Articles Published in: 2014

July 7, 2014

FHA Loan Reader Questions: Bankruptcy and Foreclosure

A reader asks, “I had a FHA mortgage with my previous home. Because of circumstances beyond my control, I had to file bankruptcy and my home was foreclosed on. It has been almost 2 years since the bankruptcy was discharged. Would I be eligible for another FHA mortgage and if so, when could I apply? Also my sister wants to buy the new home with me. Could she be a second borrower?” FHA loan rules are different depending on what kind of bankruptcy was filed. In some cases the borrower may not only be subject to a minimum waiting period, but also may need to get court permission in order to be obligated on the new home loan. For example, look at the rules covering Chapter 7 bankruptcy and a | more...

July 4, 2014

Happy Independence Day!

By Joe Wallace

Today we’re pausing the normal day-to-day routine answering reader questions, writing about FHA home loan, and FHA-related news that affects you; we’re celebrating the Fourth of July holiday and our usual posting schedule will return on Monday. Thanks for reading and have a safe, happy holiday!

July 3, 2014

FHA Loan Rules For School Debt: A Reader Question

By Joe Wallace

A reader asks, “My dad took out a Parent plus loan for me while I was in college. The loan is in his name but I make the monthly payment. My husband and I are applying for a mortgage and I was wondering if the monthly payment I make is going to count against my debt to income ratio in the lenders eyes even if the loan is in my dad’s name and not on my credit?” “I know we will be providing bank statements so I assume they are going to see the payments made per month and I just wanted to be prepared either way.” This is a situation the reader should definitely discuss with the lender–technically speaking the reader is not financially obligated on the loan mentioned | more...

July 2, 2014

FHA Refinance Loans and FICO Scores: A Reader Question

By Joe Wallace

A reader asks, “Would I qualify for and FHA Loan refinance with a credit score of 589 with no credit card debt, and all house payments have been made on time for the last three years? I really need to refinance. Please help!” FHA loan rules published in HUD 4155.1 state that a borrower with a credit score above 500 is technically eligible for a VA loan, though between the range of 500 and 579 the borrower is not eligible for maximum FHA financing–it’s limited to 90%. That means a 10% down payment is required at a minimum according to FHA regulations for new purchase home loans. For refinance loans, the implications are different–speak to your loan officer about what might apply in terms of an FHA cash-out refinance. The | more...

July 1, 2014

HUD Announces Settlement in Condo Housing Discrimination Case

By Joe Wallace

A press release at the FHA/HUD official site announces a settlement in a housing discrimination case featuring unlawful restrictions in a condo project. According to HUDNo.14-083, there’s an agreement between the Connecticut Fair Housing Center (CFHC) and a company called Lil-1 Associates, plus AllPoints Realty, and a realtor. “The real estate companies will pay more than $24,000 to settle allegations that they published discriminatory listings and advertisements for condominiums specifying that children were not permitted” according to the HUD press release. “The Fair Housing Act makes it unlawful to refuse to sell or rent housing on the basis of race, color, national origin, religion, sex, disability, or familial status. This includes refusing to allow families with children under 18 unless the property qualifies as housing for older persons.” Fair Housing laws | more...

June 30, 2014

FHA Loan FICO Score Rules: A Reader Question

By Joe Wallace

A reader asks, “How low can a credit score be? i know mine is about 540. If it is for low income people with BAD credit why should the score matter at all?” The FICO score question has two important aspects borrowers should be aware of. FHA loan rules establish a minimum FICO score requirement. HUD 4155.1 includes a chart to show the FICO minimums and how maximum financing is affected depending on what the borrower’s FICO score is within these ranges: FHA minimum scores are just that–the minimum numbers required. Lenders can and often do have more strict FICO score rules than what you see printed above. There’s no such thing as a “bad credit FHA home loan”. Borrowers who do not meet the minimums listed above can’t be | more...

June 27, 2014

FHA Appraisals and Required Corrections: A Reader Question

By Joe Wallace

A reader asks about a refinance loan situation where “an appraisal is done there’s a recommendation of installing an electric line water heater and roof sealing, can the loan be approved without doing these improvements or can the cost be added to the mortgage loan to do so?” If the FHA appraiser recommends corrections or alterations, these are usually done as a condition of loan approval and may require a compliance inspection to insure they have been accomplished. However, the second part of this reader question does offer the borrower some possibilities when the borrower is required to pay for the fixes. According to the FHA loan rules published in HUD 4155.1 Chapter Two, Section A, under the heading titled, “Adding Repair and Improvement Costs to the Sales Price” we | more...

June 27, 2014

FHA Loans For Schoolteachers: A Reader Question

By Joe Wallace

A reader asks, “My daughter is a schoolteacher. Where she lives, they do not give new hires full time jobs, but hire the teacher part time all the time so they do not have to give benefits. Can she get an FHA loan? Her total need would be $400,000 for the house less a 20% down payment, which she has. She has been working for a long time under this arrangement, but is not classified a a full time teacher. Her mother or I could co-sign for her if necessary. We are both retired but have verifiable incomes and property well in excess of the total loan amount.” FHA loan rules permit co-signers, non-occupying co-borrowers and other arrangements, so the answer to this question where that is concerned is that | more...

June 26, 2014

FHA Loans For Second Homes? A Reader Question

By Joe Wallace

A reader asks, “I would like to know how hard it is to get a loan on buying a second home. Our credit scores are 649 and 685. Before anyone runs our credit again, my husband makes 2000 a month plus we get SS of 2500 a month.” The answers to this reader’s questions depend greatly on a number of factors not mentioned in the question. First there’s the question of the first home–is there an existing FHA mortgage? FHA loans for new purchase transactions require occupancy and borrowers are not permitted to apply for FHA loans for homes they don’t plan to occupy as their full time residence. FHA loans for single-family homes are intended for borrowers to purchase for their own occupancy and an FHA single family mortgage | more...

June 25, 2014

FHA Refinance Loans and HELOC: A Reader Question

By Joe Wallace

A reader asks, “We have an old home built in 1924 in Vallejo, CA. We took a HELOC on the property in 2006 when the home appraised at around $450000. The loan was structured as 10 yrs. interest only payments, which will become principal and interest at the then current HELOC rate in Oct. of 2016. “The home is now worth about half of its prior value, and we are worried about what the HELOC rate will become in 2016. We still owe $244,000 and a house around the corner sold for $235,000. Is there an FHA loan we can qualify for to help get out from under this situation? We have excellent credit(over 760 each)and income around $120000 annually, with no debt other than this HELOC situation.” FHA loan | more...