Articles Tagged With: Fair Housing Act

August 9, 2013

FHA Loan Answers: Tax Documentation

One question many borrowers have about applying for an FHA loan for the very first time involves the type of documentation a lender may require for loan approval. The tax question is a common one–do FHA loan rules require the borrower to furnish tax documentation in addition to other credit-qualifying details? According to HUD 4155.1 Chapter One Section B, “The lender must obtain federal income tax returns for the most recent two years, both individual and business, including all applicable schedules, for self-employed borrowers, and individual federal tax returns for commissioned individuals.” As you can see, not everyone may be required to supply tax data, but for those who are required, there are additional rules that may apply. “The lender must obtain signed forms IRS 4506, IRS 8821, Tax Information | more...

August 8, 2013

FHA Loan Answers: Employment Verification by Fax or Internet

By Joe Wallace

When applying for an FHA home loan, your loan officer is required to verify your employment history–current and former–as a condition of loan approval. Some borrowers live and work in the same area for extended period of time, while others may have crossed the country to accept new employment or even transitioned from overseas locations to stateside (as is often the case with military families and other government employees). In such cases, how does the lender verify employment? It may not be practical for the borrower to return to an old office or workplace to request verification and telephone or emailed requests for mailed documentation may not be done as quickly as needed. Can the lender or borrower request a faxed document from an old employer instead? Here’s what FHA | more...

August 6, 2013

FHA Loan Questions: Is It Ever “Impossible” To Deny An FHA Loan Application?

By Joe Wallace

A reader asks, “I was awarded permanent disability on June 2011; with a ‘long term re-evaluation’ in 5 to 7 years per SS; will the lender under FHA loan qualifications, not be able to decline loan because of said re-evaluation?” Assuming we understand this reader’s question properly, it seems the issue at hand is whether or not the FHA loan is “guaranteed” to be approved because of Social Security income status. FHA loan rules as written in HUD 4155.1 Chapter Four Section D state that one requirement of FHA loan approval is an examination of income and how likely that income is to continue. “The lender must analyze the income of each borrower who will be obligated for the mortgage debt to determine whether the borrower’s income level can be | 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 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 10, 2013

FHA Loan Answers: Can I Add Appraiser-Required Repairs/Improvements Into My FHA Loan?

By Joe Wallace

When you want to purchase a home with an FHA mortgage, one of the most important steps after choosing the property is the appraisal. An appraisal is required in order to establish the fair market value of the home and to make sure the home lives up to FHA minimum property standards. Appraisals may result in some required improvements, corrections or alterations to the home in order to bring it up to minimum standards. In such cases, the appraiser may make FHA loan approval conditional upon the completion of these changes and require a compliance inspection to make sure the fixes or alterations now bring the home up to standard. In such cases, is the borrower permitted to include the cost of this work in the sales price of the | more...

July 3, 2013

FHA Loan Reader Questions: FHA Rules on “Flipping”

By Joe Wallace

A reader asks, “Hello, can you help us with a couple of questions please. What does the FHA consider as a “Flip-it” property? How many days does this involve from an original sale of a property?” “Flipping” is defined by the FHA as the sale of a home purchased with an FHA loan within 90 days of the original sale. Under normal circumstances the FHA has anti-flipping rules in place that forbid this practice with homes purchased with an FHA-insured mortgage. But the FHA issued a waiver to these rules back in January 2010. It has since been extended more than once and the current waiver of FHA anti-flipping rules doesn’t expire until 2014. According to a November 2012 edition of The Federal Register, “FHA is extending the availability of | more...

July 1, 2013

FHA Loan Reader Questions: FHA Loan Rates for First Time Home Buyers

By Joe Wallace

A reader asks, “What is the current interest rate for a first time home buyer and what is the income level to qualify?” The short answer to the first part of this reader question is that there is no specific interest rate set for “first time home buyers” when it comes to FHA home loans. The interest rate on an FHA mortgage is negotiated between the borrower and the lender. While some institutions may have a first-time home buyer program, the FHA does not set the rates on FHA loans nor does it regulate them beyond general requirements to be typical for the housing market the loan is offered in. FHA loan interest rates can change depending on the nature of the markets that affect mortgage rates. Rates can change | more...

June 27, 2013

FHA Loan Reader Questions: FICO Score Minimum Requirements

By Joe Wallace

A reader asks, “Hello, my husband score is 623 and my score is 738, is there a FHA loan out there that would allow us to get a loan? I have read that some companies have stated that both parties must have at least a 650 or above.” Credit score questions are some of the most frequently asked when it comes to a new purchase FHA home loan. While it’s true that the FHA does have a set of minimum FICO scores listed (see below) there is one very important thing ALL borrowers should know about the FHA loan rules for minimum credit scores–they are the FHA’s minimums ONLY. A lender is free to require higher credit scores as long as such higher standards are consistently applied and in accordance | more...

June 21, 2013

FHA Loan Rules: Maximum Loan Amounts and Down Payments

By Joe Wallace

FHA loan rules include guidance for lenders and borrowers about maximum loan amounts and down payment requirements. There’s a myth about today’s FHA home loans that some still repeat–variations on the idea that there may be no down payment required for first-time home buyers. What’s the reality? FHA loans do require a down payment. It’s much lower than the required down payment for many conventional loans, which is why some might believe that the FHA down payment requirement is reduced or eliminated for first-time borrowers. The minimum down payment amount for an FHA new purchase loan is 3.5%. No closing costs can be used to meet this requirement–the down payment is a separate amount from what are called “non-recurring” costs, prepaid expenses, discount points, etc. The down payment amount is | more...