Articles Published in: February 2018

February 7, 2018

What Are The Differences Between OTC FHA Construction Loans And Other FHA Home Loans?

What are the basic differences between FHA One-Time Close / Single Close construction loans and other types of FHA mortgages? Borrowers should understand the basic differences and how they will affect your transaction.FHA One-Time Construction Loans / Single-Close Construction Loans Have Different Appraisal Requirements When an FHA loan applicant wants to purchase a home that is considered “existing construction”, which has been built for at least a year or more with at least one owner, the appraisal process happens as a condition of loan approval to insure the property meets minimum FHA standards. When you apply for an FHA One-Time Close construction loan, also known as an FHA construction-to-permanent loan, an inspection is required to insure the property meets minimum standards. HUD 4000.1 explains what the inspection requirements are for | more...

February 7, 2018

Can I Get An FHA Loan With A Collection In My Credit History?

By Joe Wallace

Can I get an FHA loan with a collection in my credit history? The answer can be complex since no two credit histories are alike, but there are some general guidelines that can help you understand where you might be in terms of the ability to get a home loan approved even with a collection in your credit record. It should be understood that what follows are the FHA guidelines for the loan approval process in terms of dealing with a credit issue; lender standards may also apply (and often do) above and beyond these rules. HUD 4000.1 has the rules for lender requirements when processing a loan with collections in the borrower’s credit history. The rules start out by describing what the FHA considers a “collection”. “A Collection Account | more...

February 6, 2018

Why Are FHA Loan Rules Different For Family-Owned Business Employees?

By Joe Wallace

Why are FHA loan rules different for family-owned business employees? Some borrowers fit this category-that where you work for the family business but have no ownership in it-and the rules are important to understand. The FHA definition of income derived from a family owned business is specifically, “Family-Owned Business Income refers to Employment Income earned from a business owned by the Borrower’s family, but in which the Borrower is not an owner.” The major difference in the FHA loan rules for small business owners versus those they employ (but who do not own a stake in the business) basically recognizes the difference between being an employee and an owner. The rules for self-employed FHA home loan applicants differ from employees. Self-employed borrowers are required to show that their employment is | more...

February 6, 2018

HUD Announces Aid Package For Puerto Rico

By Bruce Reichstein

The Department of Housing and Urban Development has announced a billion dollar relief package for Puerto Rico. According to a press release on the HUD official site, the agency “awarded more than $1.5 billion to help Puerto Rico to recover from Hurricanes Irma and Maria.” The funds are available via $7.4 billion in CDBG-DR (see below) funding for major disasters declared in calendar year 2017 thanks to a continuing resolution signed into law in September 2017. The HUD Deputy Secretary Pamela Hughes Patenaude discussed these HUD disaster recovery grants with Governor Ricardo Rosselló during a visit to Puerto Rico in the aftermath of Hurricanes Irma and Maria. Governor Rosselló, quoted in the press release, added, “On behalf of the many thousands of survivors here in Puerto Rico, I want to | more...

February 5, 2018

FHA Loan Employment Rules

By Joe Wallace

FHA loan employment rules include a requirement that the FHA lender insure the borrower’s income is stable, reliable, and likely to continue. There are certain standards the FHA uses to determine this beginning with a minimum employment length. The rules governing this are found in HUD 4000.1, beginning on page 197 where we learn, “The Mortgagee must document the Borrower’s income and employment history, verify the accuracy of the amounts of income being reported, and determine if the income can be considered as Effective Income”. HUD 4000.1 says effective income must be legally derived and reported on the borrower’s income tax forms. But what about the borrower’s work history? HUD 4000.1 tells the lender this is important, too-not just the amount you earn or the responsibilities you carry. “For all | more...

February 5, 2018

Does Being A Co-Signer Affect My FHA Loan Application?

By Bruce Reichstein

Does being a cosigner on another loan or line of credit affect your chances at FHA home loan approval? It’s a good question to ask before you commit yourself to being named on another person’s loan. HUD 4000.1 has the FHA loan rules for “contingent liabilities” created when you cosign another person’s loan, starting with the basic definition of the term: “A Contingent Liability refers to a liability that may result in the obligation to repay only when a specific event occurs. For example, a contingent liability exists when an individual can be held responsible for the repayment of a debt if another legally obligated party defaults on the payment.” This section of the FHA home loan rules adds that contingent liabilities can include, “Cosigner liabilities and liabilities resulting from | more...

February 2, 2018

How Do Student Loans Affect My FHA Home Loan Application?

By Joe Wallace

How do student loans affect my FHA home loan application? Some applicants worry about the amount of student loan debt they carry; after all the lender is required to determine the borrower’s debt-to-income ratio as a means to judge whether the loan is affordable or not. The debt ratio must be calculated using existing monthly debt, including student loans that are in forbearance. The fact that the loans are not being paid on at application time isn’t as critical as the idea that the loans may become a monthly obligation in the future, affecting the borrower’s ability to pay the mortgage loan. What do FHA loan rules say about student loans, and those student loans that are in deferment or forbearance? We use those two terms interchangeably here, defined as | more...

FHA One Time Close Construction Loan Option

February 1, 2018

FHA One-Time Close Construction Loan Rules For Maximum Mortgage, Down Payment

By Bruce Reichstein

FHA One-Time Close / Single-Close Construction Loan rules for maximum mortgage amounts and down payments are found in the FHA loan handbook, HUD 4000.1. The FHA One-Time Close mortgage, also known as a construction-to-permanent loan, lets borrowers apply for a loan to have a home built for them using only a single application, loan approval, and closing date. HUD 4000.1 describes it as follows: “A Construction to Permanent Mortgage combines the features of a construction loan (a short-term interim loan for financing the cost of construction) and the traditional long- term permanent residential Mortgage with a single mortgage closing prior to the start of construction”. FHA One-Time Close / Single-Close Construction Loan Maximum Loan Amount Rules Maximum mortgage amounts for FHA One Time Close loans are determined “by using the | more...

February 1, 2018

Things You Should Know About FHA Home Loans

By Joe Wallace

There are many things you should know about FHA loans before you start the application process; myths and half-understood features of this home loan program still confuse some applicants going into the process. What follows should help you better understand the basics of the FHA home loan program. FHA Loans Are Not Just For First-Time Home Buyers There is no restriction on FHA loans for those who have purchased a home before. There are no separate terms, qualifications, or other rules for those who have purchased before. All FHA loan applicants who are financially qualified are welcome to apply. FHA Loans Are Available For Condos, Mobile Homes, and Mixed-Use Properties Suburban homes are just one of the types of property you can buy with an FHA mortgage. You can purchase | more...