Articles in Category: HUD Regulations

June 12, 2014

FHA FICO Score Requirements: A Reader Question

A reader asks, “I was told that i could qualify for a FHA loan with a credit score of 608. I am a first time home buyer. Is the information I was given true?” It may sound glib to say that the answer depends on who told you, but in this case that is true. Technically speaking FHA loans are available, according to FHA loan standards in HUD 4155.1, to those in the FICO score range the reader is asking about. However, the FHA loan rules are not the only ones at work in these case. Lender FICO standards can be, and ofter are, higher than the FHA rulebook minimums. This is allowed and there’s nothing wrong with a lender who requires a higher FICO score as long as those | more...

June 11, 2014

FHA Loan Questions: Documents Required For Loan Approval

By Joe Wallace

There are sometimes questions about the nature of FHA loan application requirements. Some feel that the loan requirements are “intrusive” or are asking for too much personal data. Part of this sentiment comes from a lack of understanding of what the lender is required to do and provide under the rules of the FHA loan program. What does the FHA require of the lender in order to get a loan approved? Keeping in mind that a home loan is a major line of credit, it’s not surprising that the rules for income and employment verification, credit history and other things are more stringent than for smaller lines of credit like a credit card or cell phone account. For starters, the FHA requires all documentation to be current or at | more...

June 3, 2014

FHA Loans and Minimum Waiting Periods After Foreclosure: A Reader Question

By Joe Wallace

A reader asks, “After a foreclosure how many years you must wait for a new application?” FHA loan rules governing this question can be found in HUD 4155.1, Chapter Four, Section C. That section states in part: “A borrower is generally not eligible for a new FHA-insured mortgage if, during the previous three years • his/her previous principal residence or other real property was foreclosed, or • he/she gave a deed-in-lieu of foreclosure.” FHA loan rules permit an exception to this waiting period, IF the foreclosure can be documented as being, “…the result of documented extenuating circumstances that were beyond the control of the borrower, such as a serious illness or death of a wage earner, and the borrower has re-established good credit since the foreclosure.” A common question about these | more...

May 13, 2014

FHA Loan Credit Report Rules

By Joe Wallace

Going into the FHA loan application process for the first time? It can be helpful to understand what your lender is looking for from your FHA loan application. Do you know the FHA’s rules for credit and how credit reports are handled by your loan officer? FHA loan rules state that all applicants for the loan must be checked–credit reports must be pulled, employment history and other financial qualifying information is required. HUD 4155.1 Chapter One has rules and instructions for the lender in these areas. Under “Required Credit Information” we find the following: “A credit report submitted with a loan application must contain all credit information available in the accessed repositories. Additionally, for each borrower responsible for the debt, the report must contain all of the information available in | more...

May 6, 2014

FHA Loan Reader Questions: Chapter 7 Bankruptcy and Credit Scores

By Joe Wallace

This reader comment raises some very important issues potential FHA borrowers should keep in mind when it’s time to apply for a new home loan, no matter whether applying in the wake of a bankruptcy or not. The reader says: “I was in Chapter 7 on 8/2011 and Discharged 2.5 years ago. I just applied for a loan and when my credit was pulled they found the loan of the home I own as a open account. This loan was closed for several years and it was just put back on in 2/2014 for no reason, which I have proof since I keep all my reports. I disputed it and it was taken off right away.” “Meanwhile it cleared up that problem showing the account closed but it left late | more...

May 1, 2014

FHA Loan FICO Score Requirements: A Reader Question

By Joe Wallace

A reader asks, “I have an average FICO OF #709. My EQUIFAX is #686, TRANSUNION is #695, and my EXPERIAN IS #748. What lenders will use my average FICO to determine my FHA LOAN eligibility?” FHA loan rules about credit scores are found in HUD 4155.1. While we cannot speak for individual financial institutions, in general, lenders seem willing to work with borrowers with an average FICO score of between 620-640 or better. How does the FHA determine what the average FICO score is when the borrower has different scores from each of the three major credit reporting agencies? HUD 4155.1 Chapter Four Section A addresses this under the section titled, “Definition of Minimum Decision Credit Score”. According to Chapter Four, “If a credit score is available, it must be | more...

April 24, 2014

FHA Loan Rules: Seller Paid Closing Costs

By Joe Wallace

The FHA loan rulebook, HUD 4155.1, has rules about how much a seller or other third party can contribute to the closing costs of a borrower purchasing a property using an FHA mortgage. According to the rules, it is possible for a seller to contribute toward closing costs, but there are limits. “The seller and/or third party may contribute up to six percent of the lesser of the property’s sales price or the appraised value toward the buyer’s closing costs, prepaid expenses, discount points and other financing concessions.” Six percent of the sales price or appraised value (whichever amount is lower) also includes the following: third party payment for permanent and temporary interest rate buydowns, and other payment supplements payments of mortgage interest for fixed rate mortgages mortgage payment protection | more...

April 18, 2014

FHA Loan Approval and Rejection

By Joe Wallace

When you fill out an FHA loan application, sometimes the hardest part of that entire process is waiting to get word on FHA loan approval or rejection. FHA loan rules in HUD 4155.1 instruct the lender on exactly what should happen once the loan is approved or denied. In HUD 4155.1 Chapter One, Section A, we find the following: “The lender is responsible for notifying the borrower of the approval, either in writing or verbally, immediately after receipt of the underwriter’s decision.” What happens when the loan is disapproved? Chapter One says: “When a loan is rejected, the lender must immediately complete • a rejection notice consistent with the requirements of Regulation B and, • when required, an Equal Credit Opportunity Act (ECOA) notice, forwarded to the borrower. At least | more...

April 9, 2014

April Is Fair Housing Month

By Joe Wallace

In 1968, a federal law known as the Fair Housing Act was passed to prevent discrimination in housing. Every April, the FHA and HUD celebrate Fair Housing Month to remind borrowers, lenders, landlords and house hunters of the protections offered by the Fair Housing Act. A recent FHA/HUD press release announced the start of Fair Housing Month, stating: “Each April, the U.S. Department of Housing and Urban Development (HUD) uses Fair Housing Month to mark the passage of the 1968 Fair Housing Act, the landmark law passed shortly after the assassination of Dr. Martin Luther King, Jr. which prohibits housing discrimination based on race, color, national origin, religion, sex, disability, and family status. This year’s Fair Housing Month theme is “Fair Housing is Your Right: Use It!” Throughout the month, | more...

April 7, 2014

FHA Loan Reader Questions: Building Code and FHA Minimum Property Requirements

By Joe Wallace

A reader asks, “I have a front porch that is 40 feet long and 12 feet wide and is about 3 1/2 to 4 feet high, would FHA require banisters around this porch? It has steps with railings on each side to come onto the porch…” The main problem with addressing specific appraisal questions like this is that FHA loan rules do have some general guidelines (as well as more specific ones in some cases) but the FHA minimum property requirements are not the only rules that must be complied with in order for a home to pass the FHA appraisal. Federal, state, and local building code requirements may also apply, and the property that is not in compliance with these requirements may need corrections or repairs before the FHA | more...