Articles Tagged With: Borrower’s Rights

May 7, 2013

FHA Loan Reader Questions: Mortgage Insurance Premiums

A reader asks, “My home has more than 50% equity and I am thinking about refinancing with an FHA loan… will i still need mortgage insuranc3e for the life of the loan.. or can it be cancelled after verification of equity?” FHA loan rules for annual mortgage insurance premiums are changing. Some of the rules have already taken effect, and others go into effect on June 3 2013. FHA Mortgagee Letter 2013-04 says: “For loans with FHA case numbers assigned on or after June 3, 2013, FHA will collect the annual MIP for the maximum duration permitted under statute.” Additionally, “For all mortgages regardless of their amortization terms, any mortgage involving an original principal obligation (excluding financed Up-Front MIP (UFMIP)) less than or equal to 90 percent LTV, the annual | more...

May 6, 2013

FHA Loan Reader Questions: Do All Homes For Sale Require an Appraisal?

By Joe Wallace

A reader asks, “Do all homes need an inspection and an appraisal? My sister-in-law is the seller and is worried (about an) older kitchen; FHA may not give me a loan. The home is in good condition and the family already did an appraisal in order to get an asking price.” There are two separate procedures asked about in this reader question–an appraisal is not the same thing as a home inspection, but both are important parts of the home buying process. A home inspection is a voluntary service the borrower can and definitely SHOULD budget for when purchasing a home with any kind of mortgage whether it is an FHA, conventional, VA loan, etc. The home inspection is a more up-close look at the condition of the property and | more...

May 3, 2013

FHA Loan Answers: Legal Age For FHA Loans?

By Joe Wallace

A reader asks, “Does one of the co-borrowers have to be enrolled in college, or can one of the applicants be a young employed adult?” FHA loan rules require borrowers to be of legal age acceptable in the laws of your state. If you are old enough to sign a legally binding contract in the eyes of the law, you are old enough to apply for an FHA home loan. That does not guarantee loan approval–the FHA requires the lender to review all borrowers and co-borrowers for creditworthiness, income, employment and credit scores. A borrower who is at the legal age in his or her state, but does not meet credit standards would not be approved for a VA home loan. Borrowers who are in college would still need to | more...

May 2, 2013

FHA Loan Reader Questions: Short Sales, Credit Scores and FHA Loans

By Joe Wallace

A reader asks, “I was in the Independent Foreclosure Review. I was put in a modification for a year made all my payments and they sold my mortgage and then sent me a letter saying I was denied. I ended up short saleing on 7/5/11. My credit score is 561, what are my chances of getting an FHA loan?” Short sales in and of themselves may not be an automatic barrier to an new FHA home loan if the borrower was current on the mortgage at the time of the sale. You may find that in cases where there was a delinquency or late payments at the time of the short sale, a borrower may be required to wait at least 12 months from the time of the last late | more...

May 1, 2013

FHA Reaches Agreement With Maryland Mortgage Company Over Discrimination

By Joe Wallace

The FHA and HUD official site features a press release on a recent agreement between HUD and a Maryland-based mortgage company over allegations of discrimination and violations of the Fair Housing act. According to HUDNo.13-061, “The U.S. Department of Housing and Urban Development (HUD) announced today that it has reached a Conciliation Agreement with Primary Residential Mortgage, Inc. (PRMI), in Salt Lake City, UT, settling allegations that the lender denied a Baltimore, Maryland woman a mortgage loan because she was pregnant and on maternity leave.” Fair Housing Act laws forbid lenders, sellers, landlords and others involved in housing from discriminating against borrowers based on “sex, race, color, national origin, religion, familial status, or disability” according to the FHA. The press release states, “Refusing to approve a mortgage loan or to provide | more...

April 30, 2013

FHA Loan Answers: How Long Is An FHA Loan?

By Joe Wallace

One common FHA loan question is fairly simple and straightforward; how long can an FHA loan be? In general, FHA loans are available for 15 or 30 year terms. FHA loan rules as spelled out in HUD 4155.1 state that there is a maximum loan term–one that depends on the type of transaction and other factors. “The maximum mortgage term may not exceed 30 years from the date that amortization begins. In the case of adjustable rate mortgages (ARMs), the term must be for 30 years. FHA does not require that loan terms be in five year multiples.” FHA loan rules add, “Some programs require a shorter term, including certain streamline refinances made without appraisals.” For FHA Streamline Refinances made without an appraisal, FHA loan rules state, “The streamline refinance | more...

April 29, 2013

Deadline For New FHA MIP Policy Approaches

By Joe Wallace

The deadline for a new FHA mortgage insurance premium policy is approaching; beginning on June 3, 2013 most FHA loans endorsed on or after that date will be affected by the following changes as described in FHA Mortgagee Letter 2013-04: “For loans with FHA case numbers assigned on or after June 3, 2013, FHA will collect the annual MIP for the maximum duration permitted under statute.” That basically means that many affected FHA loans will feature annual MIP for the duration of the loan rather than cancelling the MIP after a certain point. Other FHA loans will have MIP where there was none required previously. Additionally, Mortgagee Letter 2013-04 states, “For all mortgages regardless of their amortization terms, any mortgage involving an original principal obligation (excluding financed Up-Front MIP (UFMIP)) | more...

April 26, 2013

FHA Loan Reader Questions: Can My Spouse Apply Alone For An FHA Loan?

By Joe Wallace

A reader asks, “I am married and I have an extremely high debt to income ratio. On the other hand my husband has less credit but double my income and very low debt to income ratio. Is it possible that an he qualify using only his income and credit to qualify for an FHA loan?” There are several factors which may apply in a situation like this. Borrowers should know that when applying for FHA home loans, credit scores, employment history, verifiable income and other factors will figure into loan approval. That said, assuming all the above requirements are met, the basic question is whether a borrower can apply for an FHA loan independently of the spouse. This depends on community property laws which may apply in the state where | more...

April 25, 2013

FHA Loans and Non-Traditional Credit

By Joe Wallace

One commonly asked question about FHA mortgage loans involves the eligibility of borrowers who don’t have what are considered “traditional” credit histories. Can a borrower with little or no credit still qualify for an FHA loan? FHA loan rules do make provisions for those who have little credit history that can be researched via a typical credit bureau report. In cases like these, the lender is required to review certain types of documentation to verify the borrower is a good credit risk. According to HUD 4155.1, “In order for the underwriter to determine that a borrower has sufficient credit references to help evaluate bill paying habits, the credit history must…include three credit references” including at least one of the following: Rental housing payments (subject to independent verification if the borrower | more...

April 24, 2013

FHA Loan Reader Questions: Commission Income

By Joe Wallace

A reader asks, “How would you calculate a borrower who started a new job in May 2011, made a base salary with incentive? In 2012 went from incentive to commission + base & will continue for 2013 w/a verification stating commission likely will continue. Please advise.” While many FHA loan applicants work in “traditional” vocations with weekly, bi-weekly, or monthly paychecks, others are self employed, work on commission, etc. FHA loan rules anticipate these types of employment situations and have rules based on them. FHA loan rules address commission income in HUD 4155.1 Chapter Four Section D, which states, “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 last two years, and –the | more...