Articles Published in: 2016

When Is An FHA Loan Better Than A Conventional Loan?

September 7, 2016

FHA Loans After Foreclosure

There are many foreclosure avoidance programs available for consumers struggling to make their mortgage payments; the Obama mortgage, the FHA HAMP program, mortgage loan modifications offered by the lender apart from government programs, etc. But in some cases foreclosure might be unavoidable. The borrower in these circumstances may wonder how long it could take to recover from such a “negative economic event” and become a home owner once more. FHA loan rules specifically address this issue in HUD 4000.1. Page 247 of HUD 4000.1 refers to situations that involve foreclosure or a deed-in-lieu of foreclosure. We learn: “A Borrower is generally not eligible for a new FHA-insured Mortgage if the Borrower had a foreclosure or a DIL of foreclosure in the three-year period prior to the date of case number | more...

September 6, 2016

FHA Loan Questions: Chapter 13 Bankruptcy

By Joe Wallace

Here’s a good example of the type of question we are commonly asked about credit history issues and FHA home loans: “I had my chapter 13 dismissed and continue to pay and rebuild my credit. It has been 6 months and I plan to buy a home within the next 6months. Will qualify to buy a home with an FHA loan?” FHA loan rules in HUD 4000.1 address bankruptcy issues, and the rules can vary depending on the type of bankruptcy. In general (we’ll look at specific FHA loan rules in a moment) you can expect to wait a minimum of 12 months with any type of bankruptcy under FHA loan minimum standards. We emphasize “FHA standards” here because additional lender standards can and often do apply. The FHA minimum | more...

September 6, 2016

Mortgage Loan Interest Rate Trends: Slightly Higher After Friday Jobs Report

By Joe Wallace

Ahead of the holiday weekend, all eyes were on Friday’s employment stats, which can and have acted as a spoiler for mortgage loan interest rates in the past depending on investor reaction to the contents of such reports. Market watchers reported weaker-than-expected numbers in that report, and ahead of a holiday weekend we saw some lenders keeping rates the same, while others had slightly higher numbers to close out the week. 30-year fixed rate conventional mortgages were reported at or near a best execution range between 3.375% and 3.5%. Friday’s increases with some lenders were likely reflected in closing costs rather than actual higher rates. FHA mortgage loan rates continue holding fast in their best execution range between 3.0% and 3.5%. The numbers we’ve been seeing are reported by industry | more...

September 5, 2016

Happy Labor Day 2016!

By Joe Wallace

Happy Labor Day 2016! Our regularly scheduled blog posts and answers to reader questions will return tomorrow. Thanks for reading!

September 2, 2016

Foreclosure Avoidance on FHA Mortgages: The Trial Payment Plan

By Joe Wallace

The FHA recently announced changes to its policies designed to help those who purchased homes with FHA mortgages and have since fallen into financial trouble to avoid foreclosure. There are many government programs to help borrowers keep their homes in hard times including the Obama mortgage, and the FHA Home Affordable Modification Program or HAMP. If you have fallen behind on your mortgage payments on an FHA mortgage, the information here will be of special interest to you. Those who are under consideration for HAMP may learn they have to complete a trial payment plan before the HAMP modification can be finalized and approved. But what does this trial payment plan (also referred to as TPP) entail? The FHA announced modifications to the HAMP program this summer, and in FHA | more...

September 1, 2016

FHA Loan Reader Questions: Judgments and Loan Approval

By Joe Wallace

A reader asks, “I have a judgment for a car that was repossessed in May 2010. It was a car purchased by my husband with myself as cosigner. I didnt plan on paying it off as we are waiting on a divorce and he has no plans to help pay it off. Will I be able to get a FHA mortgage with this lingering on my credit? I do have credit scores in the 650 range and higher.” Community property laws in a given state, where applicable, may affect the answer to this question, but in general, FHA loan rules in HUD 4000.1 state that judgments on a borrower’s credit history must have some kind of resolution. On pages 177 and 178 of HUD 4000.1 we learn a great deal | more...

September 1, 2016

FHA Home Loans: General Rules

By Joe Wallace

FHA home loans are unique compared to conventional loans due to the lower down payment and more forgiving credit requirements. There are some basic rules governing FHA mortgage loans you should know about going into the process; keeping these in mind will save time and help you better prepare for the loan. One of the key issues for FHA mortgages is the location of the home. According to HUD 4000.1, “The Property must be located within the U.S., Puerto Rico, Guam, the Virgin Islands, the Commonwealth of the Northern Mariana Islands, or American Samoa.” That’s a very basic requirement, but FHA loan rules do get more specific from there. A property must be situated in a reasonable owner-friendly location. For example: “The Mortgagee must determine if a Property is located | more...

August 31, 2016

FHA Loan Debt To Income Ratio Rules: Student Loans

By Joe Wallace

When the lender is adding up an FHA loan applicant’s income and monthly financial obligations for the purpose of calculating debt ratios, there are some debts that can be more complicated than others. Student loans, for example, can be tricky because a borrower may have student loan debt that is in “deferred” status, while others may be paying on their loans at the time of the loan application or soon thereafter. Here’s a recent reader question on the subject: “I cannot find anything that talks about NON deferred student loans. I have a client with a $63 payment on their credit report ($25,000 student loan balance). The loan is NOT in deferment, he pays $63 per month. The u/w is telling me I must use the greater of 1% of | more...

August 31, 2016

Mortgage Loan Interest Rate Trends: Slightly Higher For Some

By Joe Wallace

Monday saw mortgage loan interest rates taking back a bit of ground from Friday’s move higher; Tuesday saw some lenders keeping things unchanged while others moved a bit higher. There are some question marks around scheduled economic data releases on Wednesday and Friday, which could resolve as upward pressure on rates depending on investor reaction to Wednesday’s Pending Home Sales report and a national employment report also due on Weds. These reports in and of themselves don’t “do” anything to mortgage loan rates, it’s the behavior of the investors in the wake of those reports that creates the changes in rates we see depending on how those reports go. Friday is another day of employment data with the Employment Situation report-something that has moved rates in the past due to | more...

August 30, 2016

FHA Announces Changes To Help Delinquent Borrowers Avoid Foreclosure

By Joe Wallace

The FHA has issued a press release announcing changes to its loss mitigation program guidelines to help borrowers avoid foreclosure and remain in their homes in times of financial difficulty. According to HUDNo.16-127, “The Federal Housing Administration (FHA) today announced new procedures to strengthen the process mortgage servicers use to help struggling families avoid foreclosure and remain in their homes. FHA is streamlining its loss mitigation protocols that servicers must use when evaluating and deploying home retention options, foreclosure alternatives that allow delinquent borrowers to retain their home.” By way of background, the FHA official site (in Mortgagee Letter 2016-14) explains, “The evolution of FHAs loss mitigation guidance has also led to improved consumer engagement, the streamlining of FHAs Pre-Foreclosure Sale option, and a new loan modification by which Mortgagees | more...