Articles Tagged With: FHA Energy Efficient Mortgage

May 28, 2013

HUD Settles Alabama Housing Discrimination Case

A press release issued by the FHA and HUD announces the settlement of a housing discrimination case in Alabama. According to HUDNo.13-077, “The U.S. Department of Housing and Urban Development (HUD) announced today that LLB&B, Inc., a real estate company based in Mobile, AL, will pay $29,000 as part of a Conciliation Agreement resolving allegations that one of its agents refused to show a condominium to a prospective homebuyer because he is African American. ” This violation of the Fair Housing Act came to light thanks only to a misdirected phone call. According to the press release, “The homebuyer alleged that he learned of the discrimination when the real estate agent inadvertently left a message on his telephone voicemail indicating her belief that white neighbors would ‘panic’ at the prospect of | more...

May 24, 2013

FHA Loan Reader Questions: Buying a Home After a Short Sale

By Joe Wallace

A reader asks, “I did a short-sale last year, with total debt forgiveness and no delinquency judgement. I never missed a payment the 8 years I held the mortgage. It did not effect my credit which is currently 737.” “The bank did however report the short sale to the credit bureau and now I’m told it will be an issue getting an FHA loan. Lender says one thing, actual FHA website says another. I’m confused and discouraged. Advice?” The real issue here seems to be a disconnect between what the FHA loan rules say and the lender’s standards. If the FHA requires a certain minimum, but the lender has a higher standard, who is right? What standard is used to determine whether or not the loan can be approved? FHA | more...

May 16, 2013

FHA Loan Questions: Identity Of Interest Transactions

By Joe Wallace

One common question about FHA home loans involves the FHA rules about who can sell to whom. When it comes to a home owner selling property to someone they do not know, the rules are simple. FHA guidelines don’t allow a home owner with an “identity of interest” in the outcome of the sale to sell to an FHA borrower AND be a co-signer or co-borrower on the mortgage. What does that mean? According to HUD 4155.1 Chapter Four Section A, “A party who has a financial interest in the mortgage loan transaction, such as the seller, builder, or real estate agent, may not be a coborrower or a cosigner.” You can’t be both the buyer AND the seller. But what about in cases where the seller is a relative? | more...

May 15, 2013

FHA Loan Reader Questions: Unethical Practices?

By Joe Wallace

A reader asks, “I bought my home through FHA nearly 4 years ago. I now am selling and a buyer called and we agreed to sell to them. They are going with an FHA loan as well. At first they had my agent representing them. They somehow got their brother in law, who also is a real estate agent, to do the whole house inspection. He said that the stairs were wrong (10″ risers, no railing) He also stated that the roof in the garage needed to be jacked up and have more joists or whatever they are called and that he would do it.” “He isn’t a certified inspector with FHA and I don’t know if he is even a true inspector. He didn’t report it, the buyers came | more...

May 15, 2013

FHA Loan Questions: Well Water

By Joe Wallace

A reader asks, “Purchasing an existing home in rural county in Oklahoma. What are the FHA guidelines on water system? No rural water at property. It’s well water. Would FHA loan on that water supply?” It’s important to point out that the FHA does not loan money–the FHA guarantees the loan issued by a private lender. That out of the way, let’s examine what FHA loan rules say about wells in 4150.2, Property Analysis. In the section titled, “Individual Water Supply and Sewage Disposal Systems” we find the following: “If water and sewer systems are not connected to public systems, the water well and/or septic system must meet the requirements of the local health authority with jurisdiction.” That means the FHA won’t guaranty a loan for a property that has | more...

May 13, 2013

FHA Energy Efficient Mortgage Rules For Streamline Refinance Loans

By Joe Wallace

The FHA Energy-Efficient Mortgage (EEM) option is available for borrowers who want to apply for additional money to be used for energy-efficient upgrades on the home being purchased or refinanced with an FHA mortgage. An FHA EEM is subject to certain rules and requirements, especially when paired with a Streamline Refinance. For example, one of the requirements of a Streamline Loan is that the borrower must get a benefit from the refinance–usually in the form of lower interest or monthly payments. But with some FHA EEMs, the payments may actually go up. Is this permitted under the rules? HUD 4155.1 spells out when those higher payments may be allowed–the guidence is found in Chapter Six, Section D. Under “Streamline Refinance Transactions with EEM” where you’ll find the following: “For a | more...

May 6, 2013

FHA Loan Reader Questions: Do All Homes For Sale Require an Appraisal?

By Joe Wallace

A reader asks, “Do all homes need an inspection and an appraisal? My sister-in-law is the seller and is worried (about an) older kitchen; FHA may not give me a loan. The home is in good condition and the family already did an appraisal in order to get an asking price.” There are two separate procedures asked about in this reader question–an appraisal is not the same thing as a home inspection, but both are important parts of the home buying process. A home inspection is a voluntary service the borrower can and definitely SHOULD budget for when purchasing a home with any kind of mortgage whether it is an FHA, conventional, VA loan, etc. The home inspection is a more up-close look at the condition of the property and | more...

May 3, 2013

FHA Loan Answers: Legal Age For FHA Loans?

By Joe Wallace

A reader asks, “Does one of the co-borrowers have to be enrolled in college, or can one of the applicants be a young employed adult?” FHA loan rules require borrowers to be of legal age acceptable in the laws of your state. If you are old enough to sign a legally binding contract in the eyes of the law, you are old enough to apply for an FHA home loan. That does not guarantee loan approval–the FHA requires the lender to review all borrowers and co-borrowers for creditworthiness, income, employment and credit scores. A borrower who is at the legal age in his or her state, but does not meet credit standards would not be approved for a VA home loan. Borrowers who are in college would still need to | more...

April 25, 2013

FHA Loans and Non-Traditional Credit

By Joe Wallace

One commonly asked question about FHA mortgage loans involves the eligibility of borrowers who don’t have what are considered “traditional” credit histories. Can a borrower with little or no credit still qualify for an FHA loan? FHA loan rules do make provisions for those who have little credit history that can be researched via a typical credit bureau report. In cases like these, the lender is required to review certain types of documentation to verify the borrower is a good credit risk. According to HUD 4155.1, “In order for the underwriter to determine that a borrower has sufficient credit references to help evaluate bill paying habits, the credit history must…include three credit references” including at least one of the following: Rental housing payments (subject to independent verification if the borrower | more...

April 24, 2013

FHA Loan Reader Questions: Commission Income

By Joe Wallace

A reader asks, “How would you calculate a borrower who started a new job in May 2011, made a base salary with incentive? In 2012 went from incentive to commission + base & will continue for 2013 w/a verification stating commission likely will continue. Please advise.” While many FHA loan applicants work in “traditional” vocations with weekly, bi-weekly, or monthly paychecks, others are self employed, work on commission, etc. FHA loan rules anticipate these types of employment situations and have rules based on them. FHA loan rules address commission income in HUD 4155.1 Chapter Four Section D, which states, “Commission income must be averaged over the previous two years. To qualify with commission income, the borrower must provide –copies of signed tax returns for the last two years, and –the | more...