Articles Published in: December 2015

December 22, 2015

HUD 4000.1 On Verifying Military Income

FHA loan rules in HUD 4000.1 specify a variety of requirements for verifying a loan applicant’s income. Military income is one type of earnings brought to the FHA loan process–how is the lender instructed to review this type of employment and verify the earnings? According to HUD 4000.1, the process is similar to other typical types of employment, but thanks to military benefits, allowances, and special pay some additional guidance is required for the lender, starting with a basic definition of the term “military pay”. “Military Income refers to income received by military personnel during their period of active, Reserve, or National Guard service, including: –base pay –Basic Allowance for Housing –clothing allowances –flight or hazard pay –Basic Allowance for Subsistence –proficiency pay” All of those could be used to | more...

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

December 22, 2015

FHA Loans, Credit Issues, And Down Payment Assistance Programs

By Joe Wallace

A reader got in touch recently to ask about FHA loan credit requirements and down payment assistance programs. That question includes the following: “…My (FICO) score was about 500 for years till I finally am working with the Lexington Law Firm that I’m paying $99 a month that I have 3 negatives I still am owing but I see that now I have my score went up to 648 which is fair but I want to know about the loan.” “Will FHA approves me to get a loan to buy a house in PA. But I’m not quite sure about AmeriDream that if I still can apply to make a down payment for the house?” FHA home loan approval depends on a variety of factors, of which FICO scores are | more...

December 21, 2015

FHA Loans, First Time Home Buyers, and Job History

By Joe Wallace

We get plenty of questions about FHA home loan rules about income, employment, and issues related to being a first time home buyer. Here’s one that came in recently: “I purchased a condo in February 2012, and it was sold three years later,due to financial hardship. I started a new job November 30, 2015 in the same profession as my previous employment history as a customer service representative. Do I qualify as a first time homebuyer to apply for a FHA loan? Would I be required to be employed for at least six months on my new job?” FHA loan rules focus on the borrower’s overall employment history. Here’s what’s written in HUD 4000.1: “For all Employment related Income, the Mortgagee must verify the Borrowers most recent two years of | more...

December 21, 2015

Mortgage Rate Trends: Creeping Lower

By Joe Wallace

On Friday mortgage rates crept lower, something more than one market watcher has commented on as being a bit contradictory when you think about the idea that the Fed is raising interest rates and that the anticipation of that happening brought a lot of volatility to the markets. Investor reaction to the Fed rate hike announcement was a big “X-factor” last week in terms of which way rates could have gone after that announcement. As we’ve seen, the hike news turned out not to be a big spoiler for mortgage loan interest rates. Rates moved lower but you may notice the changes in the form of lower closing costs instead of actual alterations in the rates. 30-year fixed rate conventional mortgage loans on Friday were still begin reported, best execution, | more...

December 18, 2015

FHA 203(k) and 203(h) Mortgage Loans

By Joe Wallace

The FHA offers two programs with a 203 designation. One is known as the FHA 203(k) Rehabilitation Mortgage, the other is the 203(h) Rehabilitation Mortgage for disaster victims. HUD 4000.1 has the policies for both types of loans–but what are the differences between the two? HUD 4000.1 describes the FHA 203(k) Rehab Loan as follows: “The Section 203(k) Rehabilitation Mortgage Insurance is used to: –rehabilitate an existing one- to four-unit Structure, which will be used primarily for residential purposes; –rehabilitate such a Structure and refinance the outstanding indebtedness on the Structure and the Real Property on which the Structure is located; or –purchase and rehabilitate the Structure and purchase the Real Property on which the Structure is located.” A 203(k) Rehabilitation Mortgage comes in two options, which are described in | more...

December 18, 2015

FHA Loans And Credit Issues: Late Mortgage Payments

By Joe Wallace

In previous blog posts, we’ve discussed the importance of coming to the FHA loan application process with at least 12 months of on-time payments on your credit history. This isn’t just a good idea–it’s critical to your chances for loan approval. Why is this so important? There are two major factors at work when it comes to on-time payments, your lender’s review of your payment history, and especially how your mortgage or housing payments factor into that equation. FHA loan rules in HUD 4000.1 instruct the lender in quite specific ways on how to proceed when reviewing a borrower’s housing payment history. To begin HUD 4000.1 includes a definition for the lender: “Housing Obligation/Mortgage Payment refers to the monthly payment due for rental or Properties owned. A Mortgage Payment is | more...

December 17, 2015

HUD 4000.1 On FHA Mortgage Loan Credit Score Requirements

By Joe Wallace

When you apply for a mortgage loan to purchase a home, your lender will require you to sign paperwork authorizing your loan officer to run a credit check on all parties to be obligated on the mortgage. FHA loan rules in HUD 4000.1 spell out the minimum FICO score standards and requirements. Do you know what the minimum FHA loan standard is for FICO scores? According to HUD 4000.1, the lender must analyze FICO scores in a specific way. Many borrowers wonder how, if the lender is getting multiple credit reports from the three major credit reporting agencies (Equifax, TransUnion, and Experian), will the lender interpret differences between those scores? HUD 4000.1 states: “The Minimum Decision Credit Score (MDCS) refers to the credit score reported on the Borrowers credit report | more...

December 17, 2015

Mortgage Rate Trends: Fed Day, Interest Rate Hike

By Joe Wallace

We have paid more attention to mortgage rate trends this week due to a major economic event scheduled for Wednesday that has big potential to affect mortgage loan rates both in the short term and over the long term. The Fed was scheduled to meet on Wednesday to make an announcement about the possibility of along-discussed December interest rate hike. And Wednesday was the day the Fed finally announced the increase is actually happening. It’s something they have been considering, reconsidering, and delaying for years. But how does this affect the average home loan applicant? In the past, mortgage loan rates have been adversely affected by talk of a Fed rate increase–the rates would jump in the short term based on investor reaction to news of a possible hike, indicators | more...

Can I buy a manufactured home with an FHA loan?

December 16, 2015

FHA Forward Loan Limits For 2016

By Joe Wallace

Recently we wrote about a press release issued by the FHA and HUD announcing FHA loan guaranty limits for the coming new year. The FHA has published two sets of loan limits mortgagee letters–one for Home Equity Conversion Mortgages (FHA HECM loans) and the other for FHA single-family “forward loans”. We covered the FHA HECM loan guaranty limits in a previous blog post; now we turn our attention to the specifics of the FHA forward mortgage loan guaranty limits as published in Mortgagee Letter (ML) 2015-30, which begins by explaining how FHA loan limits are set. According to that mortgagee letter, “The Federal Housing Administration (FHA) calculates forward mortgage limits based on the median house prices in accordance with the National Housing Act. FHAs Single Family forward mortgage limits are | more...

December 16, 2015

Mortgage Rate Trends: Higher On Tuesday In Anticipation Of “Fed Day”

By Joe Wallace

Tuesday saw mortgage loan rates move higher–more lenders are offering interest rates for 30-year fixed rate conventional mortgages at 4.125% or higher (best execution). Some are still offering sub-4.0% rates to extremely well-qualified borrowers according to our sources, but this varies depending on the lender. FHA mortgage loan rates are, best-execution, at 3.75% for now, but after “Fed Day” on Wednesday when the Fed will finally end the speculation as to whether or not a December interest rate hike is happening, we could see that change depending on investor reaction to Wednesday’s scheduled Fed event. As always, “best execution” assumes ideal credit qualifications for the applicant and much depends on the lender–these rates are not available to all borrowers or from all lenders. Your experience may vary. The Fed interest | more...