Articles Published in: July 2014

July 31, 2014

FHA Loan Rules For Cosigners: A Reader Question

A reader asks, “How can a person sign a mortgage note but not have liability to repay the obligation?” FHA loan rules mention cosigners as a non-occupying parties who must sign the mortgage note but are not obligated when it comes to financial liability. According to HUD 4155.1, the lender must perform due diligence with the cosigner the same as with the borrower: “When determining the creditworthiness of borrowers, coborrowers, or cosigners, the underwriter considers their • income • assets • liabilities, and • credit histories.” How does the FHA define the cosigner? Let’s start by looking at the FHA definition of the borrower and co-borrower: “Both occupying and non-occupying borrowers and coborrowers • take title to the property at settlement • are obligated on the mortgage note, and • | more...

July 30, 2014

FHA Credit Score Minimums: A Reader Question

By Joe Wallace

A reader asks, “My credit score is 583 on Quizzle and 604 on Credit Sesame, what is the criteria for credit scores? Would I have a chance of getting approved for a refinance cash out?” The first issue we’ll address here is credit reporting–your participating FHA lender will check your credit scores as reported by the three major credit reporting agencies. Those agencies are Equifax, TransUnion, and Experian. It may be best to contact these agencies directly to request your credit scores as that is what your lender will use. FHA loan rules state that, technically speaking, borrowers with credit scores above 500 qualify for the FHA loan program. That said, FHA loan FICO standards are MINIMUM standards, and the lender is free to require a higher minimum FICO score. | more...

July 29, 2014

FHA Loans, Tax Liens, and Other Credit Issues: A Reader Question

By Joe Wallace

A reader asks, “I’m trying to get my credit re established after a BK in 2011…3.5 years thus far. I’ve had a 12 month secured loan at my credit union, and I’ve had a non secured card for just over 1 yr now, with 2 credit line increases to 2 k in 1 year of payments.” “Also trying to pay off, and get a federal tax lien withdrawn of 9 k to help better score in the meantime. The back tax will be paid in full by Dec 31 -2014…and I’m currently in the direct debit acct, so in 3 months they will withdrawn the lien automatically…After all this projected prep,…what else do I need to get in order by early 2016? to smooth sail for the FHA?” Depending on | more...

July 28, 2014

FHA Streamline Refinancing Loans and Delinquent FHA Mortgages

By Joe Wallace

In our last blog post we examined FHA loan rules for skipped payments and delinquent mortgages with regard to an FHA refinance loan. HUD 4155.1 Chapter Three addresses these issues in general, stating the FHA requirement that, “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.” But what does the FHA loan rulebook specifically say about delinquent payments on mortgages to be refinanced with an FHA Streamline Refinance loan? HUD 4155.1 Chapter Six Section C states, “A delinquent mortgage is not eligible for streamline refinancing until the loan is brought current.” That means that skipped payments are not allowed, and the delinquency issue must be addressed as | more...

July 25, 2014

Missing Payments On FHA Loans Prior To Refinancing

By Joe Wallace

One common question about FHA refinance loans involves skipping payments. The ability to skip a payment prior to getting a refinance loan seems like an attractive option to many borrowers, and for those who have become delinquent on home loans. But does the FHA allow skipping payments? How do FHA loan rules address delinquent accounts that are being refinanced? HUD 4155.1 Chapter Three addresses these issues in general, stating: “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.” To clarify, Chapter Three, Section A of HUD 4155.1 provides the following example for us to review: “If the borrower is closing on April 8, he/she must have made | more...

July 25, 2014

FHA Loan Rules For Refinancing and Reverse Mortgages: A Reader Question

By Joe Wallace

A reader asks, “We were told to get a reverse mortgage, while applying for a reverse mortgage my husband was under the impress that we did not have to make a mortgage payment. He did not make 2 payments. We have never misses a payment including the 28 years we owned our first home. The person who recommend the reverse mortgage did not explain. explain the process to us, once the paper work was competed he told us that we had to pay 85 thousand dollars in order to get a reverse mortgage, which came as a shock to us and since we could not afford it we dropped out of the program.” “Now we need to defiance as our mortgage is $1250. a month and our condo fee is | more...

July 24, 2014

FHA, HUD Announce Settlement In Housing Discrimination Case

By Joe Wallace

The FHA and HUD have announced a settlement in a New Hampshire housing discrimination case. According to HUDNo.14-089, a tenant filed two housing discrimination complaints against TKB Properties and the New England Family Housing Management Organization. Those complaints were settled and the settlement announced in the HUD/FHA press release. “The U.S. Department of Housing and Urban Development (HUD) announced today agreements with the owners and managers of two Berlin, New Hampshire properties, settling allegations that they engaged in housing discrimination when they refused to rent to a woman who was a victim of domestic violence. The Fair Housing Act makes it unlawful to discriminate in the sale or rental of housing because of race, color, national origin, religion, sex, disability, or familial status.” “No woman should be denied housing based on | more...

July 23, 2014

FHA Loan Income Requirements: A Reader Question

By Joe Wallace

A reader asks, “My spouse is waiting an immigration process. Is there any way we can count all or partial income? My credit is at $800 and we have no other debts.” This is a difficult question to answer without knowing more. The big question is whether the spouse income is verifiable or not–FHA loan rules require all income to be used in the debt to income ratio calculation (which is an important part of the loan approval process) to be verifiable. What does this mean? Verifiable income is defined as earnings that are stable, reliable, and likely to continue. Verifiable income is not always “taxable income”–veteran benefits, for example, may be counted as income even though they are tax-exempt. But some types of income can’t be used. Non-verifiable income | more...

July 22, 2014

FHA Loans And Escrow Requirements: A Reader Question

By Joe Wallace

A reader asks, “I am trying to cancel my escrow acct. with (my lender) due to them selling my Mortgage loan to an undesirable finance company called (name deleted). I was informed that all FHA loans are required to have an Escrow account. Please inform me of my rights.” FHA loan rules do not require an escrow account in every case, but your lender might. According to the FHA/HUD official site, we find the following on the page titled HUD RESPA FAQs. The Real Estate Settlement Procedures Act, also known as RESPA, governs escrow accounts for home loans. Under RESPA there is no requirement for escrow. From the HUD official site: “Does RESPA require borrowers to maintain an escrow account? NO. It is the lender’s decision whether the borrower must | more...

July 21, 2014

FHA Loan Rules For Credit, Short Sales, Foreclosures: A Reader Question

By Joe Wallace

A reader asks, “My husband and I are looking to potentially buy a manufactured home already on some land. The home itself appears to meet the requirements stated above. The mortgage loan officer is stating that we do not qualify for a loan for a manufactured home due to my husband having a foreclosure seven years ago and I have a short sale three years ago. Is this correct, that due to our prior home financing circumstances, we are ineligible for an FHA loan for a manufactured home?” The important thing to keep in mind with regard to questions like this is that FHA loan rules aren’t the only ones that govern the FHA loan transaction–lender standards also play a part. FHA loan requirements for credit and other financial qualifications | more...