Articles Tagged With: Credit Requirements

October 2, 2013

Bad Credit FHA Loans? A Reader Question

We get a lot of questions about FHA loans and bad credit. One of the latest examples comes from a reader who asks; “I am wanting to buy me a single family home but my credit is messed up. I know my score is bad! I am a single mother with 4 kids and I want my own house. I am in need of help on which way to go. Do I need to file chapter 13 or 7 or is there a way to get my credit fixed so that I can make another one of my dreams come true? Help me please.” While we cannot advise or answer questions on issues that fall outside how FHA loans work and their related issues (appraisals, Private Mortgage Insurance, etc.) | 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...

September 19, 2013

FHA Home Loan Debt To Income Ratio Rules: A Reader Question

By Joe Wallace

A reader asks, “I have significant student loans, but my parents make all payments on the loans because they had promised to provide my education as a gift (this was a commitment they made before I made the decision to pursue my education).” “They have made timely payments for three years, and they intend to continue to make payments until the loans are paid off. Can they guarantee future payments so that I can remove the loans from my debt-to-income ratio?” There are two basic factors at work when the lender is reviewing a borrower’s debt-to-income ratio. One is the borrower’s current debt load compared to the amount of income coming in. The other is how the new FHA loan payment would affect that debt load. Since the debts in | more...

September 18, 2013

FHA Loan Reader Questions: Old Foreclosures

By Joe Wallace

A reader asks, “Is a person eligible for an FHA loan if they had one 20 years ago that went into foreclosure?” FHA loan rules address the issue of past foreclosures on FHA home loans in HUD 4155.1, Chapter Four Section A. It states: “If the borrower has had past delinquencies or has defaulted on an FHA- insured loan, there is a three-year waiting period before he/she can regain eligibility for another FHA-insured mortgage.” Additionally, “The three-year waiting period begins when FHA pays the initial claim to the lender. This includes deed-in-lieu of foreclosure, as well as judicial and other forms of foreclosures. Lenders should contact the Homeownership Center (HOC) having jurisdiction over the area where the property subject to default is located for information such as the • date | more...

September 17, 2013

FHA Reverse Mortgage (HECM) Guidelines: Credit Issues

By Joe Wallace

Recently the FHA issued new rules and instructions to the lender that affect how FHA Reverse Mortgages or Home Equity Conversion Mortgages are processed. According to FHA Mortgagee Letter 2013-28, effective for all HECM case numbers assigned on or after January 13, 2014, the lender, “must perform a financial assessment of all prospective mortgagors on all HECM transaction types, i.e., traditional, refinance, and purchase.” What does that mean for the HECM loan applicant? For starters, when you apply for an FHA reverse mortgage or HECM, the lender is charged with doing the following things with your application data according to Mortgagee Letter 2013-28: performing the credit history analysis. performing the cash flow/residual income analysis; documenting and verifying credit, income, assets and property charges evaluating extenuating circumstances | more...

September 16, 2013

FHA Loan Credit Questions–What Affects Your Chances Besides FICO Scores?

By Joe Wallace

A reader asks a question about FHA credit requirements, and starts out by quoting one of our past replies to a reader question about FHA credit rules. Here’s the quote: “FICO scores are not the only issue examined on a credit application. To infer that simply by raising FICO scores for the loan application in question, the loan might be approved with the minimum down payment in this case would be misleading–there are many factors that affect your credit worthiness in the eyes of a lender, FICO scores are just one of those factors…..” The reader asks, “Which factors exactly affect one’s creditworthiness in the eyes of a lender besides FICO scores?” There are many factors that could affect a lender’s view of an individual borrower’s creditworthiness. Some are known | more...

September 12, 2013

FHA HECM Program Changes: Mandatory Obligations

By Joe Wallace

Recently the FHA and HUD announced changes to the FHA Home Equity Conversion Mortgage, also known as HECM. Those changes include new guidelines for the maximum amount of HECM loan funds that can be transferred to the borrower at the time the HECM loan closes or within the first 12 months of the HECM loan, as well as “what fees and charges are considered Mandatory Obligations” according to the new rules. According to FHA mortgagee letter 2013-27, a new “Single Disbursement” lump sum payment may be possible for borrowers applying for both adjustable and fixed interest rate HECM loans applicable for all FHA HECM loan case numbers assigned on or after September 30, 2013. “This payment option will be limited to a single disbursement at loan closing which cannot exceed | more...

September 10, 2013

HUD Announces Changes To FHA Home Equity Conversion Mortgage Program

By Joe Wallace

The FHA and HUD have announced changes to the FHA Home Equity Conversion Mortgage program designed to manage risks and make the program more secure. According to a press release issued recently, the new rules will, “manage risk associated with the Federal Housing Administration’s (FHA) reverse mortgage or Home Equity Conversion Mortgage (HECM) Program. This is part of the Department’s continuing effort to reform, strengthen and protect FHA’s Mutual Mortgage Insurance (MMI) Fund” “The changes being announced today will realign the HECM program with its original intent which will aid in the restoration of the MMI fund and help ensure the continued availability of this important program,” said Federal Housing Commissioner Carol Galante. “Our goal here is to make certain our reverse mortgage program is a financially sustainable option for | more...

September 9, 2013

FHA Loans, Late Student Loan Payments, and Home Loan Approval: A Reader Question

By Joe Wallace

A reader asks, “My wife and I are trying to get a FHA loan. Me as the primary borrower and her as co-applicant. She has lates on her student loans, which have been consolidated and are current for the last 8 months. we provided the lender a letter of explanation, detailing the reason she was late…underwriter has made a decision to deny, stating the reason was/is not good enough. Is there anything we can do?” There are two important things a borrower should consider when applying for an FHA mortgage in circumstances like these. The first is that not all lenders have the same standards. The financial institution that turns you down today may have more strict requirements than the one that offers you an FHA mortgage tomorrow. It’s very | more...

September 6, 2013

FHA Loan Rules on Second Loans: A Reader Question

By Joe Wallace

A reader asks, “I am a co-borrower on another FHA loan. Do I not have the right to acquire a FHA loan where I would be the primary borrower and the secondary residence would be my primary residence? I was informed I could not have or be on two FHA loans by my tentative mortgage company.” FHA loan rules covering issues like these are found in HUD 4155.1, Chapter Four Section B. It states, “To prevent circumvention of the restrictions on making FHA-insured mortgages to investors, FHA generally will not insure more than one principal residence mortgage for any borrower.” “FHA will not insure a mortgage if it is determined that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties, even if the | more...