Articles Published in: March 2014

March 17, 2014

FHA Loan Rules: Title Issues For Non-Borrowing Co-Owners

There are plenty of situations that come up when more than one person wants to borrow on an FHA home loan, but there are just as many circumstances where two people may want to own a property purchased with an FHA mortgage, but only one of the two is applying for the loan itself. FHA loan rules for this are found in HUD 4155.1 Chapter Four under the heading, “Title Issues Regarding Non- Borrowing Spouses or Other Parties in Interest”. The rules here state: “If two or more parties have an ownership interest in the property, but only one of the parties is applying for the loan (and credit qualifies for the loan on his/her own), it is not required that the non-applicant individual(s) execute the mortgage note and security | more...

March 14, 2014

FHA Streamline Refinance Loan Maximums

By Joe Wallace

If you want to refinance your existing FHA home loan with an FHA Streamline Refinance loan, you likely want to know what the maximum loan amount would be for the transaction. Borrowers who apply for Streamline Refinance loans are often able to do so with no credit check or appraisal (depending on the lender) and there’s no cash back to the borrower for this type of refinance loan. The maximum FHA loan for Streamline Refinance transactions may depend on whether you have a lender-required appraisal or not. According to HUD 4155.1, the maximum FHA mortgage loan for Streamlines without an appraisal are as follows: “The maximum insurable mortgage for streamline refinances without an appraisal cannot exceed the outstanding principal balance • minus the applicable refund of the UFMIP, • plus | more...

March 14, 2014

FHA Maximum Loan Amounts For Cash Out Refinancing

By Joe Wallace

FHA home loans and non-FHA mortgages can be refinanced using an FHA cash-out refinance loan. Cash-out refinancing guaranteed by the FHA always require a new credit check and a new appraisal, so borrowers should anticipate the costs of these when preparing for the new loan. One of the first question a borrower need answered when considering this refinance option is naturally, “How much can I borrow”? According to the FHA loan rule published in HUD 4155.1, the answer to that question depends on how long the borrower has owned the home. Chapter Three, Section B of this manual under the heading “Cash Out Refinance Transactions” instructs the lender as follows–if the borrower has owned the property for 12 months or less prior to the new loan application, the loan is | more...

March 13, 2014

FHA Loans and Credit Scores: A Reader Question

By Joe Wallace

A reader asks, “I have a credit score of 582, I made pretty poor financial choices in my 20′s and am working to improve my credit. I make an average of 72,000 a year now and my credit hinders my every move. I want to purchase a home and feel that no one will even consider me for a loan because of my credit.” “This would be my first time buying. Are there any recommended lending companies that will work with my sort of situation. I would prefer an FHA loan so I can qualify for the down payment assistance but I know I can’t ask for too much given my circumstances.” Borrowers in these circumstances should definitely begin with some good advice from a HUD-approved housing counselor. The FHA | more...

March 12, 2014

FHA Loan Answers: Can I Skip Payments On My Mortgage If I Refinance?

By Joe Wallace

When considering your FHA home loan refinance options, there’s a list of common questions many borrowers need answers to before deciding on the right FHA refinance loan. One such question involves the state of the current mortgage before the new loan is approved. Can a borrower skip a payment on an FHA or conventional mortgage as the new FHA refinancing loan is approved? FHA loan rules address this issue in HUD 4155.1, Chapter Three, Section A. It says: “The borrower must be current on the loan being refinanced for the month due prior to the month in which he/she closes the refinancing, and for the month in which he/she closes. Example: If the borrower is closing on April 8, he/she must have made the March payment within the month of | more...

March 11, 2014

FHA Refinance Loan Basics: Purposes of the Loan, Limits, and Loan Terms

By Joe Wallace

FHA loan rules permit the refinance of mortgage loans under a variety of circumstances. Borrowers applying for some types of FHA refinancing can go from conventional to FHA, from adjustable rate mortgages to fixed rate, and for those with existing FHA loans, an FHA-to-FHA streamline refinance is also possible. Chapter Three of HUD 4155.1 is where the basic rules covering refinance transactions can be found. Chapter Three begins by stating the basic purposes of a refinance loan which include the following: “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 same property. Note: The borrower is eligible to refinance the loan, as long as he/she has legal title, even | more...

March 10, 2014

FHA Loan Reader Questions: Employment Verification

By Joe Wallace

A reader asks, “I have been employed at a job for 5 years, and another for 1yr 3 months and looking to quit both for a 3rd job I have been employed at for 4 months. the third job is currently under the table until I am able to be full time. we are looking to buy our house in April. Should I wait to quit the other jobs or will I be okay?” We can’t give advice on whether to keep or quit a job (that’s outside the topics we cover here) but one thing that’s important to remember in these types of situations is the lender’s requirement to verify both income and employment. Any job that is, as the reader question puts it, “under the table” would be | more...

March 7, 2014

FHA Streamline Refinancing Loans Net Tangible Benefit Table

By Joe Wallace

Recently we wrote about the requirements for FHA streamline refinance loans to have a “net tangible benefit” to the borrower. The type of benefits mentioned in the FHA loan rulebook for streamline loans (in general) include a lower interest rate and/or monthly payment for the borrower. The purpose of an FHA streamline refinance loan is to help a home owner with an existing FHA mortgage get into a more affordable mortgage loan payment without an FHA required credit check or appraisal. (The lender may require one anyway.) Since there are many different types of FHA loans available, the net tangible benefit for the borrower may be different depending on the kind of loan being refinanced. The FHA has a table showing all the requirements for the different types of loans | more...

March 7, 2014

FHA Streamline Refinancing: “Net Tangible Benefits”

By Joe Wallace

Recently we posted about FHA streamline refinance loan options. FHA streamline loans are for existing FHA mortgages and feature no money back to the borrower. That means there is no FHA-required credit check or appraisal, though the lender may require one. FHA Streamline Refinancing rules as printed in HUD 4155.1 state that in most cases an FHA streamline refinance must result in a “net tangible benefit” to the borrower. What does this mean and how can a borrower know what those benefits will be? HUD 4155.1 Chapter Six says, “The lender must determine that there is a net tangible benefit to the borrower as a result of the streamline refinance transaction, with or without an appraisal. Net tangible benefit is defined as • a 5% reduction to the principal and | more...

March 6, 2014

FHA Streamline Refinances–What’s Possible?

By Joe Wallace

FHA Streamline refinancing loans are for existing FHA mortgages. They feature no FHA-required appraisal in most cases, and there is no FHA-required credit check in most cases. Some borrowers who want to apply for this type of FHA refinance loan may wonder if the transaction they have in mind is possible under the rules of the FHA loan program. For example, some borrowers want to refinance from a conventional mortgage to an FHA refinance, which is not possible under the FHA Streamline program (but is under FHA Cash-Out Refinancing). What transactions ARE permitted? According to HUD 4155.1, Chapter Six, Section C under the heading “Types Of Permissible Streamline Refinances” we find a list of the following: • no cost refinances • ARM to ARM refinancing • ARM to fixed rate | more...