Articles Tagged With: Credit Requirements

October 31, 2013

FHA and HUD Update Loss Mitigation Instructions for Lenders

Borrowers who get into financial trouble may have difficulty paying their monthly FHA mortgages. In all cases, the FHA encourages borrowers to get in touch with the lender as soon as possible to make arrangements to avoid going into delinquency and default on an FHA loan. Borrowers who do this have the most options, and find many more doors open to them. Borrowers who wait until it’s too late to prevent going into default may have few choices. What is the lender’s responsibility when a borrower starts missing payments and is in danger of foreclosure? The FHA and HUD have issued updated guidance telling lenders what must be done and what the acceptable course of action is for the financial institution in such cases. These updates were published in FHA | more...

October 31, 2013

FHA Loan Mortgage Insurance: A Reader Question

By Joe Wallace

A reader asks, “Veterans are not required to purchase mortgage insurance with a VA loan. Is there a way that a veteran can be exempt from the mortgage insurance premium? The mortgage insurance is very high.” The short answer to this reader question is “no”. FHA loans are not designed the same way that VA home loans are–FHA loans require a Mortgage Insurance Premium (MIP), where VA home loans do not. Veterans should consider their options between VA home loans and FHA mortgages carefully. In some cases a veteran or currently serving military member could choose an FHA loan over a VA mortgage, for a variety of reasons. But a borrower faced with these choices should make the most informed decision possible. FHA home loans do have certain similar features | more...

October 29, 2013

FHA Loans and Trust Income

By Joe Wallace

FHA home loan applications require the borrower to list income and job details so that the lender can accurately determine a borrower’s debt-to-income ratio. For this purpose, FHA loan rules say that only income that is likely to continue can be used–the borrower’s wages, tips, bonuses and other earnings may be counted if they meet FHA criteria for “stable and reliable” and “likely to continue”. One source of income for some borrowers involves a trust fund–can trust income be used as verifiable income for an FHA mortgage loan? The answer is yes, but only if the trust income meets FHA loan minimum standards as described in HUD 4155.1, which includes the following guidance to lenders when reviewing trust fund income listed on a borrower’s application, found in a section called | more...

October 25, 2013

FHA Loan Applications: What Borrowers Need To Have Ready

By Joe Wallace

When you’re getting ready to fill out an FHA loan application, knowing in advance what documentation you’ll need to get the process moving forward can be a big help. There are individual lender requirements that you’ll need to get directly from your loan officer, but the FHA loan rulebook (HUD 4155.1) lists some things the FHA requires as part of the process the lender uses to verify your employment, income, and credit data. The list of documentation includes (but may not be limited to) the following list found HUD 4155.1 Chapter One Section B: general mortgage credit analysis documents evidence of Social Security Number verification of deposit verification of employment (VOE) alternative employment documentation appraisal documentation. FHA loan rules in Chapter One say, “Lenders must obtain the most recent documents | more...

October 18, 2013

FHA Loans and Credit Disputes: A Reader Question

By Joe Wallace

A reader asks, “My plan is to buy the house I’m leasing, my 3 scores are 616, 621 and 619. Will I qualify for an FHA loan? I have a student loan that i haven’t paid on my credit report it states its on dispute, will this disqualify me from an FHA?” The answer to this question depends greatly on what is meant by the “unpaid” student loan. Does that mean the borrower has not made any payments? Or does that mean payments are being made but the loan hasn’t been paid in full? Are there missing or delinquent payments in dispute? When there are disputed items on a credit report, the lender is required to learn more in order to process the FHA loan application. FHA loan rules found | more...

October 17, 2013

FHA Loans and the Government Shutdown: A Reader Question

By Joe Wallace

*UPDATE** The government shutdown has ended for now as of Wednesday night October 16 2013, but the advice in this post is sound, regardless. There could easily be another government shutdown if conditions repeat themselves in the next round of negotiations over the Federal budget when the current plan expires next year. If there is another government shutdown, the advice in this post will be good to know for affected FHA borrowers. A reader asks, “I am a seller of a home that was suppose to close Oct 1. We still have not closed as of Oct 12. My buyer’s financial company is saying it is due to the government shutdown. Everything I read says it should not be held up. How does my buyer find out what is going | more...

October 16, 2013

FHA Loan Rules For Non-Purchasing Spouses

By Joe Wallace

One common FHA loan question has to do with the status of a non-purchasing spouse. Can a married borrower apply for an FHA loan with a non-purchasing spouse? In such cases would the income or credit history of the non-purchasing spouse be considered as part of the loan application? The answer depends greatly on the state laws where you live, or the state laws in the area where the home is to be purchased. According to the FHA loan rules found in HUD 41551., Chapter Four: “If required by state law in order to perfect a valid and enforceable first lien, a non-purchasing spouse may be required to sign either the security instrument or documentation indicating that he/she is relinquishing all rights to the property. When the security instrument is | more...

October 10, 2013

FHA Loans For Building on the Borrower’s Own Land Part Two

By Joe Wallace

A reader asked us recently about FHA loans for building on land the borrower already owns: “…My end goal would be to demolish (the original) house and build a completely new one in its place for us to all reside in…what I am wondering is does this kind of demolish and rebuild qualify for FHA loans and with me having to move to do this what kind of eligibility would I have for FHA loans.” The rules for FHA loans where construction would happen on land the borrower already owns can be found in HUD 4155.1, Chapter Two. FHA loan rules allow new purchase loans for single family homes when the borrower wants to build on his or her own land. According to Chapter Two, “A borrower is eligible for | more...

October 8, 2013

Minimum Down Payments for FHA Loans: A Reader Question

By Joe Wallace

A reader asks, “Chapter 7 bankruptcy discharged in Oct 2010. Credit score now around 670. The hardest thing I am finding is the ability to save for a down payment. What would be a minimum down payment that I would be required to have before I could get an FHA loan? Thanks.” Unlike VA mortgage loans, FHA home loans feature a minimum down payment, also known as a minimum cash investment. The down payment must not only be a certain percentage of the loan amount, but it is also required to come from approved sources that can be verified. Borrowers cannot, for example, take out a cash advance on a credit card or any other form of unsecured loan for the down payment. FHA loan rules describe the minimum down | more...

October 3, 2013

FHA Commissioner Addresses Confusion Over FHA Loans During Government Shutdown

By Joe Wallace

FHA Commissioner Carol Galante issued a statement clarifying some confusion over the FHA’s ability to process new single-family FHA home loan applications during the government shutdown. According to a variety of sources including CNN.com and American Banker, earlier reports from the FHA mistakenly announced the agency would not issue new loans if the government shut down. Galante issued a statement to clear up the issue, saying, “The HUD Contingency plan posted on Friday mistakenly included incorrect information about a potential shutdown’s impact on the FHA single-family loan program,” HUD said in a statement. “FHA will be able to endorse single family loans during the shutdown. A limited number of FHA staff will be available to underwrite and approve new loans.” The original shutdown plan had mistakenly announced, “FHA will be | more...