Articles Tagged With: Appraiser

January 22, 2014

FHA Loan Reader Questions: Getting Behind on an FHA Mortgage

A reader asks, “Let’s say a borrower misses a month’s payment. The next month, they have enough money for one payment, but not the two months that they owe. Can the lender tell them not to pay until they have enough money for *all* that they owe, preventing them from at least not getting further behind in their payments? This feels unethical; is it legal?” Skipping payments on an FHA loan is a bad idea in general. The reader did the right thing by contacting the lender as soon as there was a problem making the payments–borrowers should always work closely with a lender in order to avoid going into FHA loan default and foreclosure. But in situations where the borrower isn’t sure if the participating FHA lender is helping | more...

December 2, 2013

FHA Loan FICO Score Requirements: A Reader Question

By Joe Wallace

A reader asks, “What if my credit score is below 600, but am now cleaning up my record so I can purchase a home. Not a pricey home but one I can retire in some day. I checked my credit report and some of the things on it are no longer a problem, and now paid, but they remain on it. I need to know as soon as possible because the small home I am interested in might be sold soon.” Let’s examine what the FHA loan rulebook (HUD 4155.1) says about minimum FHA requirements for credit scores: This table is reproduced directly from HUD 4155.1. Note that the FHA minimum credit score requirements is 500 or above. But does this mean that a borrower with a FICO score of | more...

November 21, 2013

FHA Loans and “Non-Occupying Borrowers”

By Joe Wallace

We’ve gotten a variety of questions lately about the FHA loan rules for occupancy related to buying a single-family home. FHA loan rules state that a borrower must occupy the home purchased with a single-family FHA mortgage as his/her personal residence. But what about when two or more people are obligated on the FHA home loan? Are both required to meet this occupancy rule? FHA loan rules in HUD 4155.1 state that at least one person obligated on the FHA loan must live in the home as the primary residence. In cases where not all the borrowers will do so, the loan is classified differently and there are different rules that may affect the mortgage. According to HUD 4155.1, Chapter 2 Section B, “A non-occupying borrower transaction involves two or | more...

November 8, 2013

FHA HECM Loans

By Joe Wallace

FHA Reverse Mortgages, also known as Home Equity Conversion Mortgages or HECM loans, are designed for qualified borrowers aged 62 or older who own their home or have very few payments left on the home. There are three basic types of FHA HECM loans: Traditional (Equity in current property used to obtain a new HECM loan) Purchase (HECM loan proceeds used to purchase a principal residence) Refinance (Refinance of an existing HECM loan with a new HECM loan) The FHA loan rulebook, HUD 4155.1, says of HECM loans that the following properties can be used to secure the reverse mortgage/HECM: 1 Unit (Single Family Residence) 2-4 Unit with one unit occupied by the borrower HUD-approved Condominium Project Manufactured home built after June 15, 1976 Borrowers who are age-eligible to | more...

September 26, 2013

FHA Loan Rules on Special Forbearance

By Joe Wallace

The FHA recently updated its rules associated with foreclosure avoidance and loss mitigation on FHA mortgages; borrowers who get into financial difficulty and may have trouble paying their FHA insured home loans should contact their loan officer immediately to discuss options for avoiding foreclosure. The newly updated FHA loan rules in this area include something known as Special Forbearance. Special Forbearance is described by the FHA as, “a written agreement between a mortgagee and mortgagor to reduce and/or suspend mortgage payments.” According to the most recent guidance from the FHA, “A Special Forbearance is available only to mortgagors who are unemployed. Special Forbearance agreements must provide for a minimum of 12 months for re-employment and require subsequent evaluation for a more permanent Loss Mitigation option to cure the default.” This | more...

July 3, 2013

FHA Loans: Broker and Agent Fees

By Joe Wallace

As with many other aspects of the FHA home loan process, there are rules and regulations that cover broker and real estate agent fees. Those rules are spelled out in Chapter Five of HUD 4155.1. In a section titled “Settlement Requirements Needed To Close” we find detailed rules on how such fees can be issued and paid. For example, FHA loan rules require real estate broker fees to be included in the HUD-1 settlement statement. The specific rule says, “If a borrower is represented by a real estate broker and must pay any fee directly to the broker, that expense must • be included in the total of the borrower’s settlement requirements, and • appear on the HUD-1 Settlement Statement.” The rules are different when the seller is paying a | more...

June 21, 2013

FHA Loan Rules: Maximum Loan Amounts and Down Payments

By Joe Wallace

FHA loan rules include guidance for lenders and borrowers about maximum loan amounts and down payment requirements. There’s a myth about today’s FHA home loans that some still repeat–variations on the idea that there may be no down payment required for first-time home buyers. What’s the reality? FHA loans do require a down payment. It’s much lower than the required down payment for many conventional loans, which is why some might believe that the FHA down payment requirement is reduced or eliminated for first-time borrowers. The minimum down payment amount for an FHA new purchase loan is 3.5%. No closing costs can be used to meet this requirement–the down payment is a separate amount from what are called “non-recurring” costs, prepaid expenses, discount points, etc. The down payment amount is | more...

June 14, 2013

HUD Updates Good Neighbor Next Door Policy

By Joe Wallace

The Department of Housing and Urban Development has updated its policy on the Good Neighbor Next Door program, which offers homes at a major discount to qualifying borrowers. According to HUD, the program “offers HUD owned single family (one-unit) homes to eligible participants at a 50% discount” to “law enforcement officers, teachers and firefighters/emergency medical technicians and who meet all other requirements of the program”. The HUD Good Neighbor Next Door program is available to those who want to purchase using an FHA insured mortgage. Recently the FHA and HUD have issued guidance about the Good Neighbor Next Door Program, which includes clarification on the mortgage insurance premium for the loan. According to FHA Mortgagee Letter 2013-20, “The purpose of this Mortgagee Letter is to: Clarify that the mortgage insurance | more...

June 13, 2013

FHA Loan Rules on Verifiable Income: Commissions

By Joe Wallace

FHA loans require the lender to verify the applicant’s employment, credit history, and income. When it comes to income verification, the FHA requires the lender only to use “verifiable income” when calculating a borrower’s creditworthiness. When an FHA loan applicant has ordinary hourly or salary income, it’s simple to establish what verifiable income might be using pay stubs, income tax reports, and other documentation. But what about when a mortgage loan applicant has a job that pays a commission instead of a salary? FHA loan rules have provisions for commission-based income, as described in HUD 4155.1 Chapter Four. There, you’ll find the following: “Commission income must be averaged over the previous two years. To qualify with commission income, the borrower must provide • copies of signed tax returns for the | more...

June 12, 2013

FHA Loan Reader Questions: Appraisals, Moldy Bathrooms, and Dirt Floor Basements

By Joe Wallace

A reader asks, “Can I get an FHA loan if the home has a dirt floor basement and mold in the bathroom?” There are two important things FHA loan applicants should know about the FHA appraisal process. One is that the FHA does not have a complete, exhaustive list of every type of issue a home might have that could disqualify it from FHA loan approval. Second, the FHA requires homes be in compliance with state and local building code. Any situation that is not code compliant for the state or local authority would not pass for the FHA, either. In such cases the FHA appraiser might require corrections, repairs, or other modifications as a condition of FHA loan approval. In other cases the problems may be so bad that | more...