Articles Tagged With: FHA Handbook

July 16, 2015

FHA Loans And Federal Law

We’ve been discussing FHA loans, the Fair Housing act, and other federal laws lately. There have been many changes to applicable federal law in recent times that can and do directly affect the mortgage lending process. It’s no surprise that the FHA single family home loan program, being created by the federal government, would lead the way in pro-consumer regulatory changes and set the example when it comes to requiring equal treatment for all qualified borrowers. But some of the most important federal laws and regulations aren’t brand new–they’ve been around for quite some time. Some have been further modified to make them more inclusive. The Fair Housing Act now includes language that protects people regardless of their gender identity, family status, sexual orientation and much more. FHA loan rules | more...

July 3, 2015

FHA Home Loans: Pre-Purchase Counseling, HECM Loan Counseling

By Joe Wallace

We often write posts that encourage borrowers to examine their pre-purchase counseling options before starting on the journey to apply for an FHA mortgage loan. We also write posts for eligible Home Equity Conversion Mortgage (HECM) loan applicants discussing HECM loan counseling. Some borrowers might wonder what the difference is between the two. There are some obvious differences. HECM loans are a type of refinancing loan for eligible borrowers aged 62 and older that requires no monthly payments and comes due when the borrower dies or sells the home. FHA single family home “purchase loans” are for borrowers looking to buy a home with an FHA guaranteed mortgage. So up front, many of the concerns a borrower has with a new purchase loan differ greatly than those for any refinance | more...

April 13, 2015

FHA Streamline Refinance Loan Applications: A Reader Question

By Joe Wallace

A reader asked us a question recently about applying for a refinance loan. “Do I mark “YES” on “Credit qualifying Streamline”?” The term, “credit qualifying streamline” refers in this case to an FHA streamline refinance loan that requires a credit check. HUD 4155.1 states the following about credit qualifying: “The purpose of the mortgage credit analysis is to determine − a borrower’s credit performance − a borrower’s capacity to repay the mortgage, and − whether or not the borrower has sufficient funds to close, and – limit collection actions or foreclosure. ” Furthermore, as part of this process, HUD 4155.1 states: “The lender must • verify the borrower’s identity, and • ask sufficient questions of the borrower to get a complete picture of the − borrower’s financial position − source | more...

April 6, 2015

FHA FICO Score Rules: A Reader Question About “Median Scores”

By Joe Wallace

A reader asks, “Would like to buy a home.. My current scores are 607 Experian, 579 TU, 554 EQ. Wifes scores are mid 500′s. Which score would be looked at.. I just paid off some collections so my score is not updated if its going to change. Should I wait another year before I apply or go for it. Would we have to put 3.5% down our salary is about 85k a year. Looking for a home in the range of 180k, also due to our low scores would we have a high rate?” The rules for FHA loan FICO score review are found in HUD 4155.1. Chapter Four, Section A is where you will find a heading titled, “Definition of Minimum Decision Credit Score”. The lender is instructed: “If | more...

August 12, 2014

FHA Loan Approval, FHA Loan Denial: The Process

By Joe Wallace

When you apply for an FHA loan, sometimes the hardest part is waiting to hear back from the lender that the loan has been approved and all can move forward. Did you know that FHA loan rules have a process for the lender to follow when the loan has been approved or denied? HUD 4155.1 has the guidelines and instructions to the lender for loan approval or rejection. Chapter One of this document has a section called Borrower Approval Or Rejection and tells the lender that, when the loan has been approved, there are a set of steps to be followed. The lender: • 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 | more...

May 8, 2014

FHA Loans Where The Seller Is A Family Member: A Reader Question

By Joe Wallace

A reader asks, “What is defined as a family member? My partner and I were told by our underwriter that we can only get a loan for 85% of the house’s value. The person we are purchasing from is a fourth cousin of my partner who wouldn’t be on the mortgage.” “The house’s appraisal value is significantly lower than expected. It’s replacement value is over 250k, but due to a glut of houses on the market and a lack of comparable in the area it was appraised at under 75k. It was appraised just higher than what the purchase price would be. Our loan officer has questioned the underwriter about this and they said family is family. Is there a definition of family put out by the FHA?” The sale | more...

April 23, 2014

FHA Loan Reader Questions: FHA Loan Foreclosures

By Joe Wallace

A reader asks, “How long does it take to foreclose an FHA loan ?” The FHA official site has much to say on this subject in general, but borrowers should know that FHA foreclosure times will vary by state. FHA.gov says, “Foreclosure processes are different in every state. If you are worried about making your mortgage payments, then you should learn about your state’s foreclosure laws and processes. Differences among states range from the notices that must be posted or mailed, redemption periods, and the scheduling and notices issued regarding the auctioning of the property.” There is an FHA foreclosure timeline, however, that can give some good general information in this area. The timeline is very general and the amount of time this process takes will definitely vary. According to | more...

April 18, 2014

FHA Loan Reader Questions: Complaints About Substandard Work

By Joe Wallace

A reader asks, “I am looking for how to report substandard work with FHA home loan and FHA inspection being done by pictures. I purchased my home in November of 2013 and still have not received the needed corrections on the home that in turn is adding more cost to me for repairs.” There are several possibilities based on the reading of this question. Is the reader complaining about an FHA appraisal that had required corrections that never took place? Or does the reader’s mention of an “FHA inspection” mean that the borrower paid for a home inspection that made recommendations that were never carried out to the borrower’s satisfaction? In the case of the latter, if the borrower contracted for home repairs based on the recommendation of a privately | more...

February 26, 2014

FHA Loan Reader Questions: Roof Requirements

By Joe Wallace

A reader asks, “For an FHA loan, are there roof requirements on a detached garage or do the requirements solely apply to the roof over the home?” FHA loan rules for property analysis can be found in HUD 4150.2. Under the “Roof” section we find the following: “The covering must prevent moisture from entering and must provide reasonable future utility, durability and economy of maintenance. When re-roofing is needed for a defective roof that has three layers of shingles, all old shingles must be removed before re-roofing…The appraiser must observe the roof to determine whether the deficiencies present a health and safety hazard or do not allow for reasonable future utility.” The rules do not make a distinction between attached garages or detached garages, but the line about future utility | more...

January 27, 2014

FHA Loan Answers: Can A Parent Buy A Home With A Child Using An FHA Loan?

By Joe Wallace

Lots of parents want to help their children get a leg up in the early stages of adult life. Some parents pay for their children to go to college, some buy cars, and still others buy homes for their children. Can a parent and child apply for an FHA mortgage together even if the parent doesn’t plan on living in the home? FHA loan rules found in HUD 4155.1 explain what is possible and what is not possible for an FHA loan when it comes to applications with “non-occupying co-borrowers”. In such cases, Chapter Two Section B of HUD 4155.1 says, “A non-occupying borrower transaction involves two or more borrowers where one or more of the borrower(s) will not occupy the property as his/her primary residence. When there are two | more...