Articles Published in: September 2015

September 30, 2015

FHA Loans For Rental Properties?

A reader asked us a question recently about purchasing rental property with an FHA mortgage: “I’m considering cosigning on a rental property for my son so he can move in with friends. He has no credit established yet. My husband and i are also in the process of looking to move. How will cosigning affect us if we want to buy in the next 2-6 months and go with an FHA loan?” Is the reader question referring to a situation where the parent wishes to co-borrow with the child to purchase a residence for the child to occupy? Or does it refer to co-signing on a lease to help the child, with the parents later applying for an FHA loan for themselves? In the case of an FHA borrower who | more...

September 30, 2015

FHA Single Family Home Loan Policies: Credit Qualifying Under HUD 4000.1

By Joe Wallace

With the publication of HUD 4000.1 in its entirety, FHA single family home loans have a new policy handbook. It contains existing policy, revised or amended loan rules, and other changes that are relevant when it comes to applying for a single family home loan or refinance loan. With the new rule book, we’re examining the contents of those rules in a variety of areas to show the current state of FHA loan rules, credit requirements, appraisal rules and other important topics. Let’s examine some basics of qualifying for an FHA mortgage under the new rulebook. In general, HUD 4000.1 instructs the lender, referred to here as “the mortgagee”, as follows: “The Mortgagee must obtain a credit report for each Borrower who will be obligated on the mortgage Note. The | more...

Can I buy a manufactured home with an FHA loan?

September 29, 2015

Changes To Home Loans Coming In October

By Joe Wallace

The Consumer Financial Protection Bureau (CFPB) is a government agency designed to help consumers and protect their interests against fraud and unfair practices. CFPB issued a statement recently about new federal guidelines that will affect the mortgage lending process, making it easier for borrowers to understand the transaction. The agency has announced that starting October 3, 2015, those who apply for “most mortgages” on or after that date, “the stress of shopping for a mortgage will be reduced, as our new mortgage disclosure rule takes effect. The new rule and disclosures ease the process of taking out a mortgage, helping you save money, and ensuring you know before you owe.” What are the changes you should be aware of? According to ConsumerFinance.gov: Four overlapping disclosure forms will be streamlined into | more...

September 29, 2015

FHA Loan FICO Scores And Payment History

By Joe Wallace

When the FHA loan rule book (HUD 4000.1) lists its minimum FICO score requirements, some people forget that these requirements are minimums and that participating lenders are free to require higher FICO scores, and often do. We get plenty of reader questions about FHA FICO score requirements–here’s a recent example: “I have my 3 FICO scores they are 633,601, and TransUnion is 565…I have credit but some late payments the last being December 2014…My question is do you think I could get a FICO loan for the mortgage or would I need to bring my FICO up?” The answer to the reader’s question is complex for two reasons–lender standards apply and while based on what’s listed here the reader technically qualifies for an FHA mortgage loan, the lender’s FICO score | more...

September 28, 2015

FHA HECM Loans and Death Of The Primary Borrower

By Joe Wallace

We get many questions about FHA HECM loan rules. Some of those questions have to do with the legal rights and/or obligations associated with HECM loans for primary borrowers and what happens to the non-borrowing occupant if the borrower dies (in terms of ownership and occupancy of the property). Here’s a recent question that showed up in the comments section: “Several years ago my father and I took out a Reverse Mortgage on our home. He had to be the primary borrower because of his age and I was and still am not 62. I am a co-owner of the house and my name is on the deed. I had to go through the counseling and I had to sign all papers that he signed. My question is when something | more...

September 28, 2015

Mortgage Rate Trends: Slightly Higher But Holding Within The Range

By Joe Wallace

On Friday, mortgage loan rates were generally found within the range of rates reported previously (see below). There was some upward movement on rates but in general 30-year fixed rate conventional mortgage loan interest rates are, best execution, between 3.875% and 4.0%. As of Friday FHA mortgage rates were in their best execution comfort zone of 3.75% and as always borrowers may notice more variation among participating lenders than with conventional counterparts. Best execution assumes ideal conditions such as outstanding FICO scores and other financial qualifications. The numbers reported here are not available to all borrowers or from all lenders. Your experience may vary. There are some scheduled economic data releases due this week, so it’s possible we could see some alteration of rates within the range, but Friday’s employment | more...

September 26, 2015

FHA Loan Rules In HUD 4000.1 And Past Mortgagee Letters From FHA/HUD

By Joe Wallace

When the new FHA single-family home loan policy hand book (HUD 4000.1) took effect, it became the official go-to reference for FHA single family new purchase loans and refinance loans. That means that the old FHA loan rule books for single family transactions, including HUD 4155.1 and HUD 4155.2, became inactive as of the launch date for HUD 4000.1. It also means that a large amount of previous FHA/HUD correspondence also became inactive. The FHA/HUD official site has an archive of all FHA mortgagee letters (ML for short, which feature policy changes, updates, modifications, etc.) but there are many of those that are now inactive, superseded by HUD 40001. There is no way to list all the mortgagee letters, handbooks, and other items that have been made inactive, but the | more...

September 25, 2015

HUD 4000.1 Questions: FHA Loans For Homes In Flood Zones, Flood Insurance

By Joe Wallace

With the publication of HUD 4000.1, the new Single Family Home Loan handbook, there have been plenty of changes, alterations, restatements of policy and other issues borrowers and lenders alike should be aware of. We’re examining some of the most frequently asked questions about policies found in HUD 4000.1 to help borrowers and lenders know what current policy, as found in the new handbook, is on specific issues. One of those issues has to do with flood insurance and flood zone determination. FHA loan rules have standards for new construction and existing construction homes; let’s examine what the rules in HUD 4000.1 say about flood insurance for existing construction. According to the FHA official site, rules for flood insurance include the following requirement of the lender: “The lender must determine | more...

September 25, 2015

FHA Loan Applications and Repayment Issues

By Joe Wallace

We get many questions from readers about FHA loans in our comments section. Some of those questions refer to specific credit issues such as the one that came in recently asking: “My loan is currently processing. There is a problem with being 30 days late on my rent last year. Will this totally effect my changes of being approved???” The answer to this question isn’t as simple as quoting a passage from the new FHA loan rulebook, HUD 4000.1. The answer depends greatly on the borrower’s other financial qualifications. FHA loan rules state that a one-time lapse is not necessarily enough to dismiss the applicant as a bad credit risk. The lender will be looking for patterns that indicate whether the borrower has a reliable payment history on financial obligations. | more...

September 24, 2015

FHA Refinance Loan Rules: HUD 4000.1

By Joe Wallace

The FHA Single Family Home Loan policy handbook, HUD 4000.1, contains a variety of changes, updates and other alterations to FHA loan policy. In many cases, FHA loan rules for new purchase loans and refinance loans may have stayed the same, in other cases there are slight (or more substantial) revisions to FHA policy. One set of frequently asked questions about this new handbook and revised policy centers around FHA refinance loans. For example, one section of the new handbook that governs refinance loan transactions discusses what policy FHA has when the borrower’s name is on the title of the property but not listed on the mortgage secured by that property. Does the borrower qualify for an FHA refinance loan in such cases? According to a Frequently Asked Questions list | more...