Articles Tagged With: Credit Requirements

August 1, 2013

FHA No Cash Out Refinancing Loans With An Appraisal

FHA refinance loans include an option described in the FHA loan rules as a No Cash-Out Refinancing Loan With An Appraisal. These loans have rules that govern all aspects of the loan from the amount of the maximum mortgage amount (see below) and how much a borrower can receive in cash at the closing of the loan (the borrower may not receive cash back in excess of $500 at closing according to HUD 4155.1 Chapter Three Section B). How much is the maximum FHA loan amount for no cash-out refinancing loans? According to HUD 4155.1, “The maximum mortgage for a no cash out refinance with an appraisal (credit qualifying) is the lesser of the 97.75% Loan-To-Value (LTV) factor applied to the appraised value of the property, or existing debt.” Additionally, | more...

July 31, 2013

FHA Loan Answers: Alimony and Child Support as Verifiable Income

By Joe Wallace

FHA loan rules say that a borrower’s income must be verified in order for it to count when the lender makes debt-to-income ratio calculations necessary for approving (or denying) the mortgage loan. Verifiable income is defined basically as earnings that are stable, reliable, and likely to continue. A borrower’s full or even part-time employment would count in most cases. But the money a borrower makes, for example, by selling items on eBay, would likely not pass the “stable” or “likely to continue” requirements. When it comes to non-job “income” such as child support or alimony payments, FHA loan rules make provisions that allow this income to be counted under the right conditions. A borrower does not have to declare child support income under the Fair Housing Act, but it is | more...

July 30, 2013

FHA Loan Answers: Buying Homes From Family Members With An FHA Mortgage

By Joe Wallace

Here’s a question about FHA loans that isn’t as common as some, but still comes up often enough to discuss here: can a family member purchase a residence from another family member using an FHA mortgage? FHA home loans have rules designed to protect the integrity of the loan process–FHA loan rules in HUD 4155.1 say that some FHA loan transactions may have different or lower loan amounts depending on the circumstances of those loans. “Certain types of loan transactions affect the amount of financing available to a borrower and how the maximum mortgage amount is calculated. These transactions include identity-of-interest properties with non-occupying coborrowers three- and four-unit properties properties where a house will be constructed by a borrower on his/her land, and/or as a licensed general contractor payoffs of | more...

July 29, 2013

FHA Loan Reader Questions: Bankruptcy and FHA Loans

By Joe Wallace

A reader asks, “I filled for a Chapter 13 bankruptcy in March 2009, then converted it to a Chapter 7 which was discharged in March 2012. I would like to buy a house, but was told I had to wait 2 years from the March 2012 date by a mortgage broker I called. I have worked to repair my credit since then and have incurred no more dept other than a small credit limit credit card that I was using to build new, good credit.” “I have a good job with good pay in education, with solid 2 years of increased income and have signed a contract for another year. What process should I take to try and qualify for an FHA loan under the 2 year wait period after | more...

July 25, 2013

FHA Loans and Your Credit

By Joe Wallace

For some borrowers, the credit approval process is a mystery, especially when it comes to FHA home loans. Do you understand what the lender needs in order to approve a home loan application? Borrowers should understand that FHA loan approval is based on several factors including FICO scores, debt to income ratio, but also the repayment history shown on your credit report. FHA rules and instructions to the lender on this area are found in HUD 4155.1 Chapter Four. In Section C, we get some insight into this process and how the lender is supposed to evaluate your repayment history as found in a credit report: “Evaluating credit involves reviewing payment histories in the following order: • first: previous housing expenses, including utilities, • second: installment debts, • third: revolving | more...

July 25, 2013

FHA Loans After Chapter 7 Bankruptcy: A Reader Question

By Joe Wallace

A reader asks, “I filed chapter 7 in March 2010 and discharged in June 2010. I had a home included in the bankruptcy but after the two year waiting period the lender told me I had to wait an additional three years from the time of the final sale of the property which was not until March 2013. So are they correct in stating that it is a five year waiting period before I can qualify for an FHA loan?” FHA loan rules for FHA mortgages applied for in the wake of a Chapter 7 Bankruptcy are found in HUD 4155.1 Chapter Four, Section C, which states the following: “A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have | more...

July 24, 2013

“No Credit Check” FHA Loans: A Reader Question

By Joe Wallace

A reader asks, “In regard to not all FHA streamline loans require a new credit check. What is the criteria required for FHA loans that do not require a credit check and/or appraisal?” FHA new purchase home loans do require a credit check and an appraisal, as do all FHA cash-out refinance and Home Equity Conversion Mortgages or HECM loans. There is no such thing as a no-credit check FHA loan for a new purchase transaction or for any transaction that includes cash back to the borrower that is not in the form of a bona fide refund. Certain exceptions may be possible for FHA energy efficient add-ons for a Streamline Refinance loan, depending on the circumstances. The FHA Interest Rate Reduction Refinance Loan or Streamline Refinancing loan is the | more...

July 22, 2013

FHA Loan Reader Questions: A Few Basics:

By Joe Wallace

A reader asks, “Why is there no website that shows you what income qualification rules might apply for an FHA loan ? Is there a maximum income allowed for a first-time, unmarried, home buyer?” There’s a simple reason where there is no website that details income qualification rules for FHA home loans when it comes to maximum loan amounts, first-time home buyer preferences and whether marital status itself affects an FHA home loan application: these are generally not factors. That’s NOT to say that your marital status or income might not affect your FHA loan. Far from it. Married borrowers applying for a loan together may have a better chance based on income factors and other aspects than a single borrower. (Two applicants applying together may also have its share | more...

July 12, 2013

FHA Loan Reader Questions: Is There A List Of Acceptable Down Payment Sources?

By Joe Wallace

A reader asks, “I am trying to find the complete FHA list of acceptable sources for down payments. For example, can a client refinance an existing land or home loan as a source of obtaining the necessary funds needed for downpayment?” FHA loan rules are very specific about acceptable sources of down payment funds. A borrower is required to make a minimum cash investment or down payment of at least 3.5% for a typical new-purchase FHA mortgage. That 3.5% can come from the borrower’s own funds, or be a bona fide gift, or come as the result of the borrower cashing out investments, bonds or other resources. What exactly IS the down payment a percentage of? How does the borrower know what to expect in this area? The FHA loan | more...

July 11, 2013

FHA Streamline Refinance Loans With Appraisals

By Joe Wallace

FHA refinancing loans include something known as a Streamline Refinance option; the FHA Streamline Refinance allows a borrower with an existing FHA mortgage to apply for refinancing to lower mortgage rates or monthly payments. No cash back is permitted and no FHA-required credit qualifying is needed. Additionally, FHA Streamline loans have no FHA-required appraisal. But what about situations where there IS an appraisal with an FHA Streamline Refinance? FHA loan rules for no-appraisal streamline loans describe the maximum loan amount as follows: “The maximum insurable mortgage for streamline refinances without an appraisal cannot exceed the outstanding principal balance • minus the applicable refund of the UFMIP, • plus the new UFMIP that will be charged on the refinance. Note: The outstanding principal balance may include interest charged by the servicing | more...