Articles Tagged With: Credit Requirements

March 26, 2013

FHA Loan Reader Questions: Loan Applications

A reader asks, “Are all FHA loans , down payments, and everything regarding my future home have to be dealt with an authorized lender or can I deal with FHA directly? If this is the case, where do I have to send all paperwork?” The answer to this question is fairly simple–all FHA loans and FHA refinance loans are handled via a participating lender. Borrowers must apply via the lender, who processes the paperwork and submits it to the FHA where appropriate. The FHA single-family mortgage loan program does not feature a “direct application” process where the borrower submits loan paperwork to the FHA. This is part of a common misconception about the FHA loan program. The FHA does not lend money directly to borrowers, set or maintain interest rates, | more...

March 22, 2013

Your FHA Loan Down Payment

By Joe Wallace

One of the most commonly asked questions about FHA loans is “How much will my down payment be?” The answer to that question depends on how much your home loan is and whether you’re paying the minimum 3.5% down payment or a larger amount. Regardless of how much you pay, the FHA has rules about HOW the downpayment is made. Did you know there are “acceptable sources” for down payment funds as well as “unacceptable sources”? For example, a borrower is free to use money saved in a checking, savings, or investment account. But the borrower cannot use cash advance loans or payday loans to make the down payment. In fact, any “non-collateralized” loan is not an acceptable source of down payment funds. The FHA rules in these circumstances extends | more...

March 20, 2013

FHA Loan Answers: Rules For Occupancy

By Joe Wallace

We answer a lot of reader questions about FHA loans. One of them most common involves the FHA occupancy regulations for single family loans. Readers want to know if they can rent out a house purchased with an FHA loan under the single-family mortgage program. Is this possible? Are FHA single-family mortgages available for vacation homes or other limited-occupancy residences? A look at the FHA loan rulebook clears up these questions quickly According to HUD 4155.1, Chapter Four Section B, we learn the following under the section titled Eligibility Requirements For Principal Residences: “This topic contains information on eligibility requirements for principal residences, including • a definition of principal residence • the FHA requirement for establishing owner occupancy • FHA-insured Mortgages on principal residences and investment properties, and • exceptions | more...

March 19, 2013

FHA Loan Answers: What Does Your Lender See On Your Credit Report?

By Joe Wallace

When you apply for an FHA guaranteed home loan, you’re required to list a variety of items on your application form including credit data. Your recent debts and other recurring financial obligations are required because the lender must determine your debt-to-income ratio. Some borrowers wonder if leaving items off the application means the lender won’t know about them. But it’s very important to know what the FHA requires and what the lender is responsible for checking when it comes to credit. Do you know what goes into your credit report and what the lender has access to when he or she is processing your application data? Many people don’t. Here’s what the FHA loan rulebook, HUD 4155.1 has to say about credit reporting data and what the lender is required | more...

March 18, 2013

FHA Loan Reader Questions: Upcoming PMI Changes

By Joe Wallace

A reader asks, “My expected closing date is March 31, 2013. I see that there will be some new guidelines regarding PMI effective this year. Would I be required to pay private mortgage insurance until I have 20% equity and have paid PMI for five years or would I be required to pay PMI for the life of the loan?” The FHA has issued guidance about its coming changes to the PMI structure and payments. This information is found in FHA Mortgagee Letter 2031-04. It says in part: “FHA will increase its annual mortgage insurance premium (MIP) for most new mortgages by 10 basis points or by 0.10 percent. FHA will increase premiums on jumbo mortgages ($625,500 or larger) by 5 basis points or 0.05 percent, to the maximum authorized | more...

March 12, 2013

FHA Loan Seller Concessions: Have They Changed?

By Joe Wallace

In 2010, the FHA announced it was considering a new rule to cap seller concessions or contributions at a lower rate–reducing those concessions from 6% to 3%. That rule was not implemented, but in 2012 the seller concession cap was revisited once more. According to an FHA mortgagee letter found on the FHA/HUD official site, “In a separate Federal Register notice to be published soon, the FHA will propose to reduce the maximum allowable seller concession from its current level to one more in line with industry norms. The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. The revised proposal reflects public comments received on an earlier proposal published in a Federal Register notice on July, 15, 2010. The revised proposal calls for a | more...

March 12, 2013

FHA Loan Answers: Credit Evaluations

By Joe Wallace

A reader asks, “If my husband has a judgement against him from an old credit card debt, can we put the house in my name and use my credit only and still get approved? Or will they check him at some point anyway and reject me because of his judgement?” The answer to this reader question can be complicated. A married FHA loan applicant who is not affected by community property laws in his or her state may be able apply for an FHA loan without the participation or financial obligation of the spouse. As long as state laws don’t state otherwise, a married FHA loan applicant should be able to apply for an FHA guaranteed mortgage without obligating anyone else on the loan. In cases where more than one | more...

March 11, 2013

FHA Loan Reader Questions: Closing The Deal

By Joe Wallace

A reader asks, “My mom applied for a FHA loan, went through the loan application and was approved. She signed with a builder and they built the house on her property. Two days before closing, the mortgage lending company informs her that she cannot close on her finished house, due to her not having a credit score when they re-ran her credit file.” “When she was approved she had a credit score. What can be done, her house is built on her property and yet to move in, meanwhile the builder has chose another lending company, and she to repeat whole process over, can the first lending company do this?” There’s no way to judge what has happened in a situation like this–there isn’t enough information AND there may be | more...

March 8, 2013

FHA Loan Answers: Using A Power of Attorney on FHA Mortgages

By Joe Wallace

Some borrowers are confused or have conflicting information about the ability to use a power of attorney on someone else’s behalf to initiate or continue the FHA mortgage loan application process. What are the FHA loan rules for this procedure? The FHA loan rulebook, HUD 4155.1, Chapter One, states the following: “The initial mortgage loan application may not be executed by using a power of attorney”. That would SEEM to be the FHA’s last word on the matter, but there are exceptions to this rule, which is where some of the confusion may occur. Please note that the rule states the INITIAL application may not be executed via power or attorney but does not necessarily prohibit one from being continued in such a manner. FHA loans do permit military members | more...

March 5, 2013

FHA Loans and Refinance Loans: Interest Rates and Fees

By Joe Wallace

What do you, the borrower, need to know about FHA loan fees for new purchase mortgage loans and home loan refinances? It’s a big issue, but there are some basics to understand as you’re planning your next move in the search for a new home or a refinance loan rate. First, the FHA does not set interest rates on refinance loans or mortgage loans. It does require them to be appropriate, reasonable and customary for the market, but the job of negotiating interest rates is one the borrower and lender work on together. The FHA loan rulebook says as much in Chapter One of HUD 4155.1: “Under all currently active FHA single family mortgage insurance programs, the borrower and the lender negotiate the interest rate and any discount points.” Another | more...