Articles Published in: March 2015

March 12, 2015

FHA Loan Eligibility Rules: Divorce and Foreclosure

A reader asks, “Foreclosure exception question. Say a couple was looking to purchase a home, but the husband had a foreclosure which occurred under his name. Would they be able to qualify for a NJ mortgage using divorce as the exception to the three year rule, especially when the divorce decree is dated for one specific year but the foreclosed mortgage loan is from two years after the divorce???” “I am very curious as to this because to me it wouldn’t make sense that the divorce circumstance for exception would be an option due to the fact that this person took out a mortgage for a property which he was not living in two years after his divorce took place, and placed it solely in his name? I would think | more...

March 11, 2015

FHA Mortgage Rate Trends: Improving

By Joe Wallace

Last Friday, a strong jobs report put a lot of pressure on mortgage loan rates in general, pushing 30-year fixed rate conventional loan interest rates out of the three percent zone and into 4.0% best execution territory. That’s a large step higher for rates that have managed to hang on to the mid to upper three percent range (best execution) for quite some time. FHA mortgage loan rates, which can be slow to follow the changes in conventional loan rate moves depending on circumstances, also pushed into higher territory, hitting 3.75% for the first time in a long while. This move higher is still better than some rates we’ve seen hit in the last two years but in recent memory this is as close to the 4.0% range as FHA | more...

March 11, 2015

Disputing Bad Credit Information Before Applying For An FHA Loan

By Joe Wallace

A recent article published by Marketplace reports that disputing bad credit information on your credit report is going to be easier than in years past. According to the article titled, “Disputing bad credit is about to get a whole lot easier”, “The nation’s three biggest credit reporting companies—Experian, TransUnion, and Equifax—are changing the way they collect and report the credit scores. The changes involves the way bureaus handle credit-rating disputes, as well as how they report unpaid medical bills.” That can be a big help for borrowers who need to deal with credit agencies or manage credit applications while dealing with medical expenses. According to the article, “Under the Fair Credit Reporting Act, all credit error claims are entitled to a ‘reasonable investigation’. In practice however, that wasn’t happening. Chi | more...

March 11, 2015

FHA Loans and Debt-To-Income Ratio: A Reader Question

By Joe Wallace

A reader asks, “Our daughter and son in law are trying to obtain a FHA loan. They are only using my son in law for the loan because our daughter’s credit score is too low. However his income/debt ratio is too high because of a car loan.” “We have agreed to pay off the car to lower the monthly income/debt ratio. Their combined income is enough to cover the mortgage and pay us back. How will this affect their loan application?” Unfortunately, there’s no clear way to address this question for a variety of reasons. There are many variables including whether or not the couple resides in a community property state, where state law will have a say in how the lender may or may not consider the FHA loan | more...

March 10, 2015

Buying A Home With An FHA Loan? Advice And Assistance From The FHA/HUD

By Joe Wallace

If you are considering the purchase of a home using an FHA loan offered by a participating FHA lender, you don’t have to start the planning process in the dark. The FHA official site, www.FHA.gov, has a page of resources and advice you can use long before you start house hunting that can help you be a much better prepared FHA borrower. Not sure how much home you can afford before you start your journey to find the right property? The FHA Home Economics PDF is a very good place to start your research. You can also check out the FHA’s helpful list of housing programs broken down by state–there may be resources in your home state for first time home buyers, or buying assistance programs near you. Explore the list | more...

March 10, 2015

FHA Appraisals: A Reader Question

By Joe Wallace

A reader asks, “FHA mortgages, at one time,required the properties to meet stringent guidelines for habitability; (ie)roof, heating and other standards were the seller’s responsibilities, before escrow closed…. Are these parameters no longer an issue? Can a government secured loan be approved without these conditions being met?” FHA loan rules still require an appraisal of any home to be purchased with a new purchase single family FHA mortgage and certain types of FHA refinancing. The FHA appraisal is required to establish the fair market value of the property and to make sure the home meets basic FHA minimum property requirements. FHA appraisals should not, however, be misconstrued as a seal of approval from the FHA. Just because a home passes the FHA appraisal process with few or no required corrections | more...

March 9, 2015

FHA Loan FICO Scores: A Reader Question

By Joe Wallace

A reader asks, “My husband and I are wanting to buy our 1st home this year! I have a credit score of 736 while my husbands is currently 621. We are working on his a lot. I’ve read that people have been approved for FHA at a 580 score. Can this really happen and is there a way to know which lenders would approve with a lower credit score? We already have a $15,000 down payment.“ Potential FHA borrowers should know that the FHA minimum FICO score for maximum financing is 580. However, this does not take into consideration what a lender might require; the lender is free to require a higher FICO score. Lender standards vary and a borrower will need to research the lender offering the most competitive | more...

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

March 9, 2015

FHA Loan Questions: Seller Concessions

By Joe Wallace

A reader asks., “I saw a listing agent who stated in an MLS listing that the seller can only contribute up to 1% of sales price to an FHA qualified buyer’s closing costs. (She was implying not to ask for over 1% seller concession because of this FHA requirement). Is that correct? On your site I read that figure to be a maximum of 6%. Can you clarify please. The home is in Apache Junction, AZ (Phoenix suburb and county of Maricopa).” FHA loan rules state that any seller concession that exceeds six percent is considered an inducement to purchase and will result in a dollar-for-dollar reduction in the loan amount. This is true for all states, not just the one in the reader question, but it is important to | more...

March 7, 2015

FHA Loan Rules: Employment Verification

By Joe Wallace

When you want to apply for an FHA home loan, the lender will give you forms to complete that include requests for information on your past and current employment. Employment history is an important part of the FHA loan application review process and the lender is required to verify your employment by contacting your place of work. But what do FHA loan rules specifically require? HUD 4155.1 has the guidelines for lenders. Chapter One Section B of HUD 4155.1 instructs your lender: “The lender is required to verify the applicant’s employment history for the previous two years. However, direct verification is not required if all of the following conditions are met: • the current employer confirms a two-year employment history (this may include a pay stub indicating a hiring date) | more...

March 6, 2015

Reader Questions About FHA Loan Appraisals: When Do They Expire?

By Joe Wallace

A reader asks, “How long do FHA Appraisals stay with the property in Georgia?” A search of the FHA official site at www.FHA.gov reveals a Frequently Asked Questions page that answers this query, but know that this FHA loan rule applies to all FHA loan appraisals, not just those that are completed in the state of Georgia. According to the FHA FAQ page titled, “Do FHA Appraisals Expire?” we learn the following: “The FHA appraisal validity period is 120 days for existing, proposed or under construction properties. If the Homeownership Center (HOC) determines that soft market conditions exist in certain areas or markets, it may shorten the term of appraisals for substantial rehabilitation upon advance notice to lenders.” When does the 120 day period an FHA appraisals begin? According to | more...