Articles Tagged With: Borrower’s Rights

June 4, 2013

FHA Loan Reader Questions: Does Bankruptcy Hurt Your Chances?

A reader asks, “We want to know, if filing bankruptcy 3 years ago will hurt our chances? We had to do that because I lost my job. But now I am on social security disability so I do have income.” “Our credit score is about 650. My husband makes 60K per year and I get 12K per year but little in savings. We have established new revolving credit within the past two years. Is this good enough to apply and get pre-approved for a home loan?” We’ve been getting a number of bankruptcy-related questions lately, and one thing we’d like to remind potential FHA borrowers in this situation is that a call to 1-800 CALL FHA (the official help line of the FHA) can answer many of these bankruptcy questions | more...

June 3, 2013

FHA Credit Score Rules

By Joe Wallace

We’ve gotten a lot of reader questions lately about FHA loan standards for credit, FICO scores and more. Many readers want to know what the FHA FICO score requirements are and whether their credit reports are good enough to qualify for an FHA mortgage. There are two important things to understand about FHA loan credit requirements. The FHA loan rules spell out the minimum FICO scores required by the FHA; those minimums are found in HUD 4155.1 Chapter Four, Section A. According to the FHA, “The table below describes the relationship between the borrower’s minimum credit score and the maximum loan-to-value (LTV) ratio for which he/she is eligible.” The FHA minimum for maximum financing is listed in the table above at 580. But many borrowers don’t understand that the FHA | more...

June 3, 2013

FHA Loan Reader Questions: Bankruptcy Issues

By Joe Wallace

A reader asks, “I recently completed a debt reorganization on ch 11 bankruptcy. My plan is 5 years. I will not be discharged until then (5 years).” “However, I would like to refinance my mortgage loan. my credit score is bad because I am in bankruptcy for the next 5 years. Can I refinance ? Can a FHA loan help me and would they refinance my existing loan?” FHA loan rules have plenty to say about bankruptcy issues. For example, in HUD 4155.1 Chapter Four, we find the following: “A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have elapsed since the date of the discharge of the bankruptcy. During this time, the borrower must have • re-established good | more...

May 31, 2013

FHA Loan Application Rules

By Joe Wallace

When some FHA mortgage loan applicants fill out their loan paperwork, it may be tempting to leave recent or new financial obligations out of that paperwork. In some cases it may be a simple oversight, in others it might be a question of an applicant mistakenly thinking that the lender won’t know or can’t find out. What’s the reality? FHA loan rules anticipate situations like these. In HUD 4155.1, Chapter Four, Section C, there’s a heading titled, “Recent and/or Undisclosed Debts or Inquiries”. It states: “Lenders must determine the purpose of any recent debts, as the borrower may have incurred the indebtedness to obtain the required cash investment.” That means that the lender must, among other things, determine whether the borrower has gone into debt in order to make his | more...

May 30, 2013

FHA Loan Credit Standards

By Joe Wallace

When applying for an FHA home loan, many borrowers are in the dark about credit score requirements and other issues related to FICO scores in general. We recently answered a reader question about FHA loan credit requirements and now is a good time to review FHA policy on FICO scores. The FHA requires the lender to use an available credit score to determine whether or not the borrower is eligible for an FHA home loan. The FHA has rules for interpreting or using FICO scores from credit reports. According to the FHA Frequently Asked Questions list on the official site: “When the credit report reflects: • 3 credit scores (one from each repository) – the middle score is used • 2 credit scores – the lower of the two scores | more...

May 30, 2013

FHA Loan Reader Questions: Credit Scores

By Joe Wallace

A reader asks, “My credit score is in the ‘poor’ range (low score 475. Hi score 585) and I will need assistance with down payment. However, I have an excellent income and have been on the job over 15 yrs. I have recently been approved for an auto loan which I am using to I prove my credit scores. Might I qualify for FHA, and what assistance is available for the down?” The FHA has rules about minimum credit scores needed for FHA loan approval. According to the FHA official site: “When a credit score is available, it must be used to determine eligibility for FHA insured financing. The score that is used to determine eligibility is called the ‘decision credit score’. When the credit report reflects: • 3 credit | more...

May 28, 2013

HUD Settles Alabama Housing Discrimination Case

By Joe Wallace

A press release issued by the FHA and HUD announces the settlement of a housing discrimination case in Alabama. According to HUDNo.13-077, “The U.S. Department of Housing and Urban Development (HUD) announced today that LLB&B, Inc., a real estate company based in Mobile, AL, will pay $29,000 as part of a Conciliation Agreement resolving allegations that one of its agents refused to show a condominium to a prospective homebuyer because he is African American. ” This violation of the Fair Housing Act came to light thanks only to a misdirected phone call. According to the press release, “The homebuyer alleged that he learned of the discrimination when the real estate agent inadvertently left a message on his telephone voicemail indicating her belief that white neighbors would ‘panic’ at the prospect of | more...

May 24, 2013

FHA Loan Reader Questions: Buying a Home After a Short Sale

By Joe Wallace

A reader asks, “I did a short-sale last year, with total debt forgiveness and no delinquency judgement. I never missed a payment the 8 years I held the mortgage. It did not effect my credit which is currently 737.” “The bank did however report the short sale to the credit bureau and now I’m told it will be an issue getting an FHA loan. Lender says one thing, actual FHA website says another. I’m confused and discouraged. Advice?” The real issue here seems to be a disconnect between what the FHA loan rules say and the lender’s standards. If the FHA requires a certain minimum, but the lender has a higher standard, who is right? What standard is used to determine whether or not the loan can be approved? FHA | more...

May 23, 2013

FHA Announces Assistance For Homeowners in Oklahoma

By Joe Wallace

The FHA and HUD have announced disaster relief for victims of the recent tornado in Oklahoma. According to HUDNo.13-078, “HUD will speed federal disaster assistance to the State of Oklahoma in addition to resources being provided by Federal Emergency Management Agency (FEMA) and other federal partners. HUD will provide support to homeowners and low-income renters forced from their homes due to tornadoes and severe storms.” U.S. Housing and Urban Development Secretary Shaun Donovan has also reiterated current Federal Housing Administration policy, “that mortgage lenders should release insurance payments to homeowners rather than applying these funds toward outstanding mortgage debt” according to the press release. On Tuesday May 21, 2013, the President made a federal disaster declaration for Oklahoma counties including Cleveland, Lincoln, McClain, Oklahoma and Pottawatomi. A federal declaration allows | more...

May 22, 2013

Foreclosure Avoidance: FHA Modifies Mortgage Rate Rules

By Joe Wallace

The FHA loan program requires borrowers to find a participating lender, negotiate terms, and come to an agreement on an acceptable mortgage loan interest rate. In general, the FHA and HUD do not set or regulate mortgage rates, except to require that such rates be “reasonable and customary” for the market. But the FHA has issued new guidance for mortgage rates as they apply to home loss mitigation/foreclosure avoidance programs as described in FHA Mortgagee Letter 2013-17. “The purpose of this Mortgagee Letter is to provide guidance for determining the interest rates to use when implementing FHA’s Loss Mitigation Home Retention options,” the document states, adding that the new policies described in ML 2013-17, “are to be implemented by mortgagees for Trial Payment Plans offered on or after July 1, | more...