Articles Tagged With: Credit Requirements

February 11, 2013

FHA Loan PMI Changes: A Reader Question

A reader asks. “I read somewhere that the PMI will no longer drop off after 78% of the LTV is reached and will remain on the loan until full payment. Is this true?” The FHA has indeed changed its rules concerning mortgage insurance premiums. We covered the FHA announcement in a recent post, but many borrowers or soon-to-be FHA loan applicants wonder if the new FHA loan rules for mortgage insurance apply to their loans. Let’s examine what the FHA has announced about mortgage insurance premiums. The changes are twofold–one is an increase in the MIP premiums, the other change has to do with mortgage insurance cancellation policy. In a press release titled, “FHA Takes Additional Steps To Bolster Capital Reserves” the agency announced; “FHA will increase its annual mortgage | more...

February 7, 2013

FHA Loan Reader Questions: FHA Loans After a Foreclosure

By Joe Wallace

A reader asks, “I had a bankruptcy discharged in 2009. My mortgage was part of this bankruptcy however the bank did not foreclose until 2012. I am employed and have an average credit score of 678. Would I qualify for a FHA loan on a new property?” This is a tricky question because it includes both a bankruptcy AND a foreclosure. In such cases it’s best to contact the FHA directly for advice. Does the borrower’s two situations–bankruptcy and foreclosure–have any special consideration? There are different possibilities depending on the type of bankruptcy (not mentioned in the reader question), but let’s examine the FHA rules for the borrower’s more recent foreclosure issue. Can a borrower apply for an FHA mortgage in 2013 if there was a foreclosure action in 2012? | more...

February 6, 2013

FHA Loan Rule Changes

By Joe Wallace

The FHA has issued several rule changes recently including alterations to the FHA HECM and HECM Saver programs, new guidelines for mortgage insurance, and also the procedures for how some FHA loan applications must be processed with credit scores and debt-to-income ratios that exceed certain new guidelines. For example, FHA refinance loans for borrowers with negative equity in their homes have new guidelines which state, “Refinances of Borrowers in Negative Equity Position where the borrower has a decision credit score below 620 and the debt-to-income ratio exceeds 43.00% must be manually underwritten.” The same is true in cases of FHA Energy Efficient Mortgages. New FHA rules state, “While Energy Efficient Mortgages where the borrower has a decision credit score below 620 and the debt-to-income ratio exceeds 43.00% must be manually | more...

February 5, 2013

FHA Announces Changes To HECM Loan Program

By Joe Wallace

The FHA has issued a press release and Mortgagee Letter describing changes to the FHA Home Equity Conversion Mortgage (HECM) program. According to the FHA official site, the FHA will merge certain options associated with the HECM program and the FHA HECM Saver program as described below: “…FHA will consolidate its Standard Fixed-Rate Home Equity Conversion Mortgage (HECM) and Saver Fixed Rate HECM pricing options. This change will be effective for FHA case numbers assigned on or after April 1, 2013. The Fixed Rate Standard HECM pricing option currently represents a large majority of the loans insured through FHA’s HECM program and is responsible for placing significant stress on the MMI Fund.” The FHA press release adds, “To help sustain the program as a viable financial resource for aging homeowners, | more...

February 4, 2013

FHA To Increase Mortgage Insurance Premiums

By Joe Wallace

In the last week of January 2013, the FHA issued a statement announcing an increase in annual mortgage insurance premiums or MIP for its single family home loans. According to the FHA official site, “FHA will increase its annual mortgage insurance premium (MIP) for most new mortgages by 10 basis points or by 0.10 percent.” The FHA is also increasing the annual MIP for FHA Jumbo Loans, which are defined as mortgages at $625,500 or more, “by 5 basis points or 0.05 percent, to the maximum authorized annual mortgage insurance premium.” The FHA also says the increases mentioned here are excluding “certain streamline refinance transactions.” This change takes effect for FHA loans with case numbers assigned on or after April 1, 2013, with certain exceptions as granted by the FHA | more...

January 31, 2013

A Reader Question on FHA Minimum Property Requirements

By Joe Wallace

A reader asks, “Would a home that is missing just the cabinet doors in the kitchen qualify for FHA? It has the everything else, its just the doors that are missing.” From time to time we get questions like these that reference specific conditions in a home. Will X make my home ineligible for an FHA mortgage? Does Y disqualify the property? In answering these questions there are two important aspects to consider. One is whether or not a specific condition is described in FHA minimum property standards. Some are, but many more are not. For example, a home located in certain flood zones may not qualify for an FHA mortgage. A home with standing puddles of water in the basement or a leaky roof may require corrections or repairs | more...

January 25, 2013

FHA Loan Reader Questions: Multiple FHA Loans

By Joe Wallace

A reader asks, “I was told that I could apply for a second FHA loan if my family outgrew the first house. We have a 980 sqft home–2 bedroom 1 bath that was purchased when my wife and I had only one child. Now we are 4 and need a bigger home. I applied for the second FHA loan and was told last minute that I needed to sell the first home, or lower the balance down to 70% of balance. I hear different things from different banks and want to see if FHA can help me out on this.” According to the FHA, “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. | more...

January 25, 2013

FHA Loan Reader Questions: How Do FHA Loans Differ From Credit Union Mortgages?

By Joe Wallace

A reader asks, “What is the difference between an FHA loan and a loan from a credit union?” FHA loans differ from other types of loans for many reasons. Conventional mortgages, for example, often require much higher down payments and credit score requirements for conventional lenders. When it comes to credit unions, there may be many differences or similarities depending on which lender you’ve compared the FHA terms and conditions with. It’s not possible to say across the board how FHA loans may vary–credit unions are all different–but a quick look at some terms and conditions of individual credit unions can be revealing. For example, some credit unions we looked at offered qualified first time home buyers conventional loans with low down payments but did not offer at or near | more...

January 24, 2013

FHA Single-Family Home Loans: For Personal Use Only

By Joe Wallace

One topic we’ve covered recently in blog posts and in our answers to reader questions concerns the permitted uses for single-family FHA home loans. Read what the FHA official site says about FHA policy (in general) on multiple FHA home loans for a single borrower: “To prevent circumvention of the restrictions on FHA-insured mortgages to investors, FHA generally will not insure more than one mortgage for any borrower (transactions in which an existing FHA mortgage is paid off and another FHA mortgage is acquired are acceptable).” FHA home loans for single-family properties also have a rule stating the borrower must occupy the property as the primary residence once the sale is complete. That is another rule designed to reinforce the “no investors” policy on these types of loans. Some borrowers | more...

January 17, 2013

Paying The Up Front Costs Of Your FHA Loan

By Joe Wallace

The FHA loan program is designed to help borrowers get into an affordable home. However, those new to the FHA loan program might not realize there are up front expenses which must be budgeted for; unlike the VA loan program administered by the Department of Veterans Affairs, the FHA loan program does not feature a “no down payment” option. FHA home loans have a required down payment the FHA regulations describe as a “minimum investment”. FHA loan rules as found in HUD 4155.1 describe the up-front costs of an FHA loan (including the down payment) as follows: “Under most FHA programs, the borrower is required to make a minimum downpayment into the transaction of at least 3.5% of the lesser of the appraised value of the property or the sales | more...