Articles Published in: 2014

August 25, 2014

FHA Loan Down Payment Rules: A Reader Question

A reader asks, “Without having the 20% down on a property at the purchase of a home, can the loan be refinanced, to achieve the 20% in a short time period less than 3 years?” It’s not entirely clear what the reader is getting at in this question, but in general, FHA loan requirements include a minimum down payment of 3.5% which must be paid on or before the loan’s closing date. This is known as the “minimum cash investment” and is non-negotiable. It must be paid up front. Some lenders may, depending on circumstances, require a larger down payment as a condition of loan approval. This may be due to credit issues which require the loan to have “compensating factors” which can include a down payment of more than | more...

August 22, 2014

FHA Mortgage Rate News For Friday August 22 2014

By Joe Wallace

If you are looking for an FHA home loan, chances are good you are paying attention to the rise and fall of FHA mortgage rates. There are many reason why these rates can change day to day or week to week. One factor—economic data releases that suggests weakness in the economy. This data can influence rates and push them lower, or, conversely, when economic/jobs data indicates improvement, rates can and sometimes do move higher as a result. But other factors can push rates higher or lower, too. We found a good example of that recently–mortgage rates moving lower based on investor reaction to world headlines. Last Friday, mortgage rates hit their lowest levels in the last eight weeks or so. That drop in rates was attributed to how investors reacted | more...

August 21, 2014

FHA Loan Rules For Verifiable Income: Retirement Pay and Social Security Benefits

By Joe Wallace

When applying for an FHA loan, many borrowers want to know if certain types of income will count towards their debt to income ratio. The debt to income ratio is calculated by the lender using income that qualifies according to the loan rules spelled out in HUD 4155.1. Not all income can be used–some types of income are not verifiable because the income isn’t considered stable, reliable, or likely to continue. But what does the FHA loan rulebook say about retirement pay and Social Security income? When it comes to retirement pay, the lender is required to document the income and its source. There’s also a consideration as to how long that pay might continue according to HUD 4155.1 Chapter Four Section D, which states: “Retirement income must be verified | more...

August 20, 2014

FHA Loan Appraisal Requirements: A Reader Question

By Joe Wallace

A reader asks, “We are looking at purchasing a home that was built in 1871 almost everything has been replaced but the owner can not find the well. They have an idea of where it is but not sure.” “They just put in a UV Water system and replaced the septic tank, but I am concerned that we will not get approval with an FHA loan. Any advice or suggestions would be greatly appreciated. I have already contacted our county property surveyor and health inspector and there is no information with the county on the property because in NY only new properties get surveyed.” Questions like this are very difficult to answer for one simple reason–FHA minimum property standards aren’t the only rules at work when it comes to appraisals. | more...

August 19, 2014

FHA Loan Rules: Qualifying Commission Income

By Joe Wallace

There are many questions about who can qualify for an FHA mortgage loan. One type of question involves whether FHA rules have a minimum income requirement (they do not) and other types of FHA loan questions involved what kind of income may qualify for an FHA mortgage. FHA loan applicants who earn some or most of their income through commissions do well to ask these sorts of questions–what do the FHA loan rules say about commission earnings? The FHA loan rulebook, HUD 4155.1, spells out the requirements for verifiable commission income. If income is declared verifiable, it may be counted towards the debt to income ratio your lender will calculate when processing your loan. HUD 4155.1 Chapter Four discusses commission income as follows: “Commission income must be averaged over the | more...

August 18, 2014

How Long Are FHA Appraisals Valid? A Reader Question

By Joe Wallace

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...