Articles Tagged With: Down Payment

October 18, 2013

FHA Loans and Credit Disputes: A Reader Question

A reader asks, “My plan is to buy the house I’m leasing, my 3 scores are 616, 621 and 619. Will I qualify for an FHA loan? I have a student loan that i haven’t paid on my credit report it states its on dispute, will this disqualify me from an FHA?” The answer to this question depends greatly on what is meant by the “unpaid” student loan. Does that mean the borrower has not made any payments? Or does that mean payments are being made but the loan hasn’t been paid in full? Are there missing or delinquent payments in dispute? When there are disputed items on a credit report, the lender is required to learn more in order to process the FHA loan application. FHA loan rules found | more...

October 16, 2013

FHA Loan Rules For Non-Purchasing Spouses

By Joe Wallace

One common FHA loan question has to do with the status of a non-purchasing spouse. Can a married borrower apply for an FHA loan with a non-purchasing spouse? In such cases would the income or credit history of the non-purchasing spouse be considered as part of the loan application? The answer depends greatly on the state laws where you live, or the state laws in the area where the home is to be purchased. According to the FHA loan rules found in HUD 41551., Chapter Four: “If required by state law in order to perfect a valid and enforceable first lien, a non-purchasing spouse may be required to sign either the security instrument or documentation indicating that he/she is relinquishing all rights to the property. When the security instrument is | more...

October 10, 2013

FHA Loans For Building on the Borrower’s Own Land Part Two

By Joe Wallace

A reader asked us recently about FHA loans for building on land the borrower already owns: “…My end goal would be to demolish (the original) house and build a completely new one in its place for us to all reside in…what I am wondering is does this kind of demolish and rebuild qualify for FHA loans and with me having to move to do this what kind of eligibility would I have for FHA loans.” The rules for FHA loans where construction would happen on land the borrower already owns can be found in HUD 4155.1, Chapter Two. FHA loan rules allow new purchase loans for single family homes when the borrower wants to build on his or her own land. According to Chapter Two, “A borrower is eligible for | more...

October 10, 2013

FHA Loans For Building on the Borrower’s Own Land

By Joe Wallace

EDITOR’S NOTE: This article was written before changes to FHA loan rules made the old FHA Lender’s Handbook referenced in this article obsolete. The new FHA Single-Family Home Loan Rules are found in HUD 4000.1 and there have been many updates and changes to FHA home loans including One-Time Close Construction mortgage rules. Learn about the most up-to-date information on FHA Construction loans for borrowers who want to build on their own lot. ——- (The information below is no longer up-to-date, but we retain the original article here for archival purposes.) A reader asks, “I am looking to move back home, to where my grandma resides. her home of 45+ years is in disrepair. I filed bankruptcy two years ago, the one where you dont make trustee payments. My question | more...

October 8, 2013

Minimum Down Payments for FHA Loans: A Reader Question

By Joe Wallace

A reader asks, “Chapter 7 bankruptcy discharged in Oct 2010. Credit score now around 670. The hardest thing I am finding is the ability to save for a down payment. What would be a minimum down payment that I would be required to have before I could get an FHA loan? Thanks.” Unlike VA mortgage loans, FHA home loans feature a minimum down payment, also known as a minimum cash investment. The down payment must not only be a certain percentage of the loan amount, but it is also required to come from approved sources that can be verified. Borrowers cannot, for example, take out a cash advance on a credit card or any other form of unsecured loan for the down payment. FHA loan rules describe the minimum down | more...

September 26, 2013

FHA Loan Interest Rates

By Joe Wallace

Mortgage rates have, at the time of this writing, been moving lower for a variety of reasons. Given the up-and-down environment mortgage loan interest rates have experienced in the last six months, it’s easy to understand why some borrowers might be confused about how interest rates–and more importantly, interest rate locks on FHA mortgages–work. According to the FHA loan rulebook, HUD 4155.1, there is no provision for the government to set mortgage rates on an FHA mortgage. “Under all currently active FHA single family mortgage insurance programs, the borrower and the lender negotiate the interest rate and any discount points.” Borrowers might want to commit to a specific interest rate on a day when the rates seem particularly advantageous. But the loan won’t close until a later date in many | 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 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...