Articles Published in: August 2014

August 18, 2014

How Long Are FHA Appraisals Valid? A Reader Question

A reader asks, “Our home was on the market, the buyer got an FHA Appraisal, their financing fell through yesterday, the appraisal was done last week, Will the new buyer who is FHA also have to get a new appraisal or can the first one be used since it has only been two weeks?” FHA loan rules covering appraisals are found in HUD 4155.1, which states: “FHA appraisals on existing properties are valid for six months. However, appraisals cannot be reused –during the six month validity period once the mortgage for which the appraisal was ordered has closed, or –for a subsequent refinance, even if six months have not passed.” Re-use of an FHA appraisal is specifically addressed in the FHA loan rulebook when it comes to refinance loans: “A | more...

August 15, 2014

FHA Loans: Can The Seller Pay Closing Costs?

By Joe Wallace

There are plenty of expenses related to buying a home that house hunters need to save up and/or budget for–loan fees, appraisal expenses, certain types of insurance, even moving expenses should be factored into the equation. But can the seller pay some of these costs on an FHA loan to make the sale more attractive to the borrower? This is a common question among many first-time home buyers and sellers. The answer is yes–but on a limited basis as defined in the FHA loan rulebook. FHA loan rules don’t allow sellers to contribute more than a total of six percent of the sales price of the home without there being a dollar-for-dollar reduction in the loan amount based on the contribution above that six percent. What’s more, FHA loan rules | more...

August 15, 2014

HUD Announces Settlement In New Jersey Lending Discrimination Case

By Joe Wallace

The FHA and HUD have announced a settlement in a case involving a New Jersey mortgage corporation that allegedly discriminated against home loan applicants based on disability. According to the press release HUDNo.14-098, ” The U.S. Department of Housing and Urban Development (HUD) announced today that Freedom Mortgage Corporation, a national residential mortgage lender based in Mt. Laurel, New Jersey, will pay $104,000 to settle allegations that it discriminated against loan applicants with disabilities by requiring them to provide medical or other documentation regarding their disability.” The Fair Housing act makes it illegal to discrminated against those who seek housing (buying OR renting) based on such criteria. “This includes requiring persons with disabilities to provide medical or other documentation not required of mortgage applicants who are not disabled.” according to | more...

August 14, 2014

FHA Loan Credit Report Rules

By Joe Wallace

When an individual borrower applies for an FHA home loan, the lender needs his/her employment data, pay stubs, and tax information. The lender will also pull copies of the applicant’s credit reports. But what happens when two people apply for the FHA loan together? FHA loan rules are clearly spelled out for the lender when it comes to credit reports. HUD 4155.1 Chapter One Section C has instructions for the lender that include the following: “A credit report submitted with a loan application must contain all credit information available in the accessed repositories. Additionally, for each borrower responsible for the debt, the report must contain all of the information available in the credit repositories pertaining to • credit • residence history, and • public records information” But the most important | more...

August 13, 2014

FHA Loan Employment History Rules: The Basics

By Joe Wallace

We get many questions on a regular basis about the FHA loan program’s rules for employment. Is there a minimum required employment time a borrower must have in order to qualify for an FHA mortgage? The FHA loan rules for employment are found in HUD 4155.1. In Chapter One, Section B, we learn the following: “The lender is required to verify the applicant’s employment history for the previous two years. However, direct verification is not required if all of the following conditions are met: • the current employer confirms a two-year employment history (this may include a pay stub indicating a hiring date) • the lender only uses base pay (no overtime or bonus pay) to qualify the borrower and • the borrower signs Form IRS 4506 or Form IRS | more...

August 12, 2014

FHA Loan Approval, FHA Loan Denial: The Process

By Joe Wallace

When you apply for an FHA loan, sometimes the hardest part is waiting to hear back from the lender that the loan has been approved and all can move forward. Did you know that FHA loan rules have a process for the lender to follow when the loan has been approved or denied? HUD 4155.1 has the guidelines and instructions to the lender for loan approval or rejection. Chapter One of this document has a section called Borrower Approval Or Rejection and tells the lender that, when the loan has been approved, there are a set of steps to be followed. The lender: • records the results of the credit analysis on the HUD-92900-LT, FHA Loan Underwriting and Transmittal Summary • enters any modification of the mortgage amount or approval | more...

August 11, 2014

FHA Loan Employment Rules: A Reader Question

By Joe Wallace

A reader asks, “I am currently living if Florida and wish to try to get an FHA to buy a home in Illinois when I return there next year. I am a nurse and I have heard you must be employed for same employer for at least 1 year to be eligible for FHA loan. Since I will be moving back to Illinois will I have to wait 1 year after I move to apply?” FHA loan rules covering the reader’s employment history question can be found in HUD 4155.1, Chapter Four, Section D under the heading, “Stability of Income”. That section states clearly: “To be eligible for a mortgage, FHA does not require a minimum length of time that a borrower must have held a position of employment. However, | more...

August 8, 2014

Who Can Get An FHA Home Loan?

By Joe Wallace

Do you know who is considered legally eligible to apply for an FHA home loan?There are many myths about FHA home loans. One type of myth involves the basic eligibility for an FHA mortgage. Some mistakenly believe the FHA is only for disadvantaged or low-income borrowers. There may be an assumption about a maximum income limit that is not true, and others may assume that the FHA program is only for those who have never purchased a home before. The truth is that any borrower who can qualify with credit scores, debt-to-income ratios and other financial data is able to apply for an FHA mortgage loan. What does the FHA loan rulebook (HUD 4155.1) say about the basic eligibility requirements for an FHA mortgage? According to Chapter Four of the | more...

August 8, 2014

FHA Refinance Loans: How Much Is The Maximum Loan Amount?

By Joe Wallace

One important question on the minds of all borrowers looking to refinance a home loan with an FHA loan is “how much can I borrow?” In many cases this question is important to the borrower because he or she wants to know if there will be cash back available on the transaction. What does that mean? For some borrowers, the question is whether or not the FHA will permit the borrower to apply for a loan amount larger than the existing debt on the home so the applicant can take the excess loan amount in cash. In general that practice is not permitted, but cash back to the borrower may be allowed in specific ways under the FHA loan program regulations. For example, for a cash-out refinance loan, the home | more...

August 7, 2014

FHA Loan Application Basics

By Joe Wallace

FHA loans are much like conventional loans when it comes to applying and qualifying. Like a conventional loan, your lender will need your credit, income, and employment history data to make a determination on loan approval. Where FHA loans stop being like conventional mortgages includes the amount of down payment required (the FHA has a much lower requirement in many cases), the interest rate (which can also be lower than conventional loans depending on circumstances) and occupancy rules. What are some of the basic things you need to know about FHA loan applications? First, it’s best to be careful when filling out your credit and employment information. Omitting or concealing past issues is not recommended. The lender will get a comprehensive picture of your credit history when looking at the | more...