Articles Tagged With: FHA Energy Efficient Mortgage

June 24, 2013

FHA Loan Reader Questions: Down Payment Assistance

A reader asks, “I want to move and was qualified for an FHA but needed to know if there is any programs to help assist with the down payment. I know there is an option for sellers to offer 6% sellers assist but is there any else to cover the rest?” The FHA itself does not offer any type of down payment assistance program. In the past there have been down payment assistance programs offered on a state or local level, but some federal laws have banned certain types of down payment assistance. Others not banned by federal law would be obliged to meet FHA loan rules as to the source of down payment money (see below). What does this mean? FHA loan rules require all borrowers to make a | more...

June 18, 2013

FHA Loan Approval or Rejection: The Rules

By Joe Wallace

FHA loan rules cover a lot of ground, including specific procedures that are supposed to happen when an FHA single-family mortgage loan is approved or denied. Did you know the FHA loan rules, listed in HUD 4155.1, give instructions on how approvals and rejections are handled? Those rules are found in Chapter One, Section A of HUD 4155.1. When an FHA loan application is approved, the rules instruct the lender: “When a borrower is approved, the Direct Endorsement (DE) underwriter • records the results of the credit analysis on the HUD-92900-LT, FHA Loan Underwriting and Transmittal Summary • enters any modification of the mortgage amount or approval conditions under “Underwriter Comments” on the form, and • approves the borrower and authorizes closing, if the case is a DE case.” The | more...

June 14, 2013

HUD Updates Good Neighbor Next Door Policy

By Joe Wallace

The Department of Housing and Urban Development has updated its policy on the Good Neighbor Next Door program, which offers homes at a major discount to qualifying borrowers. According to HUD, the program “offers HUD owned single family (one-unit) homes to eligible participants at a 50% discount” to “law enforcement officers, teachers and firefighters/emergency medical technicians and who meet all other requirements of the program”. The HUD Good Neighbor Next Door program is available to those who want to purchase using an FHA insured mortgage. Recently the FHA and HUD have issued guidance about the Good Neighbor Next Door Program, which includes clarification on the mortgage insurance premium for the loan. According to FHA Mortgagee Letter 2013-20, “The purpose of this Mortgagee Letter is to: Clarify that the mortgage insurance | more...

June 13, 2013

FHA Loan Rules on Verifiable Income: Commissions

By Joe Wallace

FHA loans require the lender to verify the applicant’s employment, credit history, and income. When it comes to income verification, the FHA requires the lender only to use “verifiable income” when calculating a borrower’s creditworthiness. When an FHA loan applicant has ordinary hourly or salary income, it’s simple to establish what verifiable income might be using pay stubs, income tax reports, and other documentation. But what about when a mortgage loan applicant has a job that pays a commission instead of a salary? FHA loan rules have provisions for commission-based income, as described in HUD 4155.1 Chapter Four. There, you’ll find the following: “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 | more...

June 13, 2013

FHA Loan Reader Questions: Minimum Employment

By Joe Wallace

A reader asks, “Info to qualify FHA loan–I only have one year proof of taxes (W2). Do I need to finish this year to try to qualify?” While this question isn’t quite clear, it seems safe to assume the reader wants to know whether he or she meets FHA loan approval standards for an FHA mortgage. Let’s examine what FHA loan rules have to say about minimum employment history. Those rules can be found in HUD 4155.1 Chapter Four Section D, which says: “To be eligible for a mortgage, FHA does not require a minimum length of time that a borrower must have held a position of employment. However, the lender must verify the borrower’s employment for the most recent two full years, and the borrower must • explain any | more...

June 7, 2013

FHA Loan Questions: Applying for an FHA Loan With No Credit Card History

By Joe Wallace

A reader asks, “I have a credit score of 662, but I have no outstanding credit. I do not have any credit cards open, nor a car loan (loan was open in 2003)I have 0 installment loans, 0 credit cards, 0 retail cards. How can I get approved for a home loan? I have had credit in the past, but closed my accounts when I moved out of the country in 2001 and never got any credit cards again.” FHA loan rules address this in HUD 4155.1 Chapter Four, Section C. That section says in part, “Past credit performance is the most useful guide to • determining a borrower’s attitude toward credit obligations, and • predicting a borrower’s future actions. Borrowers who have made payments on previous and current obligations | more...

June 5, 2013

FHA Loan Answers: First Time Homebuyers

By Joe Wallace

A reader asks, “I have a Chapter 7 bankruptcy a yr ago w/a score 589 and as a veteran honorable recieving SS benefit income of $735.00/month, and together with my wife, employed 5/yrs with an income is $1,920.00 a month, with a score 580. We have been renting for 5yrs without missing or late payments with the same landlord in Fla. Can we qualify as a first time home buyer?” There are two basic issues related to this reader question. The reader asks if there’s a chance to qualify “as a first time home buyer”. The FHA does not, contrary to popular belief, require applicants to be first time home buyers in order to get an FHA home loan. By the same logic, there is no benefit or preference given | more...

June 3, 2013

FHA Credit Score Rules

By Joe Wallace

We’ve gotten a lot of reader questions lately about FHA loan standards for credit, FICO scores and more. Many readers want to know what the FHA FICO score requirements are and whether their credit reports are good enough to qualify for an FHA mortgage. There are two important things to understand about FHA loan credit requirements. The FHA loan rules spell out the minimum FICO scores required by the FHA; those minimums are found in HUD 4155.1 Chapter Four, Section A. According to the FHA, “The table below describes the relationship between the borrower’s minimum credit score and the maximum loan-to-value (LTV) ratio for which he/she is eligible.” The FHA minimum for maximum financing is listed in the table above at 580. But many borrowers don’t understand that the FHA | more...

June 3, 2013

FHA Loan Reader Questions: Bankruptcy Issues

By Joe Wallace

A reader asks, “I recently completed a debt reorganization on ch 11 bankruptcy. My plan is 5 years. I will not be discharged until then (5 years).” “However, I would like to refinance my mortgage loan. my credit score is bad because I am in bankruptcy for the next 5 years. Can I refinance ? Can a FHA loan help me and would they refinance my existing loan?” FHA loan rules have plenty to say about bankruptcy issues. For example, in HUD 4155.1 Chapter Four, we find the following: “A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have elapsed since the date of the discharge of the bankruptcy. During this time, the borrower must have • re-established good | more...

May 30, 2013

FHA Loan Credit Standards

By Joe Wallace

When applying for an FHA home loan, many borrowers are in the dark about credit score requirements and other issues related to FICO scores in general. We recently answered a reader question about FHA loan credit requirements and now is a good time to review FHA policy on FICO scores. The FHA requires the lender to use an available credit score to determine whether or not the borrower is eligible for an FHA home loan. The FHA has rules for interpreting or using FICO scores from credit reports. According to the FHA Frequently Asked Questions list on the official site: “When the credit report reflects: • 3 credit scores (one from each repository) – the middle score is used • 2 credit scores – the lower of the two scores | more...