Articles Published in: March 2015

March 25, 2015

Significant Changes In Borrower Financial Status: An FHA Loan Question

A reader asks, “I am in the process of buying a new home which is scheduled to be closing is by April 30th.My loan processor had just asked me last week to write a letter explaining why there is a significant overdraft fees on my checking account?. i am worried. please advise.” In the same way that borrowers are advised not to apply for new lines of credit leading up to a home loan application, they are also urged to maintain a record of steady, on-time payments until loan approval. The reason for this is simple–the lender is required to document and make loan approval decisions based on any “significant changes” to a borrower’s financial position. A home loan is a major financial commitment and a borrower who has significant | more...

March 24, 2015

Basic FHA Loan Eligibility Requirements

By Joe Wallace

We get many questions about FHA loans–questions about FICO score requirements, questions about credit and income, residency, etc. The FHA official site (www.fha.gov) has many answers to these questions–but what ARE the basic requirements for an FHA mortgage? FHA loan rules specify a minimum FICO score needed to qualify for maximum financing, and a minimum FICO score for basic eligibility with a larger down payment in cases where the applicant’s FICO score is close to the margins of acceptability. “FHA insures mortgages” the official site says, “made by approved lenders to individuals and nonprofit and government agencies that are approved to participate in HUD’s programs; HUD does not loan money to homebuyers.” The FICO score requirements mentioned previously (580 for maximum financing, and FICO scores above 500 for program eligibility | more...

March 24, 2015

FHA/HUD Announce Trial Payment Plan Details

By Joe Wallace

The FHA and HUD have announced details about a trial payment plan for qualified borrowers who are in trouble on FHA home loans. The FHA mortgagee letter 2015-07, “Trial Payment Plans Associated with HUD’s Loss Mitigation Loan Modification Options for Forward Mortgages” informs lenders of certain details of the program and the conditions where the FHA views a trial payment plan (TPP) as a failure. According to the mortgagee letter, “The Trial Payment Plan Agreement is a written agreement to be executed by all parties on the original note, all parties on the FHA-insured mortgage, and all parties that will be subject to the modified mortgage and/or partial claim, except where: –a borrower or co-borrower is deceased; –a borrower and a co-borrower are divorced or legally separated; or –a borrower | more...

March 23, 2015

FHA Loan FICO Score Requirements

By Joe Wallace

We get many questions and comments about FHA home loans where FICO scores are concerned. Some borrowers seem to have doubts about whether or not they can qualify for an FHA mortgage loan or refinance loan because of their FICO scores and other financial qualifications. Consider this recent reader comment that came in: “Have a score of 565 & trying to Get A Home Loan.” While there’s no specific question mentioned, it’s easy to see the reader is looking for some kind of information on FHA loan FICO score minimum requirements. Here’s a chart that’s printed in HUD 4155.1 which lays out the minimum required FICO scores needed to get an FHA mortgage: Some who are new to applying for a home loan may wonder what it means to be | more...

March 21, 2015

FHA Loans And Your Credit: A Reader Question

By Joe Wallace

A reader asks, “Do you know what kind of things I can do to make my FICO score better to get a FHA loan? I tried to get my first house and was denied the loan because of “negative credit marks”. I really want to be able to support my family. I’ve been following this guide to improve my standing: (finance guide name deleted) Do you know if all that stuff is correct? Is there anything else I can do? Right now I don’t have the money to pay a professional, so I’m reading as much as I can to do it on my ownn We couldn’t comment on the guide the borrower mentions in the question–we haven’t read it and we aren’t experts on improving credit scores. How to improve | more...

March 20, 2015

FHA Loan Questions: Tax Records

By Joe Wallace

A reader asks, “Is an fha requirement for a home buyer to have two years of taxes?” This is a difficult question to answer in general except to say that borrowers should be prepared to include tax information as part of an FHA loan application. The actual requirement can vary depending on lender standards, state law, and whether the borrower is self employed or not. Consider what FHA loan rules found in HUD 4155.1 Chapter Four Section D have to say about self-employed FHA loan applicants, or those who own a family business: “Self employed borrowers must provide –signed, dated individual tax returns, with all applicable tax schedules for the most recent two years –for a corporation, “S” corporation, or partnership, signed copies of Federal business income tax returns for | more...

What you should know about FHA 203(h) Loans For Disaster Victims

March 20, 2015

FHA Loan Closing Costs

By Joe Wallace

A reader asks, “Is the seller of a home to a buyer that is financing with a FHA loan required to pay the buyers closing costs?” FHA loan rules do not say the seller is required to pay closing costs on behalf of the borrower; in any case the seller’s contribution to the sale whether that is in the form of paying closing costs or other incentives is limited to six percent of the sales price of the property. Here’s a quote from the HUD booklet titled, “Shopping For Your Home Loan” which includes the following under Settlement Costs: “You can negotiate which settlement costs you will pay and which will be paid by the seller. The seller may contribute a lump sum amount or may agree to pay for | more...

March 19, 2015

FHA Loan Credit Requirements For Non-Occupying Co-Borrowers

By Joe Wallace

A reader asks, “Hi i am trying to get a mortgage but have good credit but low income. I was wondering if someone could help me be a non-occupying borrower with bad credit but excellent income a job help, basically use his income not his credit.” FHA loan rules are very specific about non-occupying co-borrowers. This is because there are many different types of circumstances where a borrower may have an occupying non-borrower, or an occupying co-borrower, or in the case of this reader question, a non-occupying co-borrower. Each of these circumstances is viewed slightly differently for several reasons, and there are circumstances that may apply to one type of borrower that don’t apply to another. For example, a spouse who occupies the home but does not borrow; this situation | more...

March 19, 2015

FHA Loan Reader Questions: New FHA Loans After Foreclosure

By Joe Wallace

A reader asks, “my husband property was forclosed on out of his control of his job moving to a different state can we try to by if we havent waited 2 years” This reader question doesn’t provide quite enough information to give a specific answer. FHA loans after a foreclosure are possible, but much depends on whether the borrower had an FHA home loan or not, and the borrower’s credit history following the foreclosure activity. Here’s what FHA loan rules in HUD 4155.1 Chapter Four Section A say about attempting to get an FHA loan after a previous home purchased with an FHA mortgage was foreclosed upon: “If the borrower has had past delinquencies or has defaulted on an FHAinsured loan, there is a three-year waiting period before he/she can | more...

March 18, 2015

FHA Mortgage Rate Trends: Large One-Day Drop In Best Execution Rates

By Joe Wallace

On Wednesday mortgage loan rates in general saw a significant drop in the wake of a highly anticipated Fed announcement, which included words some have taken to mean there will be no interest rate increase in the month of April. Some sources are labeling today’s downward move as “the best day of 2015” based on that drop; 30-year fixed rate conventional loan best execution rates are for some extremely well-qualified borrowers coming in at 3.75%, best execution. Borrowers who “floated” into the Fed announcement today were, by all accounts, given a good payoff. That said, those who floated are now being encouraged by many industry professionals to lock, as there is no guarantee that today’s sharp improvement in best execution rates will continue tomorrow or the next day. The lenders | more...