHA loan, are there roof requirements on a detached garage or do the requirements solely apply to the roof over the home?” FHA loan rules for property analysis can be found in HUD 4150.2. Under the “Roof” section we find the following: “The covering must prevent moisture from entering and must provide reasonable future utility, durability and economy of maintenance. When re-roofing is needed for a defective roof that has three layers of shingles, all old shingles must be removed before re-roofing…The appraiser must observe the roof to determine whether the deficiencies present a health and safety hazard or do not allow for reasonable future utility.” The rules do not make a distinction between attached garages or detached garages, but the line about future utility | more...

February 25, 2014

FHA Home Loans: What The FHA Will And Won’t Approve

By Joe Wallace

If you’re looking for an FHA guaranteed home loan, it can be a very big help to know in advance what kinds of properties the FHA will and won’t approve loans for in its single-family home loan program. There are sometimes misconceptions about the FHA single-family home loan program; some borrowers are interested in loans for commercial buildings or properties, but single-family home loans are intended for purchasing a dwelling for the borrower’s personal use. The FHA’s list of approved and unapproved uses for an FHA mortgage make it fairly obvious how these loans can be used, but if you’re new to the program those details aren’t always as clear. You can save a lot of time knowing up front what’s allowed under the FHA mortgage program. The rules for | more...

February 24, 2014

FHA Loan Reader Questions: Refinancing Loans and Occupancy

By Joe Wallace

A reader asks, “We have a home for 25 years paid the first mortgage off and the we got a home equality line now ten years are up and the loans and it need to be refinance and the bank said because we done live in the house but my daughter and her husband do that won’t give us the loan again. Can we just get another mortgage on the house I don’t want to lose our house.” FHA loans for single-family residences do have an occupancy requirement–the borrower must live in the home as his or her “principle residence”. This is an important thing for FHA loan applicants to be aware of–FHA loan regulations include the borrower moving into the home and using it for the borrower’s personal use. | more...

February 21, 2014

FHA Loan Answers: Can The Lender Pay Closing Costs On An FHA Mortgage?

By Joe Wallace

There are a lot of rules about the closing costs associated with an FHA mortgage loan. For example, the rules in HUD 4155.1 state that closing costs cannot be considered part of the borrower’s required down payment. The minimum cash investment requirement is separate from the FHA loan closing costs and must be paid in addition to those costs. There are rules governing how much a seller can contribute to closing costs, and there are rules about what costs can and cannot be charged to the borrower. Some FHA loan applicants may wonder if there are any provisions for the lender to pay closing costs; after all, the seller may contribute so why not the lender? This practice is allowed under VA home loan rules–it’s known as “premium pricing” and | more...

February 21, 2014

FHA Loan Reader Questions: Closing Costs Paid By The Seller

By Joe Wallace

A reader asks, “What portion FHA’S closing costs that the buyer cannot pay that must be paid by the seller?” A look at HUD 4155.1 revealed no language that included a requirement for the seller to pay closing costs on behalf of the borrower for an FHA home loan. There IS language in FHA loan rules saying that the borrower cannot be charged certain fees or expenses such as the lender’s legal fees for retaining a lawyer. FHA loan rules in Chapter Five, Section A of HUD 4155.1 also mention the following: “If the seller pays the broker fee as part of the sales commission, it is not considered an inducement to purchase, or part of the seller contributions limitation, as long as the seller is paying only the normal | more...

February 20, 2014

When Filling Out Your FHA Loan Application

By Joe Wallace

When a borrower fills out an FHA home loan or refinancing loan application, some may be tempted to leave out unfavorable information or provide documents to the lender that are not as up to date as they could be, but reflect more favorably than the most current information. When applying for a home loan, honesty is definitely the best policy–FHA loan rules published in HUD 4155.1 require the lender to exercise due diligence where this information is concerned. Chapter One Section B of HUD 4155.1 instructs the lender: “The mortgage loan application package must contain all documentation that supports the lender’s decision to approve the mortgage loan. When standard documentation does not provide enough information to support the approval decision, the lender must provide additional, explanatory statements that are consistent | more...

February 19, 2014

FHA Loan Reader Questions: Divorce, First Mortgages, and Second Mortgages

By Joe Wallace

A reader asks, “Currently, my husband and I have a FHA loan on our primary residence. We are no longer living together, but still married. I have lived in the home for the last 5 years and paid the first mortgage which is current, never late. My husband inquired a second mortgage on the property in 2006 but is not current on the payments of the second mortgage.” “The second mortgage is in his name only. He filed bankruptcy in 2009 which has been discharged. He did not reaffirm debt of the first mortgage, but he reaffirmed the second mortgage. Can his name be removed from the FHA loan, especially since he is no longer obligated to pay the first mortgage by not reaffirming the debt during his Chapter 7 | more...