Articles Published in: 2014

May 16, 2014

FHA Announces New Credit Access Measures For “Under Served Borrowers”

The FHA has announced a new program to help under served borrowers get better access to credit to buy a home. According to the FHA press release HUDNo14-048, and the Blueprint for Access pamphlet, a new program will help with credit counseling and savings on their mortgages as a result of attending that counseling. “Today, the Federal Housing Administration (FHA) issued its ‘Blueprint for Access’ outlining the additional steps the agency is taking to expand access to credit for underserved borrowers. These steps include encouraging a broader use of housing counseling. This week, HUD will publish a notice in the Federal Register for the Homeowners Armed with Knowledge (HAWK) pilot program to further incorporate housing counseling into the home buying process for borrowers using FHA insured financing.” The press release | more...

May 15, 2014

FHA Maximum Mortgage Amounts

By Joe Wallace

If you’ve never applied for an FHA mortgage loan before, chances are good that your questions about FHA loans include how much you can borrow. There’s a section of the FHA rulebook for mortgages, HUD 4155.1, that governs maximum mortgage amounts for FHA loans. Chapter Two of this guide addresses the issue, stating: “The maximum insurable mortgage on a purchase is the lesser of the statutory loan limit for the area (typically a county, or metropolitan statistical area (MSA), or applicable loan-to-value (LTV) limit, applied to the lesser of the sales price, or appraised value. The Department of Housing and Urban Development (HUD) issues a Mortgagee Letter (ML) announcing the new mortgage limits every year.” When discussing the maximum allowable mortgage, FHA loan rules do not include the amount of | more...

May 14, 2014

FHA Loans and Powers Of Attorney: An Important Rule To Remember

By Joe Wallace

If you are considering the use of a Power of Attorney in conjunction with an FHA mortgage loan, there’s a very important rule you should know. Using a Power of Attorney isn’t common for many borrowers, but for those who do need it, understanding the rules and responsibilities of this procedure can make the entire process go more smoothly. FHA loan rules state clearly, “The initial mortgage loan application may not be executed by using a power of attorney, except in circumstances as indicated in the table below. Note: Either the initial application or the final, if one is used, must contain the signatures of all borrowers.” The table referenced in that quote from HUD 4155.1 includes circumstances for military members. “A power of attorney may be used for military | more...

May 13, 2014

FHA Loan Credit Report Rules

By Joe Wallace

Going into the FHA loan application process for the first time? It can be helpful to understand what your lender is looking for from your FHA loan application. Do you know the FHA’s rules for credit and how credit reports are handled by your loan officer? FHA loan rules state that all applicants for the loan must be checked–credit reports must be pulled, employment history and other financial qualifying information is required. HUD 4155.1 Chapter One has rules and instructions for the lender in these areas. Under “Required Credit Information” we find 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 | more...

May 12, 2014

FHA Refinance Loans With No Cash Out

By Joe Wallace

There are several FHA refinance loan options. One is FHA Streamline Refinancing, which has no FHA-required credit check or appraisal (though your lender may require one of both). Another is the FHA Cash-Out refinance loan option, where a borrower can take cash back on the loan once the original loan is paid in full. The cash back on such loans can be used for any purpose acceptable under the terms of the new loan agreement. But there’s another refinance loan option available similar to cash-out in that a credit check is required, but without cash back. The no-cash-out FHA refinance loan has rules covered in HUD 4155.1, including maximum loan amounts and what can be added to the new loan amount. FHA loan rules also cover what kinds of liens | more...

May 9, 2014

FHA Loans and Student Loan Debt: A Reader Question

By Joe Wallace

A reader asks, “My student loans are currently based on my income/family size. It says I have a 0.00 payment every month. It is good for a year, and my income will be staying the same amount.” “I printed all this out to submit to the lender, but my loan officer really wanted/needed a monthly repayment amount, which I cannot give him. I am wondering if the lender will just estimate a monthly repayment number or how that works?” The problem in this situation is that the lender’s standards are likely the applicable guidelines above and beyond what is stated in the FHA loan rules found in HUD 4155.1 Chapter Four under the heading titled, “Borrower Liabilities: Projected Obligations and Obligations Not Considered Debt”. Section Six of Chapter Four states: | more...

May 9, 2014

FHA Loan Rules For Loan Approval: Previous Housing Obligations and Your Credit

By Joe Wallace

When you fill out your FHA loan application paperwork online or in person, it’s obvious that part of the qualification process involves having your credit scores examined and your employment verified. What may not be so obvious is that the lender is also looking for patterns of reliability in areas such as the timely payment of your monthly obligations. Some FHA loan applicants might mistakenly assume that while late or missed mortgage payments might be a factor that missed rent payments aren’t held in the same esteem. Is this true? Not according to HUD 4155.1 Chapter Four, Section C, which has instructions for the lender on checking credit report data. A strict interpretation of Chapter Four reveals no difference between how the FHA or the lender should view late or | more...

May 8, 2014

FHA Loans Where The Seller Is A Family Member: A Reader Question

By Joe Wallace

A reader asks, “What is defined as a family member? My partner and I were told by our underwriter that we can only get a loan for 85% of the house’s value. The person we are purchasing from is a fourth cousin of my partner who wouldn’t be on the mortgage.” “The house’s appraisal value is significantly lower than expected. It’s replacement value is over 250k, but due to a glut of houses on the market and a lack of comparable in the area it was appraised at under 75k. It was appraised just higher than what the purchase price would be. Our loan officer has questioned the underwriter about this and they said family is family. Is there a definition of family put out by the FHA?” The sale | more...

May 7, 2014

FHA Loan Documentation Standards: What’s Required, What’s Not Permitted

By Joe Wallace

In order to get the FHA loan application approval process moving, the lender may need authorization from the borrower to check credit reports, individual creditors, employers, even current or former landlords. In order to do this, your loan officer may need you to sign paperwork showing the financial institution has the authorization needed to request personal data. There are strict rules that govern this process. They are found in HUD 4155.1 Chapter One, Section B, which starts off by stating: “The lender may ask the borrower to sign a general authorization form that gives the lender blanket authority to verify information needed to process the mortgage loan application, such as • past and present employment records • bank accounts, and • stock holdings. If using a blanket authorization form, the | more...

May 6, 2014

FHA Loan Reader Questions: Chapter 7 Bankruptcy and Credit Scores

By Joe Wallace

This reader comment raises some very important issues potential FHA borrowers should keep in mind when it’s time to apply for a new home loan, no matter whether applying in the wake of a bankruptcy or not. The reader says: “I was in Chapter 7 on 8/2011 and Discharged 2.5 years ago. I just applied for a loan and when my credit was pulled they found the loan of the home I own as a open account. This loan was closed for several years and it was just put back on in 2/2014 for no reason, which I have proof since I keep all my reports. I disputed it and it was taken off right away.” “Meanwhile it cleared up that problem showing the account closed but it left late | more...