Articles Published in: May 2015

When Is An FHA Loan Better Than A Conventional Loan?

May 19, 2015

FHA Loans, Foreclosure, and Credit Reports: A Reader Question

A reader asks, “Suntrust Mortgage foreclosed on me in 2010. I had asked for a loan modification and they closed anyway. I had an equity line and I just found out that was placed on my credit report. I found out that my home sold for more than the 1st loan but they never paid the 2nd line of credit, both being with suntrust. when I call suntrust, all they say is any information given will be used to collect a debt. I do not owe that amount on my credit report and they will not do anything about it.” “I am one of the 2,200 in north Carolina that was foreclosed on improperly. I will be retiring from a local government office soon and cannot get a loan due | more...

May 18, 2015

FHA Loans, Appraisal Issues, and Home Inspections: A Reader Question

By Joe Wallace

A reader asks, “We had both the appraiser and an inspector come out before purchasing our home. We worked out to have repairs made by the seller and everything passed their standards. Now that we are in the house the cracks that we were told by all three (the seller, the appraiser and the inspector)are leftover from a previous foundation repair are actually issues with the foundation (we have had three companies come out to verify and all say that there are no signs of previous repair).” “We are trying to figure out how to approach this. We also found out, after signing, that our roof is also not covered by the insurance and will not be unless we get a new roof. There are 3 layers of roof and | more...

May 18, 2015

FHA Loan Debt To Income Ratio Rules: A Reader Question

By Joe Wallace

A reader asks, “I am trying to purchase a house. My loans arent scheduled to begin repayment until Nov, of 2016, well over 12 months from now. I am currently enrolled. If you factor in what my loan payment will be, I am at a 46% debt/income ratio, if not, I am under the 41% line. My question is: Will my student loans count toward the debt/income ratio, even though I dont have to start paying them for another 18 months or so?” FHA loan rules in HUD 4155.1 Chapter Four, Section C addresses the student loan debt topic, as follows; “Debt payments such as a student loan or balloon note scheduled to begin or come due within 12 months of the mortgage loan closing must be included by the | more...

What happens to my FHA loan in a natural disaster?

May 16, 2015

FHA Loan Occupancy Rules: A Reader Question

By Bruce Reichstein

A reader asks, “Is there a time requirement of the purchaser for moving into a recently purchased home with an FHA loan? Also, can the purchaser have family members move into the recently purchased home (FHA loan) instead of the purchaser?” In general, FHA loan rules require the borrower to the an owner-occupier. FHA single family home loans are for principal residences only, so the borrower must certify that he or she is buying a home for personal use. Additionally there is an occupancy requirement–FHA loan rules state the borrower must move into the home and use it as the primary residence within two months of the loan closing date. This information is found in HUD 4155.1, Chapter Four Section B, titled, “Eligibility Requirements for Principal Residences”. It begins by | more...

May 15, 2015

FHA Appraisals: A Reader Question

By Joe Wallace

A reader sent us a lengthy question recently about FHA appraisals. While won’t reprint the entire message here for the sake of brevity, we’ve kept the most relevant portions: “We are considering a HECM loan. The appraiser came out and we were not impressed. Prior to leaving, he told my husband and I that there was a couple of small things we needed to do before being able to close the loan(some peeling paint and a 1988 Cadillac inherited from my dad that was under our carport that we did not have licensed). Then we get a copy of the appraisal and under improvements he marked NO where it asks if there are any physical conditions that affect the livability, soundness, or structural integrity of the property. However, under reconciliation, | more...

May 15, 2015

FHA Loan Rules For Employment: A Reader Question

By Joe Wallace

A reader asks, “if one party has a temp position to perm and there is a letter from temp staff stating that she will be hired full time at the end of the 6 month probation period by the company she is working for can we be eligible for a fha loan or will it get denied?” FHA loan rules for verifying employment and income from that employment are found in HUD 4155.1 Chapter Four, Section D, which states in part: “To be eligible for a mortgage, FHA does not require a minimum length of time that a borrower must have held a position of employment. However, the lender must verify the borrowers employment for the most recent two full years, and the borrower must: –explain any gaps in employment | more...

May 14, 2015

The FHA Appraisal Is Not A Home Inspection

By Joe Wallace

In recent weeks we have gotten a variety of reader comments and questions about FHA appraisals–some of which repeat an oft-heard misconception about the FHA appraisal process. One of the questions we have to answer more often than we’d like goes something like this: “The house I wanted to buy was inspected by the FHA appraiser and now there are serious problems with the roof/septic/plumbing/electrical system/etc. Why did the FHA inspector not see these problems during the appraisal process?” While we do not claim to speak for the FHA or represent the FHA in any way, a reading of the FHA official website shows the FHA’s official stance on what the appraisal process is and is not supposed to do. A document titled, “For Your Protection, Get A Home Inspection” | more...

May 14, 2015

FHA Loans: Is There A Minimum Loan Amount?

By Joe Wallace

A reader asks, “Is there a minimum amount that you can get a loan for meaning (how cheap of a house will they loan on?) under 40K?” FHA loan rules in HUD 4155.1 do spell out an FHA loan limit, which is known as the “floor” on the bottom end, and the “ceiling” at the top end of the range. The FHA recently issued a mortgagee letter (HUDNo.2015-25) which updates the information for FHA loan limits in general and announces a new FHA loan rulebook to be issued soon, titled FHA Single Family Housing Policy Handbook 4000.1. The mortgagee letter states: “The minimum FHA national loan limit ‘floor’ is at 65 percent of the national conforming loan limit (which is $417,000 for a one unit property for the period January | more...

May 13, 2015

FHA Mortgage Loan Interest Rate Trends: Moving Higher

By Joe Wallace

In spite of some domestic economic developments that should be helping rates move lower (or at least preventing a move higher) mortgage loan rates are moving higher–to the point where some market watchers are using the phrase “highest of 2015” to describe where the rates have gone. Indeed, we’ve seen 30-year fixed rate conventional mortgage loan rates move up into the 4% zone, which is reported “best execution”. That means that outstanding financial qualifications are assumed including excellent FICO scores and loan repayment history. Borrowers with less-than-perfect credit are likely seeing rates above 4.0%. FHA mortgage loan rates are holding for now at 3.75% best execution according to our sources, and again, that is for extremely well-qualified borrowers. There is greater variation for FHA mortgage loan interest rates among lenders | more...

May 13, 2015

FHA Loan Rules For Commission Income: A Reader Question

By Joe Wallace

A reader asks, “With commission income can a person be at one job for about a year and then move to a different employer but same line of work and still commission type pay and be there for a year qualify? Can the 2 years be from different employers?” This scenario would be handled on a case-by-case basis by the lender for several important reasons. The lender will need to determine if the commission income is likely to continue, for starters, and also insure that the amount of commissions has not decreased. FHA loan rules in HUD 4155.1 state: “Commission income showing a decrease from one year to the next requires significant compensating factors before a borrower can be approved for the loan. A borrower whose commission income was received | more...