Articles Published in: March 2015

March 6, 2015

FHA Loan Questions: Going Back To Full-Time Employment After Owning a Small Business

A reader asks, “Can I qualify for a Back to Work Loan if I lost a job and then when I couldn’t find work, started a business with a partner. Two years later the partnership breaks up and I am forced to pursue full-time employment.” “During the time that I operated the business, my draws reflected a greater than 20% net loss. Now that I am employed full-time, my earnings are the same or greater than the earnings I made prior to losing my job. Also the business is still operated by my former business partner.” Questions like these are difficult to answer except in general terms. The lender’s standards will play a role in loan approval, so it’s unclear above and beyond FHA loan minimum requirements what the answer | more...

March 5, 2015

FHA Loan Income Verification–What You Should Know

By Joe Wallace

If you are considering an application for an FHA loan or an FHA refinance loan, you might wonder about some of the details of your application. One area some get concerned over is the income and employment section–specifically how the lender will verify both income and employment. When it comes to your income, the lender will request pay stubs–your most recent verification of deposit or other proof of income that can function as a pay stub. In most cases the lender will request documentation that is the most current, but in some cases can be no more than 120 days old. For employment verification, the lender will contact the employer (or request added documentation if you are self employed). According to the FHA loan rules found in HUD 4155.1, the | more...

March 5, 2015

FHA Loan Reader Questions: Chapter 13

By Joe Wallace

A reader asks, “I am a bit confused. My Chapter 13 was discharged in February 2014. Since then I have re-established my credit and my score is at 660 and no late payments. What is the sooner I will be able to pre-qualify for a loan and/or close on a FHA.” Chapter 13 bankruptcy is addressed specifically in FHA loan rules. FHA loans are still possible for qualifying borrowers, but the following rules apply. “A Chapter 13 bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage, provided that the lender documents that • one year of the pay-out period under the bankruptcy has elapsed • the borrower’s payment performance has been satisfactory and all required payments have been made on time, and • the borrower has received written | more...

March 4, 2015

FHA Loan Approval or Rejection: The Notification Rules

By Joe Wallace

When a borrower applies for an FHA home loan for the first time, it’s normal to wonder how long it might take and how the borrower might be contacted when the decision has been made. When it comes to the length of time to process the loan, there is no set answer–it can depend a great deal on the lender’s workload, how easy or difficult it is to track down a borrower’s credit information, etc. But once a decision has been made, FHA loan rules in HUD 4155.1 tell the lender how to proceed. Once the decision has been reached, FHA loan rules state, “The lender is responsible for notifying the borrower of the approval, either in writing or verbally, immediately after receipt of the underwriter’s decision.” That is found | more...

March 3, 2015

FHA Mortgage Rate Trends: Moving Higher

By Joe Wallace

It looks like an upward trend for mortgage loan rates in general at the time of this writing–we’re seeing some volatility in the rates that might be likely to continue thanks to some anticipated data releases later this week that have potential to move rates higher (based on investor reaction to those reports) including a jobs report and a Non-Farm Payroll report. If rates do move higher in the wake of events like these they could move quickly–some market watchers say if you can’t handle the risk of the rates moving suddenly upward, locking in a mortgage loan rate is a good idea. How are the rates doing? 30-year fixed rate conventional mortgages are edging closer to 4.0% territory–some say the 30-year fixed rates are, best execution, the highest they’ve | more...

March 3, 2015

Interest Rate Caps On FHA ARM Loans

By Joe Wallace

In our last blog post we began discussing FHA adjustable rate mortgages, also known as ARM loans. We talked about how an FHA ARM loan works: “An ARM has four components: (1) an index, (2) a margin, (3) an interest rate cap structure, and (4) an initial interest rate period. When the initial interest rate period has expired, the new interest rate is calculated by adding a margin to the index. Your lender will disclose the margin at time of loan application (margins may vary from lender to lender, so it’s a good idea to shop around for a low margin).” We also mentioned the adjustable nature of the interest rates on these loans. “As the index figure moves up or down, the FHA official site says a borrower’s interest rate, | more...

March 2, 2015

FHA Loans, Missed Payments, and Your Mortgage

By Joe Wallace

FHA borrowers who get in trouble on their FHA mortgages are urged to be proactive about their situation in order to avoid defaulting on the FHA loan and risking foreclosure. The FHA has help available starting with advice for borrowers in this situation–you can find this advice on the FHA official site at http://portal.hud.gov/hudportal/HUD?src=/topics/avoiding_foreclosure . But the FHA has also issued guidance to lenders and loan officers telling financial institutions what the government expects the lender to do in cases where the borrower becomes delinquent on the FHA mortgage loan. Case in point, the recent FHA mortgagee letter titled, “Revised Notification to Homeowners of Availability of Housing Counseling Services”. According to this mortgagee letter, dated February 4 2015, “Mortgagees must provide delinquent borrowers with a notice describing the availability of housing | more...

March 2, 2015

FHA Loan Credit Issues

By Joe Wallace

A reader asks, “My partner had a 642 and i have a 517. I have messed up in the past with my credit,but i am now paying off what i have on my credit report. Would we be able to get a home loan with these scores?” That would depend on the standards of the individual lender. FHA loan rules state that borrowers below a certain FICO score are not eligible for maximum FHA loan financing (which requires the borrower to put down a minimum cash investment of 3.5%). Here’s what the FHA official site says about circumstances like the one in the reader question: “When a credit score is available, it must be used to determine eligibility for FHA insured financing. The score that is used to determine eligibility | more...