Articles Published in: June 2014

June 5, 2014

FHA Loan Reader Questions About Credit Issues

In response to one of our earlier posts, FHA Loan Credit Report Rules, a reader asks, “So if you have bad credit you can’t get approved by FHA? I thought the whole point of FHA was to help people with credit issues buy a home….” The key to understanding the FHA loan program’s requirements in this area is to know what the FHA loan rulebooks says about credit in general, and creditworthiness of the FHA loan applicant. According to HUD 4155.1, Chapter One, Section A, the lender or underwriter is responsible for making sure the loan applicant is able to repay the loan and willing to do so based on credit scores, credit history and related factors: “The purpose of underwriting is to • determine a borrower’s ability and willingness | more...

June 4, 2014

FHA Loans For More Than One Borrower: A Reader Question

By Joe Wallace

A reader asks, “I would like to know if my mother and i can get a loan together, as i will be getting a divorce and she wants to move from her current residence, so we thought we could split the payments as we would rather not rent.I work full time as an LPN and she is on social security. My age is 54 and she is 76 (very good health).” FHA loans do permit more than one borrower. There are different situations where these borrowers are permitted including those where both applicants would occupy the home together and those where one applicant would be considered a “non-occupying co-borrower”. In the case of this reader question, FHA loan rules require both applicants to qualify for the loan. That means both | more...

June 3, 2014

FHA Loans and Minimum Waiting Periods After Foreclosure: A Reader Question

By Joe Wallace

A reader asks, “After a foreclosure how many years you must wait for a new application?” FHA loan rules governing this question can be found in HUD 4155.1, Chapter Four, Section C. That section states in part: “A borrower is generally not eligible for a new FHA-insured mortgage if, during the previous three years • his/her previous principal residence or other real property was foreclosed, or • he/she gave a deed-in-lieu of foreclosure.” FHA loan rules permit an exception to this waiting period, IF the foreclosure can be documented as being, “…the result of documented extenuating circumstances that were beyond the control of the borrower, such as a serious illness or death of a wage earner, and the borrower has re-established good credit since the foreclosure.” A common question about these | more...

June 2, 2014

FHA Loan Rules For Earnest Money Verification: A Reader Question

By Joe Wallace

A reader asks, “My mortgage lender is requiring that I show a bank statement as the only acceptable proof that the earnest money check cleared. Although I have nothing to hide I feel tremendously violated…” “…I feel there are less intrusive ways of showing proof. I have distrust with the system that assumes we are all dishonest and finds the most intrusive way to show something took place. I am frankly shocked to be told that this is a common well accepted practice and the only acceptable manner. Please let me know if indeed there is another way today.” FHA loan rules do require the lender to verify the source of earnest money. HUD 4155.1 states, “If the amount of the earnest money deposit exceeds 2 percent of the sales price or | more...