Articles Published in: 2014

June 11, 2014

FHA Loan Questions: Documents Required For Loan Approval

There are sometimes questions about the nature of FHA loan application requirements. Some feel that the loan requirements are “intrusive” or are asking for too much personal data. Part of this sentiment comes from a lack of understanding of what the lender is required to do and provide under the rules of the FHA loan program. What does the FHA require of the lender in order to get a loan approved? Keeping in mind that a home loan is a major line of credit, it’s not surprising that the rules for income and employment verification, credit history and other things are more stringent than for smaller lines of credit like a credit card or cell phone account. For starters, the FHA requires all documentation to be current or at | more...

June 10, 2014

FHA Refinance Loan Rules For Payments Before and After The New Loan

By Joe Wallace

FHA refinance loan advice includes a variety of recommendations about creditworthiness. For example, you should make sure you have 12 months of on-time payments on your credit record before you apply for a refinance loan, especially when applying for cash-out refinancing loans. But what about the timeliness of your original mortgage payments? Borrowers who have made all their payments on time and are about to refinance may wonder if, because of the timing of an FHA refinance transaction, two payments might be required in a single month. Can’t the borrower skip the final payment on the old mortgage before the new one kicks in? The rules for refinance loans found in HUD 4155.1 Chapter Three instruct the lender to make sure the borrower is current and paid up all the | more...

June 9, 2014

FHA Loan Policies on Foundations: A Reader Question

By Joe Wallace

A reader asks, “My fiancé bought an FHA house. The foundation is cracked in several places. We just find the last wall of the basement has been leaking. The owners clearly knew the basement was leaking before the sold it. There are signs of it being covered up. Isn’t he protected from something like this in FHA loan policies?” A home that is classified as new existing construction may or may not be covered in a builder’s warranty for certain structural issues, depending on the age of the property and the nature of the construction agreement–without knowing whether a warranty is in effect, it’s difficult to say whether a borrower has recourse but one thing is certain. All new purchase FHA loans require an appraisal, but a home that passes | more...

June 6, 2014

Adding Solar Energy Installation Costs To An FHA Loan

By Joe Wallace

When you’re purchasing a home with an FHA mortgage loan, it may be necessary to add improvement or upgrade costs to the loan amount, depending on the circumstances. The FHA has specific rules that govern this practice–for example, no costs incurred before the appraisal can be added to the loan. HUD 4155.1 has the rules that cover these extra costs. For example: “The repair and improvement amount that may be added to the sales price before calculating the maximum mortgage amount is the lowest of the • amount that the value of the property exceeds the sales price • appraiser’s estimate of repairs and improvements, or • amount of the contractor’s bid, if available.” FHA loan rules in the same section also state that, “The mortgage amount may be increased | more...

June 6, 2014

National Home Ownership Month

By Joe Wallace

The FHA and HUD have announced June as National Home Ownership Month, an effort to raise awareness of a variety of issues including the recent push to expand FHA loan access to under served borrowers through a special program known as HAWK, or Homeowners Armed With Knowledge. HAWK is particularly relevant to FHA borrowers because it could potentially save program participants about $10 thousand over the lifetime of an FHA home loan. HAWK is a new program under development, and according to the FHA/HUD it’s viewed as a key part of saving the American Dream of home ownership for borrowers current and future. “Under the HAWK pilot program, homebuyers who commit to housing counseling will qualify for tangible savings on their FHA-insured loans. The average buyer would save approximately $325 | more...

June 5, 2014

FHA Loan Reader Questions About Credit Issues

By Joe Wallace

In response to one of our earlier posts, FHA Loan Credit Report Rules, a reader asks, “So if you have bad credit you can’t get approved by FHA? I thought the whole point of FHA was to help people with credit issues buy a home….” The key to understanding the FHA loan program’s requirements in this area is to know what the FHA loan rulebooks says about credit in general, and creditworthiness of the FHA loan applicant. According to HUD 4155.1, Chapter One, Section A, the lender or underwriter is responsible for making sure the loan applicant is able to repay the loan and willing to do so based on credit scores, credit history and related factors: “The purpose of underwriting is to • determine a borrower’s ability and willingness | more...

June 4, 2014

FHA Loans For More Than One Borrower: A Reader Question

By Joe Wallace

A reader asks, “I would like to know if my mother and i can get a loan together, as i will be getting a divorce and she wants to move from her current residence, so we thought we could split the payments as we would rather not rent.I work full time as an LPN and she is on social security. My age is 54 and she is 76 (very good health).” FHA loans do permit more than one borrower. There are different situations where these borrowers are permitted including those where both applicants would occupy the home together and those where one applicant would be considered a “non-occupying co-borrower”. In the case of this reader question, FHA loan rules require both applicants to qualify for the loan. That means both | more...

June 3, 2014

FHA Loans and Minimum Waiting Periods After Foreclosure: A Reader Question

By Joe Wallace

A reader asks, “After a foreclosure how many years you must wait for a new application?” FHA loan rules governing this question can be found in HUD 4155.1, Chapter Four, Section C. That section states in part: “A borrower is generally not eligible for a new FHA-insured mortgage if, during the previous three years • his/her previous principal residence or other real property was foreclosed, or • he/she gave a deed-in-lieu of foreclosure.” FHA loan rules permit an exception to this waiting period, IF the foreclosure can be documented as being, “…the result of documented extenuating circumstances that were beyond the control of the borrower, such as a serious illness or death of a wage earner, and the borrower has re-established good credit since the foreclosure.” A common question about these | more...

June 2, 2014

FHA Loan Rules For Earnest Money Verification: A Reader Question

By Joe Wallace

A reader asks, “My mortgage lender is requiring that I show a bank statement as the only acceptable proof that the earnest money check cleared. Although I have nothing to hide I feel tremendously violated…” “…I feel there are less intrusive ways of showing proof. I have distrust with the system that assumes we are all dishonest and finds the most intrusive way to show something took place. I am frankly shocked to be told that this is a common well accepted practice and the only acceptable manner. Please let me know if indeed there is another way today.” FHA loan rules do require the lender to verify the source of earnest money. HUD 4155.1 states, “If the amount of the earnest money deposit exceeds 2 percent of the sales price or | more...

May 29, 2014

FHA Loan Fees: A Reader Question

By Joe Wallace

A reader asks, “Are there any fees associated, with a FHA loan? I was contacted after inquiring online about a loan and the representative informed me that it would be a fee of $11.00 for credit reports and a fee of $149.00 which normally would cost $350.00 for the application process and additional fees of about $49.00 until credit score was at least 620..need to know if this is legitimate before I pay these fees.” FHA loans do involve fees. A reading of HUD 4155.1 Chapter Five reveals the following: “Lenders may charge and collect from borrowers those customary and reasonable costs necessary to close the mortgage loan. Borrowers may not pay a tax service fee.” Chapter Five also states, “FHA no longer limits the origination fee to one percent | more...