Articles Published in: 2014

April 23, 2014

FHA Loan Reader Questions: FHA Loan Foreclosures

A reader asks, “How long does it take to foreclose an FHA loan ?” The FHA official site has much to say on this subject in general, but borrowers should know that FHA foreclosure times will vary by state. FHA.gov says, “Foreclosure processes are different in every state. If you are worried about making your mortgage payments, then you should learn about your state’s foreclosure laws and processes. Differences among states range from the notices that must be posted or mailed, redemption periods, and the scheduling and notices issued regarding the auctioning of the property.” There is an FHA foreclosure timeline, however, that can give some good general information in this area. The timeline is very general and the amount of time this process takes will definitely vary. According to | more...

April 22, 2014

FHA Loan Appraisals–When Do They Expire?

By Joe Wallace

One common question about FHA loans involves the length of time an appraisal is valid. How much time before a current appraisal expires on the property you want to purchase with an FHA mortgage loan? According to FHA loan rules, “The validity period for all appraisals on existing, proposed and under construction properties is 120 days.” That is found in HUD 4155.2 Chapter Four, which also adds some instructions to the lender about when the appraisal is considered valid–the actual starting date for the validity period: “The term of the appraisal begins on the day the home is inspected by the FHA-approved appraiser and this date appears on the URAR.” The existence of these rules begs an important question. Can an FHA borrower refinance with an “appraisal required” FHA refinancing | more...

April 21, 2014

FHA Loan Down Payments

By Joe Wallace

One important question about any home loan transaction involves the down payment. How much should a borrower save? When it comes to FHA home loans, there are rules about the minimum required “cash investment” (down payment) specified in HUD 4155.1 Chapter Two. The amount of the down payment depends on the appraised value and/or the sale price of the home. According to Chapter Two, the maximum amount the borrower can get with the FHA loan guarantee is calculated as follows “The maximum mortgage amount that FHA will insure on a purchase is calculated by multiplying the appropriate loan-to-value (LTV) factor by the lesser of the property’s • sales price, subject to certain required adjustments, or • appraised value.” The next step according to this portion of Chapter Two is calculating | more...

April 18, 2014

FHA Loan Reader Questions: Complaints About Substandard Work

By Joe Wallace

A reader asks, “I am looking for how to report substandard work with FHA home loan and FHA inspection being done by pictures. I purchased my home in November of 2013 and still have not received the needed corrections on the home that in turn is adding more cost to me for repairs.” There are several possibilities based on the reading of this question. Is the reader complaining about an FHA appraisal that had required corrections that never took place? Or does the reader’s mention of an “FHA inspection” mean that the borrower paid for a home inspection that made recommendations that were never carried out to the borrower’s satisfaction? In the case of the latter, if the borrower contracted for home repairs based on the recommendation of a privately | more...

April 18, 2014

FHA Loan Approval and Rejection

By Joe Wallace

When you fill out an FHA loan application, sometimes the hardest part of that entire process is waiting to get word on FHA loan approval or rejection. FHA loan rules in HUD 4155.1 instruct the lender on exactly what should happen once the loan is approved or denied. In HUD 4155.1 Chapter One, Section A, we find the following: “The lender is responsible for notifying the borrower of the approval, either in writing or verbally, immediately after receipt of the underwriter’s decision.” What happens when the loan is disapproved? Chapter One says: “When a loan is rejected, the lender must immediately complete • a rejection notice consistent with the requirements of Regulation B and, • when required, an Equal Credit Opportunity Act (ECOA) notice, forwarded to the borrower. At least | more...

April 17, 2014

HUD and the City of Dubuque, Iowa Settle Discrimination Case

By Joe Wallace

A recent press release at the FHA/HUD official site announced a settlement in a racial discrimination complaint brought by HUD against the city of Dubuque, Iowa. The FHA/HUD press release HUDNo.14-034 says HUD and the city of Dubuque have reached an agreement to end a practice which HUD alleged discriminated against people based on race. “The U.S. Department of Housing and Urban Development (HUD) announced today an agreement with the city of Dubuque, Iowa, settling allegations that the City discriminated against African Americans in the administration of its Housing Choice Voucher Program…The agreement announced today is the result of a review HUD conducted in June 2011, which found that Dubuque imposed policies that discriminated against housing choice voucher applicants based on their race.” What were those policies? According to the press | more...

April 16, 2014

FHA Loan Answers: Do Student Loans Count Against Your Debt-To-Income Ratio?

By Joe Wallace

When you apply for an FHA loan, your lender must calculate the amount of income you have versus the amount of debt you currently pay on and factor in the amount of your projected mortgage. The amount of debt is compared to your income to determine whether or not you can afford the loan based on FHA guidelines. In general, borrowers should have less that 40% of their income taken up by recurring financial obligations. FHA rules explain exactly how much debt to income you can have and still qualify for an FHA mortgage. These ratios can vary depending on the borrowers status as a self-employed person or other factors. The overall debt picture is important when the lender is trying to figure out if a borrower is a good | more...

April 14, 2014

FHA Loans Following Foreclosure On A Previous FHA Mortgage

By Joe Wallace

There are loan rules for when a borrower can apply for a new FHA mortgage following a short sale, bankruptcy, or similar scenarios, but one area that is commonly misunderstood is what happens when a borrower goes into foreclosure on a home purchased with an FHA mortgage, with regards to how soon after that bankruptcy has been disharged. FHA loan rules for this situation can be found in HUD 4155.1 Chapter Four, Section A. It says, “If the borrower has had past delinquencies or has defaulted on an FHA- insured loan, there is a three-year waiting period before he/she can regain eligibility for another FHA-insured mortgage.” In addition to clearing up confusion over that basic policy, Chapter Four also addresses when that waiting period is considered effective: “The three-year waiting | more...

April 14, 2014

Applying For An FHA Loan Without A Credit History

By Joe Wallace

Take a look at what the FHA loan rulebook, HUD 4155.1 Chapter Four, Section C says about how lenders must treat borrowers who come to the FHA loan process without a credit history: “The lack of a credit history, or the borrower’s decision to not use credit, may not be used as the basis for rejecting the loan application. Some prospective borrowers may not have an established credit history. For these borrowers, including those who do not use traditional credit, the lender must obtain a non-traditional merged credit report (NTMCR) from a credit reporting company, or develop a credit history from • utility payment records • rental payments • automobile insurance payments, and • other means of direct access from the credit provider, as described in HUD 4155.1 4.C.1.e.” Why | more...

April 11, 2014

FHA Loan Occupancy Rules

By Joe Wallace

In our last blog post, we answered a reader question about what might happen if the FHA loan applicant didn’t comply with FHA occupancy requirements spelled out for all new purchase single-family FHA home loans. But what ARE those occupancy requirements? What should a borrower know about the FHA home loan requirements for occupancy before committing to the FHA mortgage? The rules for occupancy when it comes to single-family FHA loans can be found in HUD 4155.1, Chapter Four under the heading, “Eligibility Requirements For Principal Residences”. Those requirements include the following definition of a principal residence: “A principal residence is a property that will be occupied by the borrower for the majority of the calendar year.” Why is this definition so important? Because of the very next section in | more...