Articles Tagged With: FHA Loan Application

March 17, 2014

FHA Loan Rules: Title Issues For Non-Borrowing Co-Owners

There are plenty of situations that come up when more than one person wants to borrow on an FHA home loan, but there are just as many circumstances where two people may want to own a property purchased with an FHA mortgage, but only one of the two is applying for the loan itself. FHA loan rules for this are found in HUD 4155.1 Chapter Four under the heading, “Title Issues Regarding Non- Borrowing Spouses or Other Parties in Interest”. The rules here state: “If two or more parties have an ownership interest in the property, but only one of the parties is applying for the loan (and credit qualifies for the loan on his/her own), it is not required that the non-applicant individual(s) execute the mortgage note and security | more...

February 21, 2014

FHA Loan Reader Questions: Closing Costs Paid By The Seller

By Joe Wallace

A reader asks, “What portion FHA’S closing costs that the buyer cannot pay that must be paid by the seller?” A look at HUD 4155.1 revealed no language that included a requirement for the seller to pay closing costs on behalf of the borrower for an FHA home loan. There IS language in FHA loan rules saying that the borrower cannot be charged certain fees or expenses such as the lender’s legal fees for retaining a lawyer. FHA loan rules in Chapter Five, Section A of HUD 4155.1 also mention the following: “If the seller pays the broker fee as part of the sales commission, it is not considered an inducement to purchase, or part of the seller contributions limitation, as long as the seller is paying only the normal | more...

February 18, 2014

FHA Loan Reader Questions: Credit History Issues

By Joe Wallace

A reader asks, “I meet the income and credit score qualifications for an FHA loan, however I have two collection accounts on my credit report. These accounts were paid in full eight months ago. In addition, I had two credit card accounts 30 days late approximately a year ago. These were remedied within a reasonable time, yet they show on my credit report. I would like to add that these delinquent payments were due to a medical illness that left me disabled.” “I recently applied with a lender for an FHA loan and was told that I did not qualify because of my payment history. I read that, ‘a collection is minor in nature and usually does not need to be paid-off as a condition for loan approval’. If these | more...

February 5, 2014

FHA Loan Income Requirements–Is There A Minimum? A Reader Question

By Joe Wallace

A reader asks, “My credit score is 720 and is my first time to buy home , what is the minimum income to qualify to FHA or another Government loan?” There is no minimum income requirement for FHA home loans. Instead, the borrower’s income is analyzed and compared with the amount of the applicant’s monthly financial obligations. A calculation known as the debt-to-income ratio is used to qualify the borrower. According to the FHA loan rules found in HUD 4155.1, “When computing the debt-to-income (DTI) ratio, the lender must include the following recurring obligations: • monthly housing expense, and • additional recurring charges extending ten months or more, such as − payments on installment accounts − child support or separate maintenance payments − revolving accounts, and − alimony.” The rulebook | more...

February 4, 2014

FHA To Widen Acceptance Of Electronic Signatures On Home Loan Documents

By Joe Wallace

The FHA and HUD have issued a press release announcing a wider acceptance of electronic signatures on FHA loan documents. According to HUDNo.14-11, the FHA is granting “expanded authority to lenders to accept electronic signatures (e-Signatures) on documents associated with mortgage loans. The new policy allows e-Signatures on origination, servicing, and loss mitigation documents, as well as FHA insurance claims, REO sales contracts and related addenda. Current FHA policy allows for electronic signatures only on third party documents such as sales contracts and other documents not controlled by the lender” according to the press release. “By extending our acceptance of electronic signatures on the majority of single family documents, we are bringing our requirements into alignment with common industry practices,” said FHA Commissioner Carol Galante in the release. She adds, | more...

January 31, 2014

FHA Loan Occupancy Rules: A Reader Question

By Joe Wallace

A reader asks, “With a FHA Arm 5/1 or Section 251 loan, how long do I have to live in the house before I can sell it?” This may seem like a tricky question. FHA loan rules for single family home loans found in HUD 4155.1 do list occupancy requirements. According to Chapter Four: “At least one borrower must occupy the property and sign the security instrument and the mortgage note in order for the property to be considered owner-occupied. FHA security instruments require a borrower to establish bona fide occupancy in a home as the borrower’s principal residence within 60 days of signing the security instrument, with continued occupancy for at least one year.” But that rule says nothing about the borrower’s ability to sell the property. Borrowers are | more...

January 30, 2014

FHA Loans, Credit Reports, And Identity Theft

By Joe Wallace

One of the most oft-repeated bits of advice related to FHA home loans or refinance loans is that it’s best to start early–at least a year in advance–when planning for an FHA loan application. One of the reasons to start early involves the length of time it can take to check your credit report to learn your credit score and to make sure there’s no erroneous data or evidence of identity fraud on your report. With recent headlines about credit card data being stolen from major retailers, this advice couldn’t be more helpful. The Consumer Financial Protection Bureau (CFPB) is urging customers of “big box” retailers recently in the news for data breaches and hacking problems to check their credit card activity and credit reports for signs of fraud or | more...

January 24, 2014

Can FHA Home Loan Closing Costs Be Financed? A Reader Question

By Joe Wallace

A reader asks, “I have read in several places on the web that it is possible to finance your closing costs into a FHA loan. However, many of these sources are at least a couple of years old. Is this possible?” To start, let’s examine what the FHA official site has to say about FHA loans and closing costs. At www.HUD.gov on the page titled Let FHA Loans Help You, we find the following: “FHA might be just what you need. Your down payment can be as low as 3.5% of the purchase price, and most of your closing costs and fees can be included in the loan. Available on 1-4 unit properties.” Some closing costs may be financed, some may be paid by the seller within the boundaries of | more...

January 17, 2014

FHA Minimum FICO Credit Score: A Reader Question

By Joe Wallace

A reader asks, “I have Bankruptcy discharged June 1 2011. I do not have lots of credit. Have small inheritance from mother. I Want to purchase small house in Cleveland, Georgia. I have joined Equifax (663), TransUnion (718) and Experian (638). When I access each one has a score different than the other credit reporting agency. How can I determine my creditworthiness?” FHA loan rules say that in general, when a FICO score is available, the lender is required to use it to help determine a borrower’s creditworthiness. The credit score alone doesn’t tell the whole story–there are other factors that play a part in whether or not an FHA loan is approved–but it does play an important role The instructions for the lender on how to process credit score | more...

January 15, 2014

FHA Loan Assumptions: For Qualified Borrowers

By Joe Wallace

Yesterday we discussed FHA loan assumption policies—FHA loans are assumable, provided the lender can determine that the proposed new owner is able to financially qualify for the mortgage. According to HUD 4155.1 Chapter Seven, the following applies to all FHA home loans subject to laws affecting loans closed in 1989 and after: “Under the HUD Reform Act of 1989, mortgages closed on or after December 15, 1989 require credit qualification of those borrowers wishing to assume the mortgage. The creditworthiness review requirement spans the life of the mortgage. This requirement applies to both those borrowers who • take title to a property subject to the mortgage without assuming personal liability for the debt, and • assume and agree to pay the mortgage.” FHA loan rules state that any mortgage falling | more...