Articles Published in: January 2015

January 26, 2015

FHA Mortgage Insurance Premium Cuts Begin Today

On Thursday, January 8, 2014, the FHA and HUD issued a press release announcing a cut to the FHA’s required annual mortgage insurance premiums, also known as MIP. According to the press release, “As the nation’s housing market continues to improve, U.S. Housing and Urban Development Secretary Julián Castro today announced the Federal Housing Administration (FHA) will reduce the annual premiums new borrowers will pay by half of a percent. This action is projected to save more than two million FHA homeowners an average of $900 annually and spur 250,000 new homebuyers to purchase their first home over the next three years.” As President Barack Obama pointed out in one speech, the amount saved thanks to the FHA’s MIP cut could be used, in some cases, to make a mortgage | more...

January 26, 2015

FHA Housing Counseling: A Reader Question

By Joe Wallace

A reader asks, “I would like to know if you recommend a first time home buyer class in Denver?” We don’t have the resources to recommend a specific agency or class as a function of this blog, but the FHA itself does have plenty of resources to help home buyer, including a referral service that can put potential FHA borrowers in touch with an FHA/HUD approved housing counselor in the borrower’s local area. To request this referral, call the FHA at their toll-free number: 1-800 CALL FHA and request a referral to a housing counselor for pre-purchase counseling. Borrowers can also search the FHA website for information on state or local programs at the State Info page on the FHA official site. The page for Colorado, for example, includes a variety | more...

January 24, 2015

FHA Loan Rules for FICO Scores and Applications Post-Bankruptcy

By Joe Wallace

A reader asks, “What are the credit score and requirements to qualify for a FHA loan? Also, we filed bankruptcy over a year ago, what are the time limits of being discharged before someone can qualify for a FHA loan? Thank you in advance.” FHA loan rules for FICO score minimums are included on the FHA official site at www.FHA.gov. There is a chart there that breaks down the required minimum FICO scores for minimum financing, basic FHA loan program eligibility (with a higher down payment due to lower FICO scores) and cases where the FICO score does not qualify for an FHA home loan. Here is that chart: Note that FHA FICO score requirements are MINIMUMS. The lender may have higher standards. In fact, borrowers may find many lenders | more...

January 23, 2015

FHA Loan Income Rules For Child Support: A Reader Question

By Joe Wallace

A reader asks, “For FHA loan will child support stop you from getting a loan?” Let’s see what the FHA official site (www.FHA.gov) has to say about this question. On a frequently asked questions page at the official site, we find the following: “Most recurring obligations, including child support and alimony are considered in computing debt-to-income ratios. Debts lasting less than ten months must be counted if the amount of the debt affects the borrower’s ability to make the mortgage payment during the months immediately after loan closing; this is especially true if the borrower will have limited or no cash assets after loan closing. Because of the tax consequences of alimony payments, the lender may choose to treat the monthly alimony obligation as a reduction from the borrower’s gross income | more...

January 23, 2015

FHA Mortgage Rate Trends

By Joe Wallace

Mortgage rates this week were mixed and there has been some volatility that had potential to move the numbers higher–Thursday, for example, was a big day with a quantitative easing program announced by the European Central Bank. That had big potential to move rates depending on investor reaction to that announcement, but on Thursday mortgage loan rates in general held steady. This issue still has the power to affect mortgage loan rates in the U.S. depending on conditions and is a factor worth paying attention to. In general, 30-year fixed rate conventional mortgages are still considered low, even though the best execution rates have moved away from the 3.5% territory we saw earlier for the most qualified borrowers and back into a range that tops out, best execution, at 3.75% | more...

January 22, 2015

FHA Loans Following Chapter 13 Bankruptcy: A Reader Question

By Joe Wallace

A reader asks, “i filed ch 13 in 2012 and my case has been discharged as of Dec 2014. do i have to wait 2 years from that discharge date or the filing date to qualify for FHA?” FHA loan rules for applying for a new home loan in the wake of a bankruptcy state that there is a minimum seasoning period or waiting period required after the discharge of the bankruptcy. For Chapter 13 bankruptcy, the FHA official site (www.fha.gov) has a Frequently Asked Questions page about applying for a new FHA loan post-bankruptcy, which states the following: “A Chapter 13 bankruptcy does not disqualify a borrower from obtaining an FHA mortgage provided the lender documents that one year of the payout period under the bankruptcy has elapsed and | more...

January 22, 2015

FHA Loan FICO Score Requirements: A Reader Question

By Joe Wallace

A reader asks, “We r trying to buy a new double wide and property combo. But our credit scores are 582 & 533. The place where we are getting the house thru said it probly wouldn’t be a problem to get the loan. What do u think?” The answer to this question is fairly simple. When a borrower’s FICO scores are within the FHA minimums for maximum financing, it’s then the lender’s decision to approve or deny the loan based on the lending standards of that financial institution. Let’s examine the FHA FICO score minimum chart as published in HUD 4155.1 and on the FHA official site: That’s an exact reproduction of the chart found in HUD 4155.1. As you can see, one borrower’s credit score is within the FHA | more...

January 21, 2015

FHA HECM Loan Origination Fees: What CFPB Says

By Joe Wallace

In our previous blog post, a reader asked us an important question about FHA Home Equity Conversion Mortgage (HECM) loan origination fees. Here’s that question: “Is there a cap on fees a broker can be compensated for their part on a HECM loan, and if the lender list origination fee that is clearly greater than the $6000 max, which includes the broker compensation paid by the lender. My question is is the lender in violation of the origination cap?” FHA HECM loan origination fees are indeed capped at a maximum of $6,000 for certain HECM loans above a specific dollar amount. The Consumer Financial Protection Bureau, a government finance watchdog organization, has this to say about FHA HECM loan origination fees: “An origination fee is what the lender or mortgage | more...

January 21, 2015

FHA HECM Loan Origination Fee Caps: A Reader Question

By Joe Wallace

A reader asks, “Is there a cap on fees a broker can be compensated for their part on a HECM loan, and if the lender list origination fee that is clearly greater than the $6000 max, which includes the broker compensation paid by the lender. My question is the lender in violation of the origination cap?” Without more information, it would be pure speculation as to whether a particular lender is in violation of FHA loan rules, but regardless, any borrower who suspects there may be illegal or unethical practices in association with an FHA home loan or HECM loan should contact the FHA directly by calling them at 1-800 CALL FHA. Let’s see what the FHA official site (www.FHA.gov) has to say about HECM fee caps on the page | more...

January 20, 2015

Streamlined FHA 203(k) Rehab Loans

By Joe Wallace

Recently we posted about the FHA 203(k) rehab programs. Did you know there is an option for borrowers who want to take advantage of an FHA Streamline loan but don’t have extensive repairs to do? This option is known as the FHA Streamlined 203(k), and is described on the FHA official site as follows: “FHA’s Streamlined 203(k) program permits homebuyers and homeowners to finance up to $35,000 into their mortgage to repair, improve, or upgrade their home. Homebuyers and homeowners can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or an FHA appraiser.” “Homeowners can make property repairs, improvements, or prepare their home for sale. Homebuyers can make their new home move-in ready by remodeling the kitchen, painting | more...