Articles Tagged With: FHA Energy Efficient Mortgage

August 16, 2013

FHA Updates Loan Rules On Credit, Collections, and Judgments

A recent reader question asked, “I have an outstanding judgment in the amount of $8000. Can I still get a loan?” FHA loan rules are clear on the issue of credit, stating that past credit performance and patterns are considered one of the best indicators of whether an FHA loan application should be approved. But recently, the FHA has issued clarifications and updates to lenders on the subject of judgments, collections and other activities that could be considered negative credit data. According to FHA Mortgagee Letter 2013-24, Handling of Collections and Disputed Accounts, the FHA has amended its guidelines and policies for collections, disputed accounts, and judgments for most credit-qualifying FHA loan transactions. It applies to all affected FHA loans with case numbers assigned on or after October 15, | more...

August 15, 2013

FHA Extends Unemployment Foreclosure Avoidance Program Indefinitely

By Joe Wallace

The FHA has extended a program designed to help unemployed borrowers avoid FHA loan default and foreclosure. A recent FHA mortgagee letter announced, “the extension of the unemployment special forbearance policies detailed in Mortgagee Letter 2011-23, Unemployment Special Forbearance: Temporary Program Changes and Clarifications.” This program allowed FHA borrowers, “having trouble making their mortgage payments due to unemployment postpone or reduce their monthly mortgage payment while they look for work” according to a letter by Assistant Secretary For Housing Carol J. Galante, who also writes, “Beginning in August 2011, HUD required FHA servicers to offer suspended or reduced payments for at least 12 months or until the struggling borrower found a job.” That FHA loss mitigation program was set to expire August 1, 2013. But now, that program has been | more...

August 15, 2013

FHA Mortgage Insurance Rules Update

By Joe Wallace

The FHA rules for mortgage insurance changed when the FHA and HUD issued Mortgagee Letter 2013-04, which featured, “Revision of Federal Housing Administration (FHA) policies concerning cancellation of the annual Mortgage Insurance Premium (MIP) and increase to the annual MIP”. All of the scheduled changes to the MIP rules have taken place. Among the major features of those changed rules? According to the introductory paragraphs of the FHA/HUD mortgagee letter: “Consistent with FHAs ongoing efforts to strengthen the Mutual Mortgage Insurance Fund, FHA is: revising the period for assessing the annual MIP; removing the exemption from the annual MIP for loans with terms of 15 years or less and Loan to Value (LTV) ratios of less than or equal to 78 percent at origination; and increasing the annual MIP on | more...

August 14, 2013

FHA Loan Answers: Is There Ever an Automatic Rejection of an FHA Loan Application?

By Joe Wallace

FHA loan rules include certain “automatic” rejections of an FHA loan application. For most typical borrowers these factors may not be an issue, but it is a question that arises from time to time: what circumstances force an automatic rejection of an FHA loan application? Here’s one example from the FHA loan rulebook, based on FHA FICO score requirements: That table indicates that a borrower with a FICO score of less than 500 is not eligible for an FHA mortgage. But there are other circumstances which may also result in an automatic rejection of the loan application. HUD 4155.1 Chapter Four, Section A has a heading titled, “Mandatory Rejection of a Borrower” and states: “A borrower is not eligible to participate in FHA-insured mortgage transactions if he/she is suspended, debarred, | 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 8, 2013

FHA Loan Reader Questions: Minimum Employment Rules

By Joe Wallace

A reader asks, “My son-in law has been employed for the past two years, but only 19 months with the current employer. He is paid on a 1099. Another job opportunity has been offered by a different company, and different industry, but he will be making more money with this second company. He also will be paid via a 1099. Will he meet the employment requirement under these circumstances?” FHA loan rules for employment verification are found in HUD 4155.1. This document gives instructions to the lender for verifying employment, among many other things. According to HUD 4155.1, “The lender is required to verify the applicant’s employment history for the previous two years. However, direct verification is not required if all of the following conditions are met: the current employer | more...

August 5, 2013

FHA Loan Questions: Outstanding Judgments

By Joe Wallace

A reader asks, “I have an outstanding judgment in the amount of $8000. Can I still get a loan?” There are two very important considerations in situations like this, where the loan applicant has concerns about a credit issue blocking his or her approval for an FHA mortgage loan. One consideration is the FHA loan program’s rules and regulations. The other is the lending standards and requirements of the participating FHA lender. The FHA loan program is voluntary–that is to say that not all lenders choose to participate, and the ones that do have to abide by FHA minimum requirements. But lenders are not prevented from requiring higher standards as long as those standards are applied fairly and in accordance with Fair Housing laws. We can’t comment on what an | more...

August 2, 2013

FHA Loan Reader Questions: Does My FICO Score Qualify Me For An FHA Mortgage?

By Joe Wallace

A reader asks, “My credit score is 595 would I qualify to get an FHA loan?” This question comes up quite often. Technically speaking, FHA standards for borrowers with FICO scores between 500 and 579 allow the lender to approve a loan for 90% of the maximum financing limit on that transaction–that means FHA standards would require a 10% down payment. Borrowers with FICO scores below 500 are NOT eligible for FHA loans according to the FHA official site. But one thing that’s very important to remember about FHA loan standards for FICO scores is that A) your credit scores are NOT the only criteria used for loan approval and B) the lender is free to require higher FICO standards. Borrowers may be hard pressed to find a lender willing | more...

August 1, 2013

FHA No Cash Out Refinancing Loans With An Appraisal

By Joe Wallace

FHA refinance loans include an option described in the FHA loan rules as a No Cash-Out Refinancing Loan With An Appraisal. These loans have rules that govern all aspects of the loan from the amount of the maximum mortgage amount (see below) and how much a borrower can receive in cash at the closing of the loan (the borrower may not receive cash back in excess of $500 at closing according to HUD 4155.1 Chapter Three Section B). How much is the maximum FHA loan amount for no cash-out refinancing loans? According to HUD 4155.1, “The maximum mortgage for a no cash out refinance with an appraisal (credit qualifying) is the lesser of the 97.75% Loan-To-Value (LTV) factor applied to the appraised value of the property, or existing debt.” Additionally, | 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...