Articles Published in: April 2015

April 7, 2015

FHA Loan Appraisal Rules: A Reader Question About Basements

A reader asks, “We have signed a contract to sell our home to an FHA buyer. The Realtor said that he sees “no glaring” issues and we have disclosed that we have a seasonally damp basement. Will this be an issue?” The answer to this question may depend on state or local building code, and whether or not the FHA appraiser will note the condition as something that needs to be corrected if possible. HUD 4050.2 spells out some of the unacceptable conditions that could render a home unacceptable for an FHA mortgage loan unless those conditions are deemed repairable. HUD 4050.2 Chapter Three Section Six includes the following instructions: “A property with defective conditions is unacceptable until the defects or conditions have been remedied and the probability of further | more...

April 7, 2015

FHA Loans and Verifiable Income Sources: A Reader Question

By Joe Wallace

A reader asks, “I have a notarized agreement with the father of my child to receive a total amount of cash distributed in two or more deposits during the month in my account.” “I receive it on Cash and then I deposited in my bank account. My lender deny me the loan because they need to see the whole amount agreed in only one single deposit. Is that true? How can I properly prove and evidence this income?” It’s important to remember that FHA home loans have two sets of standards which must be followed–basic FHA loan guidelines are one, and participating lender standards are another. Depending on the laws of your state, lender requirements, and other factors, a borrower may find questions such as these tough to get a | more...

April 6, 2015

FHA Loan Employment Verification Rules: A Reader Question

By Joe Wallace

A reader asks, “I was trying to get a FHA loan however once all my documentation was sent to the underwriter she denied me, because I am employed by my mother and he VOE was filled out by her. They denied my because they could not use that income. I have my pay stubs & my w-2′s. Where they telling my the truth or just didn’t want to give me the loan because i am only 21. I feel like they didn’t want to give me the loan because i am so young. Everything checked out however they just refused to approve me because my mother filled out the VOE.” Unfortunately there is a great deal of information missing from this reader question that makes it impossible to speculate as | more...

April 6, 2015

FHA FICO Score Rules: A Reader Question About “Median Scores”

By Joe Wallace

A reader asks, “Would like to buy a home.. My current scores are 607 Experian, 579 TU, 554 EQ. Wifes scores are mid 500′s. Which score would be looked at.. I just paid off some collections so my score is not updated if its going to change. Should I wait another year before I apply or go for it. Would we have to put 3.5% down our salary is about 85k a year. Looking for a home in the range of 180k, also due to our low scores would we have a high rate?” The rules for FHA loan FICO score review are found in HUD 4155.1. Chapter Four, Section A is where you will find a heading titled, “Definition of Minimum Decision Credit Score”. The lender is instructed: “If | more...

April 4, 2015

House Hunting? Things To Think About On Your Way To An FHA Loan

By Joe Wallace

If you are getting ready to start house hunting and want to buy a dream home with an FHA mortgage, there are a few things to think about as you get ready to start the search for your new house. One very important thing to do is to remember to save up some money for a home inspection. It’s easy to confuse an FHA appraisal, which basically sets the fair market value for the home and insures the property lives up to minimum standards, for a “clean bill of health” for the home. But make no mistake, the FHA does NOT guarantee the home is defect-free even if it DOES pass the appraisal with no corrections. The borrower pays for this optional, but critical service and it’s one that can | more...

When Is An FHA Loan Better Than A Conventional Loan?

April 3, 2015

April Is Fair Housing Month

By Joe Wallace

April is Fair Housing Month. The FHA and HUD have made announcements every year at this time to raise public awareness of fair housing laws such as the Fair Housing Act and FHA/HUD policy for equal housing access for all regardless of gender, race, national origin, belief, sexual orientation, disability, family status, etc. “Every American deserves a fair chance to secure safe and stable housing,” said HUD Secretary Julián Castro, who was quoted in a new mortgagee letter published by the FHA/HUD. “At the core of everything we do to improve housing opportunities is a firm belief that no family should ever be denied the opportunity to own or rent a home because of what they look like, where they come from, how they get around, how they speak, who | more...

April 3, 2015

Is A Home Ever “FHA Approved”?

By Joe Wallace

A reader got in touch with us recently with a set of complaints about a home that was purchased using an FHA mortgage. The reader says, in part: “Please note that we have a home that was approved by FHA & Hud that has turned out to be a disaster. We have been through two of the programs to show that this house cannot be repaired with out costing more to repair than replaced…The people that was looking after us just laughed in the back ground as we talked to them and always adding another 4 or 5 thousand balance to our loan. In 2011 & 2012 We tried to repaid this house after being assured by FHA and Hud that it would be fine if just repaired in a | more...

April 2, 2015

FHA Home Loan And Refinance Loan Options

By Joe Wallace

If you have never explored your FHA loan options before, you should know what your options are for both refinance loans and new purchase loans. Did you know that FHA mortgages have, in most cases, a lower down payment requirement than conventional loans? The credit-qualifying rules for FHA loans and refinance loans is also more lenient than many conventional loans. For new purchase loans, the type of property you can buy with an FHA mortgage is flexible. You can buy a typical suburban-style home, a condo unit, a mixed use building that is primarily residential in nature, and even a farm home (the loan would be for the residence only). Some lenders may also be willing to issue loans for manufactured housing or modular homes. The type of loan you | more...

April 2, 2015

Commission Income And FHA Loans: A Reader Question

By Joe Wallace

A reader asks, “I made 41000 in 2013 and 65000 in 2014 I am on pace to making over 100000 this year. How will they calculate my income for an FHA loan. I am a saleried and I get commission.” The participating FHA lender is required to calculate the applicant’s income and verify that it is likely to continue–not all income can qualify to be used in figuring out the borrower’s debt-to-income ratio, only “verifiable income”. Commissions can and often are counted as verifiable income for the purpose of FHA loan approval, but that income must meet specific criteria. Borrowers who earn commission must have, in general, been earning the commission for a year or more. The FHA loan rules listed in HUD 4155.1 explain such requirements for verifiable commission | more...

April 1, 2015

FHA Mortgage Rate Trends: Moving Lower Ahead Of Jobs Report

By Joe Wallace

Mortgage rates took a bounce last Wednesday and Thursday after sustained downward momentum; rates have since recovered and we’re seeing an improvement trend that some market watchers believe might be an indication that the much-anticipated Employment Situation Report due out on Friday of this week might not be as good as it could be. That could mean good things for mortgage rates in the short term. 30-year fixed rate conventional mortgage loan best execution rates are, at the time of this writing, reported in a range between 3.625% and 3.75% depending on the lender. That range of rates is an improvement over the previous day, where rates were at a single best execution rate of 3.75%. Ditto for FHA mortgage loan rates, which had been at 3.5% best execution, and | more...