Articles Tagged With: Credit Requirements

December 12, 2012

FHA Loan Eligibility Rules–Who Is Automatically Disqualified?

We get many questions about FHA loan rules for those who have had bankruptcies, foreclosures, loan defaults and other credit issues on their records. FHA loan rules are clear–having these issues in your credit history is not an automatic cause to reject a loan application, but the borrower must wait out a minimum “seasoning period” after foreclosure, bankruptcy, etc. But there are certain cases where a borrower IS automatically ineligible for an FHA loan. What are these situations? According to FHA loan rules as described in Chapter Four of HUD 4155.1 in the section titled “Basis for Rejecting a Borrower for Federally Related Credit” you’ll learn that an FHA loan applicant is “not eligible to participate in FHA-insured mortgage transactions if he/she is suspended, debarred, or otherwise excluded from participating | more...

December 4, 2012

HUD Charges Minnesota Condo Association With Discriminatory Policies

By Joe Wallace

There are plenty of options for those seeking FHA home loans who don’t want a home in the suburbs. Some want a condo unit, and while these types of loans can be a bit more complex due to certain requirements (FHA loan rules require condos to be on or added to a list of FHA approved projects) these types of loans are definitely available to qualified FHA loan applicants. Lenders prepare borrowers for the additional steps required in the condo loan process. What the borrower should not expect? Discrimination of any kind in that process. According to a recent press release on the HUD official site, “The U.S. Department of Housing and Urban Development (HUD) announced today that it is charging the homeowner association and property managers for an Edina, | more...

December 3, 2012

FHA Loan Rules For Multiple Residences: A Reader Question

By Joe Wallace

A reader asks, “Any person individually or jointly owning a home covered by an FHA- insured mortgage in which ownership is maintained may not purchase another principal residence with FHA insurance, except in certain situations as described in HUD 4155.1 4.B.2.d.” “What are the exemptions? FHA loan rules, as published in HUD 4155.1 Chapter Four, Section B, state: “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 property to be insured will be the only one owned using FHA mortgage insurance.” There are | more...

November 23, 2012

FHA Loans and Credit Scores Below 620: A Reader Question

By Joe Wallace

A reader asks, “My husband and I have a credit score of 536. We have 41,000 to put down on a house. Can I get an FHA loan. I applied with a bank but could not.” This reader question doesn’t specifically ask, but it does imply that the reader might be under one of the most common misconceptions about the FHA loan program–that the FHA itself is responsible for making loans, lending money or otherwise distributing funds. The FHA does not loan money or disburse funds. Instead, it guarantees the home loans which are issued by a participating lender. The lender is responsible for processing, approving or denying the FHA loan applications it receives. FHA loan applicants should know that while FHA minimum credit scores at listed at 500 and | more...

November 19, 2012

Minimum Property Requirements: FHA Loan Reader Questions

By Joe Wallace

A reader asks, “I have an appraisal prepared by FHA approved appraiser. This is a short sale and appraiser has made comment that carpet in master bedroom has been removed and has bare concrete floors.” “Yet does not pose a health hazard. She has done the appraisal “As Is” but stated floor covering is required. Question is does FHA accept the floor to be painted with a sealer. Borrower does not want to put carpet in until the property is in their name. Seller will not do anything as it is a short sale. Thanks.” FHA mortgagee letters have in the past indicated that “exposed sub-flooring” or missing carpet can be grounds for issuing a correction. In this question the reader states that the missing carpet does not pose a | more...

November 16, 2012

FHA Loan Refinancing: Subordinate Liens

By Joe Wallace

A reader asks, “My husband and I have a FHA mortgage. We have had the mortgage since 2005. A couple of year ago I lost my job and we got behind.” “FHA gave us a 2nd mortgage with no interest and we only had to pay it off when we paid off the loan. I am not sure if it was called a modification.” “Our rate is 6.50%. We have been only 1 x 30 since then and we are current now. Do you think a streamline would work for us and if so would FHA subordinate the 2nd as it is?” It’s impossible to comment on whether a loan “works” for an individual as so much about home loan refinancing depends on individual circumstances, but the subordinate lien question | more...

November 14, 2012

FHA Appraisals: Are They As Strict As Conventional Loan Appraisals? A Reader Question

By Joe Wallace

A reader asks, “Are FHA appraisals generally more “strict” than traditional mortgage appraisals? I am questioning what types of repairs are generally required in advance of closing?” “Specifically, I am selling my owner-occupied home to buyers that are anticipating an FHA loan, but they have expressed concern about the appraisal process.” “There are cosmetic concerns at the house (rooms need paint, screen door should be replaced, missing shutter), but the well, septic, roof and furnace are all relatively new. Can you please clarify?” This question is difficult to answer for one simple reason–FHA appraisals require the home to live up to both FHA minimum property standards (MPRs) AND state/local building code. If FHA minimum standards are met, but local code compliance is not evident, FHA MPRs do NOT trump the | more...

November 13, 2012

FHA Loan Credit Scores: A Reader Question

By Joe Wallace

A reader asks, “I want to buy a home. I am renting a house that cost me $ 1300.00 plus lights and water bill. I filed bankruptcy almost 3 years ago and my credit score is bad. I am working at the same place for almost 7 years for about 42,000.00 yearly. Could I get a FHA loan to buy a house?” FHA loan rules, as described in HUD 4155.1 Chapter Four, explains what (from a lender’s point of view) is required when applying for an FHA home loan. Under the section of Chapter Four titled, “Hierarchy of Credit Review” we learn that FHA requires the lender to take several issues into account when evaluating credit: “Evaluating credit involves reviewing payment histories in the following order: first: previous housing expenses, | more...

November 1, 2012

What is the FHA Minimum Credit Score: A Reader Question About FHA Loans

By Joe Wallace

A reader asks, “What is the minimum credit rating score needed to be considered for an FHA loan?” This question comes up very frequently, and the answer is always a two-parter. For starters, borrowers should understand the FHA’s minimum FICO credit score requirements. These requirements are described on the FHA official site as follows: For FHA loans with case numbers “assigned on or after 10/04/10”, FHA loan rules state: When the decision credit score is:

October 31, 2012

FHA Energy Efficient Mortgages: Is Escrow Required?

By Joe Wallace

When learning abo0ut FHA home loans, escrow is one issue some borrowers have questions about. The FHA frequently asked questions pages include the following about escrow, which is governed by something called the Real Estate Settlement Procedures Act or RESPA: “Does RESPA require borrowers to maintain an escrow account? NO. It is the lender’s decision whether the borrower must maintain an escrow account for the purpose of paying taxes and other items. The HUD regulations only limit the maximum amount that a lender can require a borrower to maintain in an account.” That Q&A from the FHA official site seems to indicate that the FHA does not require escrow; indeed, it is the lender’s choice to require escrow or not. But are there situations where an escrow account may actually | more...