Articles Tagged With: FHA Energy Efficient Mortgage

February 7, 2012

Can Repair Costs Be Added to the FHA Loan Amount?

The FHA has strict rules about how a loan may be calculated. There’s the minimum cash investment required of the borrower, there are FHA loan limits, and there are rules covering what kinds of incentives a seller may provide in the form of interest rate buydowns and other financial contributions. Did you know that in some cases, the cost of home repairs on a sale property can be included in the sale price of the home for FHA loan purposes? According to Chapter Two of HUD4155.1, “Repairs and improvements may be added to the sales price before calculating the mortgage amount when…the repairs and improvements are required by the appraiser as essential for property eligibility”. These costs must be paid by the borrower, and

February 2, 2012

FHA Loan Rules: Minimum Cash Investment

By Joe Wallace

Some FHA loan terms and jargon can be confusing for the first-time borrower. For example, some readers want to know what the FHA means by “minimum cash investment”. This phrase is basically another way of stating the term, “down payment” and refers to how much money down the borrower will pay. According to FHA loan rules as stated in HUD 4155.1 Chapter Two; “The maximum mortgage amount that FHA will insure on a purchase is calculated by multiplying the appropriate loan-to-value (LTV) factor by the lesser of the property

January 31, 2012

FHA Loans, Effective Income, and Alimony

By Joe Wallace

One important section of the rules for FHA loans states a borrower’s income must be verified by the lender as “effective income”. This means that the income must be stable and likely to continue. Some types of income can’t be counted. A part-time business selling goods on eBay, for example, might not qualify. But what about other types of non-employment income like child support, alimony, or maintenance payments? There are plenty of borrowers who receive or are eligible to start receiving these types of payments. Does the FHA recognize them as effective income? In certain cases, yes. Alimony, maintenance payments as part of a divorce decree, and/or child support can qualify and be counted toward a borrower’s debt-to-income ratio provided the payments meet standards set by they FHA. According to | more...

January 25, 2012

FHA Loan Applications and Income Rules

By Joe Wallace

Borrowers who apply for an FHA insured mortgage are required to submit application data including specific details about employment, income, and the sources of that income. FHA income requirements aren’t limited to just dollar amounts and the history of the borrower’s employment–the sources and stability of the income listed on the application are also reviewed. A borrower’s debt-to-income ratio, the amount of money going out versus the amount of money coming in, is calculated using only verifiable and reliable income. The FHA has rules about the nature of the income that can be used for this calculation; if a borrower has a job that isn’t “stable and reliable” when it comes to income, it won’t help the borrower for the purposes of qualifying for an FHA mortgage. Specifically, the FHA | more...

January 20, 2012

FHA Loan Reader Question: Why Was I Denied an FHA Home Loan?

By Joe Wallace

Many readers write in with questions similar to the one we received this week, which includes the following: “I am recently divorced. While married, went through two bankruptcies (both discharged) have/had issues with back taxes (installment plans made and determined to be paid in full by ex per divorce decree). Have moved to another state, working (1.5 years), full time student. Was living with children, have moved into an apartment paying $600.00 per month (comfortably), because I could not get qualified for a loan. Have two major credit cards (visa/master credit cards not debts) established in my name for 1.9 years, never late, never over limit. Credit score is 620. Is there a main reason why, I did not or cannot be approved for a FHA loan?” Before addressing an | more...

January 17, 2012

FHA Loan Reader Question: Do I Qualify For an FHA Mortgage?

By Joe Wallace

FHA loans have minimum credit standards which include requirements for timely bill paying, dependable work history and other factors that can affect an FHA mortgage application. But FHA rules are designed to be flexible depending on a borrower’s circumstances. In general the FHA rules tend to be more forgiving when borrowers can show that financial difficulties were beyond the borrower’s control and have been resolved successfully. With that in mind, we turn to a recent question from one of our readers: “I am looking to buy, my current residence from a family member.

January 12, 2012

FHA Loans: Can I Change the Terms of Sale Agreement?

By Joe Wallace

The FHA provides many helpful resources for homebuyers on its official site at FHA.gov. One of those resources is an online version of a HUD/RESPA booklet called “Buying Your Home” which includes a section on settlement costs. One of the first portions of this booklet a prospective FHA mortgage loan applicant will read includes the following: “The real estate broker probably will give you a preprinted form of agreement of sale. You may make changes or additions to the form agreement, but the seller must agree to every change you make. You should also agree with the seller on when you will move in and what appliances and personal property will be sold with the home.” The second sentence contains a revelation for some borrowers–some loan applicants simply assume that | more...

December 29, 2011

The FHA Energy Efficient Mortgage Program-A Smart Choice For 2012?

By Joe Wallace

If you’re planning on applying for an FHA home loan or refinancing an existing FHA mortgage in the new year, it might be a good idea to consider the option of an FHA Energy Efficient Mortgage or EEM. The FHA Energy Efficient Mortgage program is designed to let a qualified borrower “to finance 100% of the expense of a cost effective

December 14, 2011

FHA Energy Efficient Mortgage Loans Part Two

By Joe Wallace

In a recent blog post we discussed the FHA Energy Efficient Mortgage Loan (EEM) and some of the basics of the program. The FHA EEM is for new purchase and refinancing mortgages and lets the borrower finance additional costs of energy-efficient upgrades or improvements to the home. Because the FHA loan program has loan limits and specific rules that govern those limits, it is easy to see how borrowers new to the FHA loan program could be confused by the terms of such a loan. After all, if a borrower can add at least $4,000 (or as much as $8,000 depending on the circumstances) to the FHA loan, how does one roll the costs of the improvements into the mortgage without exceeding the FHA loan limit for that purchase? According | more...

December 14, 2011

FHA Energy Efficient Mortgages

By Joe Wallace

Borrowers new to the FHA insured loan program should know about the FHA loan option called an Energy-Efficient Mortgage or EEM. An FHA EEM is intended to add a set amount to the FHA home loan in order to finance upgrades or improvements to the home that result in a more energy efficient property, which saves money over the long term. According to FHA loan rules, eligible properties for an EEM loan include, “New and existing one to four unit properties, including one unit condominiums and manufactured housing properties”. EEM loans are for new purchase transactions or refinancing, including the FHA 203(k) Rehabilitation Loan, FHA 203(h) loans for victims of natural disasters and standard FHA 203(b) loans. Borrowers who are purchasing multi-unit property should know an FHA EEM is calculated | more...