Articles Published in: 2014

August 12, 2014

FHA Loan Approval, FHA Loan Denial: The Process

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...

August 6, 2014

FHA Loan Reader Questions: FICO Scores, Loan Amounts

By Joe Wallace

A reader asks, “I have a FICO of 610/608/586. Is there a chance of getting approved for a loan? How much if so? And where would I begin?” FHA loan rules specify that borrowers with FICO scores above 500 are eligible to apply for an FHA mortgage loan. However, lender standards are often higher than FHA minimums so you would need to check with the individual lender to see whether such scores are acceptable. The FHA cannot force a lender to offer FHA mortgage loans or refinance loans to those who don’t meet the financial institutions minimum FICO score guidelines. Borrowers who ask “how much?” are asking a common question, but the answer depends on the sale price of the home and the appraised value of that property. FHA loans | more...

August 5, 2014

FHA Loan Minimum Property Requirements For Mobile Homes: A Reader Question

By Joe Wallace

A reader asks, “I am applying for refinance on my double wide home and have had an appraisal done and have made all upgrades they have requested. Now they are asking me to have an engineer to come out to inspect the footings that were put in and have a certified engineer sign off on them. I have looked at the requirements and do not see where this is required.” “Can you give me any advice on this? The footings (pillars) were put in according to the manufactures specifications and were inspected at the time of the installation of the double wide.” What FHA loan applicants need to know in situations like these is that FHA minimum property requirements are not necessarily the only rules that apply. The answer to | more...

August 4, 2014

FHA Loan Lender Standards: A Reader Question

By Joe Wallace

A reader asks, “I was discharged from Chapter 7 in 2010, and the sheriff sale on my home was June 27, 2012. The mortgage company is telling me that the only way to do a conventional loan after two years from the sheriff sale, is to put 15% down. Is this correct?” We can’t comment on conventional loans–that’s outside the scope of our writing here, which covers FHA loans. However, the question is still valid when applied to an FHA loan application–what’s the right answer? Unfortunately, there is no single answer because in cases like these, lender standards may apply. The FHA loan program has minimums including a minimum down payment requirement of 3.5%. But in cases like these lender standards may require the borrower to have a longer waiting | more...

What you should know about FHA 203(h) Loans For Disaster Victims

August 1, 2014

Types of FHA Home Loans

By Joe Wallace

There are a wide variety of options when it comes to the FHA loan program. Did you know you can buy or refinance a home using an FHA mortgage? You don’t have to have an existing FHA mortgage in order to refinance into an FHA mortgage, and for qualifying borrowers aged 62 or older the Home Equity Conversion Mortgage loan offered under the FHA loan program can also be an option. For new purchase FHA home loans, borrowers have the option under the FHA single-family loan program to purchase a suburban home, a townhome, condo, duplex or other home classified as real property (no houseboats or motor homes). FHA loans for new purchases require a minimum 3.5% down payment. This is non-negotiable, though borrowers are free to make a larger | more...

August 1, 2014

FHA Loan Income Requirements: A Reader Question

By Joe Wallace

A reader asks, “I am applying for an FHA loan, I left a permanent position of 3 years to do contract work which I have done for over a year now. I am currently on my 2nd assignment which still has another 6 months minimum left on it, with a possibility of an extension – I am a W-2 contractor (not 1099.) Would I be disqualified since I only have a one-year history as a contractor vs being a permanent employee?” Let’s examine what the FHA loan rules printed in HUD 4155.1 say about income and employment verification. To star with, let’s look at the FHA instructions to the lender for analyzing employment: “When analyzing the probability of continued employment, the lender must examine • the borrower’s past employment record | more...