Articles Published in: 2014

April 11, 2014

FHA Loan Rules For Occupancy: A Reader Question

A reader asks, “Nowhere does it say in the HUD document what the penalty is for not physically making your FHA home a primary residence within 60 days. What if it is 90 days or 120? What if you choose to renovate?” This is something a borrower should discuss prior to the loan closing with the lender, or with a legal expert who may be able to give sound advice based on case law or years of experience. We can’t offer legal advice, but the one thing we can advise is that the borrower be as familiar as possible with the language of the loan agreement. When it comes to renovations planned immediately after loan closing, you may have to make arrangements with the lender. Does your FHA home loan | more...

April 10, 2014

FHA Loan Reader Questions: What’s The Definition of a Condominium?

By Joe Wallace

A reader asks, “How can a person go about proving that a particular development is not a condo development? Realtors and others in our area typically call any attached housing development ‘condos’ when they are looking to sell them.” “I am specifically looking at a neighborhood of attached sing-story homes that has a HOA, charges fees for common maintenance, but when you buy a unit you also buy the ground under the unit, and an undivided percentage of the common area. The developer declares they are townhomes and not condos.” This can be a tricky question to answer for a variety of reasons, including the fact that state and/or local laws might come into play in these cases. FHA loan rules alone may not be enough to get the whole | more...

April 9, 2014

April Is Fair Housing Month

By Joe Wallace

In 1968, a federal law known as the Fair Housing Act was passed to prevent discrimination in housing. Every April, the FHA and HUD celebrate Fair Housing Month to remind borrowers, lenders, landlords and house hunters of the protections offered by the Fair Housing Act. A recent FHA/HUD press release announced the start of Fair Housing Month, stating: “Each April, the U.S. Department of Housing and Urban Development (HUD) uses Fair Housing Month to mark the passage of the 1968 Fair Housing Act, the landmark law passed shortly after the assassination of Dr. Martin Luther King, Jr. which prohibits housing discrimination based on race, color, national origin, religion, sex, disability, and family status. This year’s Fair Housing Month theme is “Fair Housing is Your Right: Use It!” Throughout the month, | more...

April 8, 2014

FHA Loan Income Requirements: Projected Income

By Joe Wallace

FHA home loan rules say the lender must verify a borrower’s income and employment as a qualifying factor for the loan. A borrower who lists his or her income as X amount of dollars will have that figure verified–the lender will check pay statements, review tax records, and possibly even speak with an employer in some cases to verify the information. But what about borrowers who don’t have income at the present time, but have “projected income” based on a job that is about to start soon, or income that is about to increase because of a promotion, pay raise, etc? Does the FHA loan rulebook make any provisions for these circumstances? According to HUD 4155.1, Chapter Four Section E, “Projected income is acceptable for qualifying purposes for a borrower | more...

April 7, 2014

FHA Loan Reader Questions: Building Code and FHA Minimum Property Requirements

By Joe Wallace

A reader asks, “I have a front porch that is 40 feet long and 12 feet wide and is about 3 1/2 to 4 feet high, would FHA require banisters around this porch? It has steps with railings on each side to come onto the porch…” The main problem with addressing specific appraisal questions like this is that FHA loan rules do have some general guidelines (as well as more specific ones in some cases) but the FHA minimum property requirements are not the only rules that must be complied with in order for a home to pass the FHA appraisal. Federal, state, and local building code requirements may also apply, and the property that is not in compliance with these requirements may need corrections or repairs before the FHA | more...

April 4, 2014

FHA Loans After A Short Sale: A Reader Question

By Joe Wallace

A reader asks, “Is there a time limit on getting a FHA loan after a short sale if you have stayed current on the mortgage payments?” FHA loans following a short sale are possible, but the timing of the loan application may play a part in whether the loan is approved. For borrowers who were not current on the mortgage at the time the short sale occurred, a mandatory waiting time known as a “seasoning period” will apply. The FHA Loan rulebook, HUD 4155.1, says “A borrower is considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage, all • mortgage payments on the prior mortgage were made within the month due for the 12-month period preceding the short sale, and • | more...

April 4, 2014

FHA Loan Reader Questions: FHA Mortgage Loan Interest Rates

By Joe Wallace

A reader asks, “Is there a current guideline for the expected interest rate under the short refi for a home 450k to 500k. My note holder indicated approx 5% interest, 6.5 APR which seems a little high given the current rates for Jumbos.” “Also, for those interested should note my Tax Rep indicated the “forgiven debt” is no longer tax exempt (meaning the next year they amount forgiven would be taxed at you income+forgiven debt level). Have you heard if the Fed is talking about re-instating? This could be a substantial one time out of pocket tax owed the next year.” The first part of this reader question would seem to imply to some that the FHA might regulate or set interest rates. But that’s a misconception almost as common | more...

April 3, 2014

FHA Loan Reader Questions: Bankruptcy Waiting Times

By Joe Wallace

A reader asks, “I was pre-approved for a FHA loan in February and now that I have made an offer on a house, the loan company is saying I have to wait three years after my bankruptcy to qualify. Can you give me the length of time I have to wait for a FHA loan?” FHA loan rules for mandatory waiting periods after a bankruptcy depend on a variety of factors including the type of bankruptcy. In some cases a borrower may need the court’s permission to enter into a new loan agreement, and in others there may be no choice but to wait out the minimum required time. But the most important thing to understand about FHA loan bankruptcy requirements is that as long as the lender observes the | more...

April 2, 2014

FHA Loan Reader Questions: “Low Income” Loans For Modular Housing/Mobile Homes

By Joe Wallace

A reader asks, “I am on disability and receive a fixed income of 788.00 monthly. I would love to be able to get a loan for a mobile or modular home. Can I be qualified for a low-income loan?” Single-family FHA loans don’t have income requirements in terms of minimum or maximum incomes per se. It’s a common misconception that you must earn a minimum amount of money or NOT earn too much money to qualify for an FHA mortgage. But if there are no minimums and no maximums, how do participating FHA lenders determine who qualifies for an FHA single-family home loan? The borrower’s income and monthly obligations are analyzed to see if the borrower can afford the loan. If a borrower’s debt-to-income ratio is within the right tolerances | more...

April 1, 2014

FHA Loan Reader Questions: Credit Scores and Down Payments

By Joe Wallace

A reader asks, “If my credit score is a 630 and were first time homebuyers can we qualify? And would a downpayment help?” The FHA loan FICO score requirement may vary from lender to lender, but in general a score above 620 may be very helpful when it comes to getting an FHA mortgage loan approved. However, this reader question raises an issue–a popular misconception about FHA mortgages–that’s important to address. FHA mortgage loans don’t require the applicant to be a first time home buyer. With that in mind the borrower should also know that there’s no “advantage” to being a first time home buyer when it’s time to apply for the FHA mortgage. That does not mean there aren’t home buyer assistance programs, pre-purchase counseling, or other programs available | more...