Articles Published in: May 2014

May 29, 2014

FHA Loan Fees: A Reader Question

A reader asks, “Are there any fees associated, with a FHA loan? I was contacted after inquiring online about a loan and the representative informed me that it would be a fee of $11.00 for credit reports and a fee of $149.00 which normally would cost $350.00 for the application process and additional fees of about $49.00 until credit score was at least 620..need to know if this is legitimate before I pay these fees.” FHA loans do involve fees. A reading of HUD 4155.1 Chapter Five reveals the following: “Lenders may charge and collect from borrowers those customary and reasonable costs necessary to close the mortgage loan. Borrowers may not pay a tax service fee.” Chapter Five also states, “FHA no longer limits the origination fee to one percent | more...

May 28, 2014

FHA Loan Income Rules: A Reader Question

By Joe Wallace

A reader asks, “Whats the least amount of income for an FHA home loan?” This is a common question, but the real question a borrower should be asking in these cases has more to do with how much money goes out in payment to financial obligations versus how much money is coming in. That is known in lending circles as the debt-to-income ratio. The specific answer to the borrower’s question here is that there is NO minimum income requirement listed in the FHA loan rulebook. “FHA’s mortgage programs do not typically have maximum income limits for qualifying, although you must have sufficient income to qualify for the mortgage payment and other debts.” That’ is a quote from according to a HUD publication titled “100 Questions And Answers About Buying a | more...

May 27, 2014

FHA Loan Credit Scores: A Reader’s Question

By Joe Wallace

A reader asks, “Hello, my credit score is 540, I’m a single parent, husband left me with a foreclosed house and a debt of about $135,000+ just from the house no credit cards. I have been separated for 3 years. I want to purchase a home again. Are there any programs for a person like me in this situation?” Borrowers who need assistance with issues like these should first call the FHA at 1-800 CALL FHA to request a referral to a HUD-approved housing counselor who may be able to assist with advice and pre-purchase counseling. There are no specific FHA programs that are offered to borrowers in a specific category (bad credit, foreclosure, bankruptcy, etc) but the FHA and HUD have recently announced a new pilot program aimed at | more...

May 26, 2014

Happy Memorial Day!

By Joe Wallace

Today we pause our usual posts about FHA loans and related issues, in honor of Memorial Day. We’ll resume our regularly scheduled posts and answers to reader questions tomorrow. Thanks for reading and be sure to thank the veterans in your life for all the service and sacrifices made in the name of freedom. To our veterans, THANK YOU for serving!

May 23, 2014

FHA Loan Requirements For Occupancy: What The Rulebook Says

By Joe Wallace

When you want to purchase a home using a single-family FHA home loan, you should know what the FHA loan program’s requirements are for occupancy of the property. Did you know you are required as a borrower to certify you’ll use the home as your personal residence? FHA loan rules in HUD 4155.1 explain these rules and how they apply to the borrower. There are many questions about occupancy including whether or not a borrower can purchase a single family home and rent out individual rooms, or whether a multi-unit property can be obtained and rented out. Essentially, the FHA single-family home loan program rules state the following: “At least one borrower must occupy the property and sign the security instrument and the mortgage note in order for the property | more...

May 23, 2014

FHA Loan Debt Ratios and Student Loans: A Reader Question

By Joe Wallace

A reader asks, “My student loans are in my name, because my parents wanted to get my credit/payment history started early, but they pay the loans…It is a blessing that they pay them every month, but if I went to get an FHA mortgage for a first time home buyer would I have to count that $350.00 per month loan expense or could they write a letter or prove that they are actually the ones that get the bill and pay it? This really makes a difference when I check the amount I could potentially be approved for.” The answer to this question may depend on the lender, but in general the student loan debt is in the borrower’s name and that is the key to understanding the issue. The | more...

May 22, 2014

FHA Loan Rules: Employment

By Joe Wallace

When you apply for an FHA mortgage loan, you’re required to submit a variety of data including your employment history. It’s the FHA loan officer’s job to insure an applicant has sufficient income to afford the loan, and to make sure that income is likely to continue. How does the lender do this? FHA loan rules spell out clearly what’s to be done–HUD 4155.1 Chapter One, Section B explains how it works. To begin: “The lender must obtain the most recent pay stub showing year-to-date earnings of at least one month, and one of the following to verify current employment: • a written VOE verbal verification of employment, or • electronic verification acceptable to FHA.” The pay stub is documentation that the applicant is currently employed. But when it comes | more...

May 21, 2014

FHA Loan Down Payment Rules: Acceptable Sources

By Joe Wallace

In a recent blog post we were asked about FHA down payment requirements–is there such a thing as a “no down payment” FHA loan? Some borrowers might mistake the VA loan program’s zero down payment option for something the FHA officers, but the truth is that FHA loans require a minimum of 3.5% down for single-family home loans. Not only that, but the money for your down payment has to be documented and come from an acceptable source. The reason for this is twofold–it prevents borrowers from over-leveraging themselves with cash withdrawals or cash advances on credit cards (credit card cash advances can’t be used to make down payments on an FHA home loan) and it keeps people with a financial interest in the transaction from loaning money for the | more...

May 20, 2014

FHA Loan Reader Questions: Down Payments

By Joe Wallace

A reader asks, “Is there any assistance I can get in order to buy a house without a down payment or very little with mortgage payments…?” In most cases the kind of assistance the reader is looking for would likely come from a state or local program, organization, or charity group. When it comes to the FHA loan program itself, the rules governing down payments are found in HUD 4155.1 Chapter Five, Section B, titled “Acceptable Sources of Borrower Funds.” In this section, we find the following instructions to the lender: “Under most FHA programs, the borrower is required to make a minimum downpayment into the transaction of at least 3.5% of the lesser of the appraised value of the property or the sales price.” Chapter Five also adds that | more...

May 19, 2014

FHA Loan Reader Questions: Student Loans and the Debt-To-Income Ratio

By Joe Wallace

A reader asks, “I am trying to purchase a property through the first time home buyer’s program. I have student loans that are in deferment for two years because that is the time I will be graduating and my school provided a letter confirming this to the loan officer.” “The loans has been deferred before i submitted my loan documents so therefore, one deferment will be end in October, 2014 and the other December, 2014 but they will be placed in deferment again for another year until I end school. The closing of this property is June, 2014. Will this pose a problem or can the sworn letter from the school be used.” The reason this question is important in the FHA home loan process is because when your loan | more...