Articles Published in: 2014

January 29, 2014

FHA No-Cash Out Refinancing Loans (With Appraisal): Basic Rules

There are plenty of reasons to refinance a home with an FHA no-cash-out refinancing loan–taking advantage of lower interest rates is one of those good reasons, as is getting into a lower mortgage payment. The FHA offers a variety of refinancing options for single family home loans–what are the basic ground rules for an FHA no-cash-out refinancing loan? For starters, the amount that can be refinanced is, according to HUD 4155.1 Chapter Three Section B, “is the lesser of the 97.75% Loan-To-Value (LTV) factor applied to the appraised value of the property, or existing debt. The total FHA first mortgage is limited to 100% of the appraised value, including any financed upfront mortgage insurance premium (UFMIP).” Chapter Three adds that in general, the maximum mortgage cannot exceed the “statutory limit, | more...

January 28, 2014

FHA Loan Rules: Non-Occupying Co-Borrower Requirements

By Joe Wallace

In a recent blog post we discussed the rules for FHA loans where a non-occupying co-borrower was involved. The scenario we discussed specifically was a parent buying a home with a child (FHA loan rules permit this under the right circumstances), but in general there are FHA mortgage loan rules that apply whenever a non-occupying co-borrower is present. In general, unless the non-occupying co-borrower is a family member, FHA loan rules in HUD 4155.1 say, “When there are two or more borrowers, but one or more will not occupy the property as his/her principal residence, the maximum mortgage is limited to 75% loan-to-value (LTV).” The rules provide an exception to that restriction when the co-borrower is: “related by blood, marriage, or law, such as − spouses − parents-children − siblings | more...

January 27, 2014

FHA Loan Answers: Can A Parent Buy A Home With A Child Using An FHA Loan?

By Joe Wallace

Lots of parents want to help their children get a leg up in the early stages of adult life. Some parents pay for their children to go to college, some buy cars, and still others buy homes for their children. Can a parent and child apply for an FHA mortgage together even if the parent doesn’t plan on living in the home? FHA loan rules found in HUD 4155.1 explain what is possible and what is not possible for an FHA loan when it comes to applications with “non-occupying co-borrowers”. In such cases, Chapter Two Section B of HUD 4155.1 says, “A non-occupying borrower transaction involves two or more borrowers where one or more of the borrower(s) will not occupy the property as his/her primary residence. When there are two | more...

January 24, 2014

Can FHA Home Loan Closing Costs Be Financed? A Reader Question

By Joe Wallace

A reader asks, “I have read in several places on the web that it is possible to finance your closing costs into a FHA loan. However, many of these sources are at least a couple of years old. Is this possible?” To start, let’s examine what the FHA official site has to say about FHA loans and closing costs. At www.HUD.gov on the page titled Let FHA Loans Help You, we find the following: “FHA might be just what you need. Your down payment can be as low as 3.5% of the purchase price, and most of your closing costs and fees can be included in the loan. Available on 1-4 unit properties.” Some closing costs may be financed, some may be paid by the seller within the boundaries of | more...

January 24, 2014

FHA Loan Reader Questions: Employment Requirements

By Joe Wallace

A reader asks, “Can a borrower get a FHA loan with less than two years of employment? She has a full time and part time job. However she has only been employed for 6 months on each job.” Let’s examine what FHA loan rules say about this subject. FHA requirements for employment verification are found in HUD 4155.1. In Chapter One, Section B we learn: “The lender is required to verify the applicant’s employment history for the previous two years. For the most recent two years the lender must obtain • copies of W-2s • written VOEs, or • electronic verification acceptable to FHA.” But what about in cases where employment can’t be verified for two years? And do the rules require the applicant to be on the job with | more...

January 23, 2014

FHA Loan Reader Questions: Trouble With The Home Purchased With an FHA Mortgage Loan

By Joe Wallace

A reader asks, “My granddaughter purchased a home with an FHA mortgage, which has some serious physical problems. Can you give me the address of someone or some department, to which she can address these problems?” Borrowers with FHA loan issues should contact the FHA directly by calling 1-800 CALL FHA. In situations like these, there are some important considerations to keep in mind. As we address these issues, we should point out that we don’t know in this particular case whether the borrower did or did not take the steps we recommend below. All we know is what’s in the reader question printed above and our advice shouldn’t be taken to imply the reader did or did not take said advice–we mention these things for the benefit of anyone | more...

January 22, 2014

FHA Loan Reader Questions: Getting Behind on an FHA Mortgage

By Joe Wallace

A reader asks, “Let’s say a borrower misses a month’s payment. The next month, they have enough money for one payment, but not the two months that they owe. Can the lender tell them not to pay until they have enough money for *all* that they owe, preventing them from at least not getting further behind in their payments? This feels unethical; is it legal?” Skipping payments on an FHA loan is a bad idea in general. The reader did the right thing by contacting the lender as soon as there was a problem making the payments–borrowers should always work closely with a lender in order to avoid going into FHA loan default and foreclosure. But in situations where the borrower isn’t sure if the participating FHA lender is helping | more...

January 21, 2014

FHA and HUD Issue New Foreclosure Avoidance Brochure

By Joe Wallace

The FHA and HUD have issued a new mortgagee letter explaining the replacement of a “saving your home” brochure issued in 2002. According to FHA Mortgagee Letter 14-01, the “How to Avoid Foreclosure” brochure, HUD-PA-426, has been replaced. “The new brochure is the “Save Your Home: Tips to Avoid Foreclosure” brochure, HUD-2008-5-FHA, which is to be sent with a cover letter to delinquent mortgagors pursuant to 24 CFR 203.602.” The FHA and HUD have replaced the old document and have included the following instructions to lenders when sending the new brochure, which is designed to help inform borrowers in trouble on their FHA mortgages about the options available to them. When sending the new brochure, lenders are required to send a cover letter which includes the following “informed borrower” information: | more...

January 20, 2014

Happy Martin Luther King, Jr. Day!

By Joe Wallace

Monday, January 20th is Martin Luther King, Jr. Day–banks are closed and we pause in our regular writing about FHA loans and answering reader questions to observe the holiday. While we don’t stop posting for all bank holidays, this day is especially significant and deserves recognition–Doctor King is one of the most significant figures of the 20th century, so today we pause to honor his accomplishments. Thank you for reading, our regularly scheduled posts resume tomorrow.

January 17, 2014

FHA Minimum FICO Credit Score: A Reader Question

By Joe Wallace

A reader asks, “I have Bankruptcy discharged June 1 2011. I do not have lots of credit. Have small inheritance from mother. I Want to purchase small house in Cleveland, Georgia. I have joined Equifax (663), TransUnion (718) and Experian (638). When I access each one has a score different than the other credit reporting agency. How can I determine my creditworthiness?” FHA loan rules say that in general, when a FICO score is available, the lender is required to use it to help determine a borrower’s creditworthiness. The credit score alone doesn’t tell the whole story–there are other factors that play a part in whether or not an FHA loan is approved–but it does play an important role The instructions for the lender on how to process credit score | more...