Articles Published in: 2014

March 5, 2014

FHA Loan Reader Questions: Can I Get Cash Back On My FHA Home Loan?

A reader asks, “When you getting a FHA loan can you have some money in the bank for the hard days to come in case something happens in the future unexpectedly?” It seems as though the reader is asking if the borrower can apply for an FHA home loan in excess of the amount required for purchase and put that money in the bank for later use. FHA loan rules are clear for new purchase home loans–there is no cash back to the borrower permitted. FHA home loans for new purchases require a minimum cash investment of 3.5%, so the down payment issue would further complicate the issue if a “no cash out” policy weren’t in place. Borrowers are not only required to make a down payment for FHA home | more...

March 4, 2014

FHA Energy Efficient Mortgages

By Joe Wallace

There is an option for FHA new purchase home loans and refinancing loans called the Energy Efficient Mortgage (EEM). According to the FHA loan rules found in HUD 4155.1, “Under the EEM Program, a borrower can finance 100% of the cost of eligible energy efficient improvements into the mortgage, subject to certain dollar limitations, without an appraisal of the energy efficient improvements. For the EEM Program, the mortgage amount includes the cost of the energy efficient improvements, in addition to the usual mortgage amount normally permitted FHA maximum loan limit for the area may be exceeded by the cost of the energy efficient improvements energy efficient improvements must be cost effective in order to be included into the mortgage, and amount of the cost effective energy package is added to | more...

March 3, 2014

FHA Loan Waiting Periods Post-Bankruptcy: A Reader Question

By Joe Wallace

A reader asks, “In 2007 I applied for bankruptcy and got dismissed in 2008. The creditors didn’t accept my plan. In 2008 house got sold. I need to know the waiting period before applying for an FHA loan.” There are two types of bankruptcy mentioned by name in the FHA loan rules found in HUD 4155.1. One is Chapter 7, the other is Chapter 13. Since the reader didn’t mention which type of bankruptcy, we’ll quote both guidelines. For Chapter 7, HUD 4155.1 Chapter Four states: “A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have elapsed since the date of the discharge of the bankruptcy. During this time, the borrower must have: –re-established good credit, or –chosen not | more...

February 28, 2014

FHA Loans And Credit Scores: More Lenient Now?

By Joe Wallace

Are FHA home loans getting easier to come by? According to one report in the L.A. Times, the answer is yes. Several sources are reporting that average credit scores on FHA mortgages has “declined steadily”. Combine that with a trend towards higher debt-to-income ratios among borrowers and you have indications that lenders in general may be easing their standards. For many years, the minimum credit score many lenders would need to approve an FHA loan was between 620 and 640. But with reports of some financial institutions approving FHA mortgages with scores at 600–still well within the FHA guidelines for loan approval–it seems the lending environment has gotten friendlier to borrowers with credit scores in this range. According to the L.A. Times report, “The FHA theoretically allows credit scores as | more...

February 28, 2014

FHA Loans For Single Parents

By Joe Wallace

There are many FHA home loan options available for qualified borrowers, but one question about the program common enough to warrant attention from the FHA official site itself is whether there is home buying assistance available for single parents looking to purchase a home with an FHA mortgage loan. According to the FHA official site, help for single parents IS available, but one important thing to remember about such homebuyer assistance programs is that they are not administered by the FHA. According to FHA.gov, “There is help available. Start by becoming familiar with the homebuying process and pick a good real estate broker.” The site points out that while single parents won’t have the advantage of two incomes when it’s time to financially qualify for an FHA mortgage, getting pre-qualified | more...

February 27, 2014

FHA Loan Rules: A Reader Question About Earnest Money

By Joe Wallace

A reader asks, “A buyer made an application for a FHA loan to purchase a property. The buyer was not able to obtain FHA loan approval by close of escrow and rather than to cancel the contract and receive the earnest money back the buyer and seller agreed in writing to extend the contract’s close of escrow provided the earnest money become unrefundable if the buyer could not close escrow for any reason.” “The buyer was not approved for FHA financing and cancelled the contract yet is claiming FHA overrides the written contract and FHA states the earnest money must be returned to the buyer when the buyer is denied aFHA loan. Does FHA have some sort of rule or authority over a legal contract between buyers and sellers for | more...

February 26, 2014

FHA Loan Reader Questions: Roof Requirements

By Joe Wallace

A reader asks, “For an FHA loan, are there roof requirements on a detached garage or do the requirements solely apply to the roof over the home?” FHA loan rules for property analysis can be found in HUD 4150.2. Under the “Roof” section we find the following: “The covering must prevent moisture from entering and must provide reasonable future utility, durability and economy of maintenance. When re-roofing is needed for a defective roof that has three layers of shingles, all old shingles must be removed before re-roofing…The appraiser must observe the roof to determine whether the deficiencies present a health and safety hazard or do not allow for reasonable future utility.” The rules do not make a distinction between attached garages or detached garages, but the line about future utility | more...

February 25, 2014

FHA Home Loans: What The FHA Will And Won’t Approve

By Joe Wallace

If you’re looking for an FHA guaranteed home loan, it can be a very big help to know in advance what kinds of properties the FHA will and won’t approve loans for in its single-family home loan program. There are sometimes misconceptions about the FHA single-family home loan program; some borrowers are interested in loans for commercial buildings or properties, but single-family home loans are intended for purchasing a dwelling for the borrower’s personal use. The FHA’s list of approved and unapproved uses for an FHA mortgage make it fairly obvious how these loans can be used, but if you’re new to the program those details aren’t always as clear. You can save a lot of time knowing up front what’s allowed under the FHA mortgage program. The rules for | more...

February 24, 2014

FHA Loan Reader Questions: Refinancing Loans and Occupancy

By Joe Wallace

A reader asks, “We have a home for 25 years paid the first mortgage off and the we got a home equality line now ten years are up and the loans and it need to be refinance and the bank said because we done live in the house but my daughter and her husband do that won’t give us the loan again. Can we just get another mortgage on the house I don’t want to lose our house.” FHA loans for single-family residences do have an occupancy requirement–the borrower must live in the home as his or her “principle residence”. This is an important thing for FHA loan applicants to be aware of–FHA loan regulations include the borrower moving into the home and using it for the borrower’s personal use. | more...

February 21, 2014

FHA Loan Answers: Can The Lender Pay Closing Costs On An FHA Mortgage?

By Joe Wallace

There are a lot of rules about the closing costs associated with an FHA mortgage loan. For example, the rules in HUD 4155.1 state that closing costs cannot be considered part of the borrower’s required down payment. The minimum cash investment requirement is separate from the FHA loan closing costs and must be paid in addition to those costs. There are rules governing how much a seller can contribute to closing costs, and there are rules about what costs can and cannot be charged to the borrower. Some FHA loan applicants may wonder if there are any provisions for the lender to pay closing costs; after all, the seller may contribute so why not the lender? This practice is allowed under VA home loan rules–it’s known as “premium pricing” and | more...