Articles Tagged With: FHA Loan Application

November 4, 2013

FHA Loan Income Requirements: A Reader Question

A reader asks, “I have a question about the FHA 3.5 percent down program. I know my scores are all in the high six’s lowest 637 highest 677 , I was told that I qualify for the loan but when push came to shove, I was told I needed my net income to be almost 4 times what i make now. What is or are the financial requirements to qualify for the program? Also, I am self employed and have been for over 5 years. I presume the rules vary from lender to lender, state to state, etc…I need to know if this lender purposely made up this story just to ‘show me the door’ so to speak.” We can’t speak for a lender’s intentions, so we’ll skip the last | more...

October 31, 2013

FHA and HUD Update Loss Mitigation Instructions for Lenders

By Joe Wallace

Borrowers who get into financial trouble may have difficulty paying their monthly FHA mortgages. In all cases, the FHA encourages borrowers to get in touch with the lender as soon as possible to make arrangements to avoid going into delinquency and default on an FHA loan. Borrowers who do this have the most options, and find many more doors open to them. Borrowers who wait until it’s too late to prevent going into default may have few choices. What is the lender’s responsibility when a borrower starts missing payments and is in danger of foreclosure? The FHA and HUD have issued updated guidance telling lenders what must be done and what the acceptable course of action is for the financial institution in such cases. These updates were published in FHA | more...

October 31, 2013

FHA Loan Mortgage Insurance: A Reader Question

By Joe Wallace

A reader asks, “Veterans are not required to purchase mortgage insurance with a VA loan. Is there a way that a veteran can be exempt from the mortgage insurance premium? The mortgage insurance is very high.” The short answer to this reader question is “no”. FHA loans are not designed the same way that VA home loans are–FHA loans require a Mortgage Insurance Premium (MIP), where VA home loans do not. Veterans should consider their options between VA home loans and FHA mortgages carefully. In some cases a veteran or currently serving military member could choose an FHA loan over a VA mortgage, for a variety of reasons. But a borrower faced with these choices should make the most informed decision possible. FHA home loans do have certain similar features | more...

October 29, 2013

FHA Loans and Trust Income

By Joe Wallace

FHA home loan applications require the borrower to list income and job details so that the lender can accurately determine a borrower’s debt-to-income ratio. For this purpose, FHA loan rules say that only income that is likely to continue can be used–the borrower’s wages, tips, bonuses and other earnings may be counted if they meet FHA criteria for “stable and reliable” and “likely to continue”. One source of income for some borrowers involves a trust fund–can trust income be used as verifiable income for an FHA mortgage loan? The answer is yes, but only if the trust income meets FHA loan minimum standards as described in HUD 4155.1, which includes the following guidance to lenders when reviewing trust fund income listed on a borrower’s application, found in a section called | more...

October 24, 2013

FHA Special Forbearance For Unemployed Borrowers Extended

By Joe Wallace

Earlier this year, the FHA indefinitely extended its special forbearance programs for unemployed borrowers. In a mortgagee letter titled, “Extension of Unemployment Special Forbearance” the agency has created an open-ended policy as described below: “The policies in Mortgagee Letter 2011-23, (Unemployment Special Forbearance: Temporary Program Changes and Clarifications) relating to special forbearances for unemployed borrowers are hereby extended until amended, superseded, or rescinded.” The policies mentioned above also include a reference to an earlier Mortgagee Letter. “In ML-2000-05, FHA provided mortgagees with additional guidance concerning the Loss Mitigation Program that all mortgagees must follow, when applicable, to reduce FHA insurance losses in those circumstances, as determined by the mortgagee, where delinquent mortgagors might be able to find an alternative to foreclosure.” “ML 2002-17 amended ML 2000-05 to allow mortgagees to | more...

October 24, 2013

FHA Updates Guidance For Superstorm Sandy Repairs Under 203(k) Loan Program

By Joe Wallace

Just as the government shutdown crisis was unfolding, the FHA was preparing an update to policies that affect borrowers who need to apply for FHA 203(k) mortgages as part of their recovery from Super Storm Sandy. Unfortunately, that press release likely got overlooked by many because of the government shutdown issue. That update, as described in FHA Mortgagee Letter 2013-36, titled, “Eligible Properties in Presidentially Declared Major Disaster Area Super Storm Sandy for 203(k) insured mortgages” describes some very important updates. These updates specifically pertain to those seeking FHA 203(k) loans in areas affected by Sandy–they do not apply to other borrowers outside this area. According to the mortgagee letter, “Handbook 4240.4 Section 1-4 currently states that, homes that have been demolished, or will be razed as part of the | more...

October 23, 2013

FHA Loan Questions: Are FHA Loans Available For Condo Units?

By Joe Wallace

When you think about your choices for buying a home using an FHA mortgage, it’s easy to forget that all types of properties can be considered for purchase–not just a typical house in the suburbs. The FHA does allow loans for condo units, and there’s a section of the FHA loan rulebook (HUD 4155.1) that discusses the requirements for this type of purchase. According to HUD 4155.1 Chapter Four Section B, “FHA must approve condominium projects before a mortgage on an individual condominium unit can be insured”. But what does the FHA define as a “condo”? How are they different than other types of housing? According to FHA loan rules: “A condominium is a multi-unit project that • has individually-owned units, which may be either − attached in one or | more...

October 17, 2013

Government Shutdown Ends, FHA Loans Continue

By Joe Wallace

The government shutdown is over, following votes in the House and the Senate on Wednesday and a signature by the President immediately following. But one thing overlooked by some during the shutdown crisis–FHA home loans did continue as normal during the crisis, even if some borrowers who needed IRS confirmation of certain tax documentation did experience some inconvenience while that issue was being sorted out. The IRS was a casualty of the shutdown, with only a small percentage of its work force available for duty under the partial shutdown. In other sectors, government buildings sometimes closed to the public but kept operating for behind-the-scenes work. But overall, FHA loans kept moving forward during the entire length of the shutdown. The reason we write about that here is because while the | more...

October 10, 2013

FHA Loans For Building on the Borrower’s Own Land Part Two

By Joe Wallace

A reader asked us recently about FHA loans for building on land the borrower already owns: “…My end goal would be to demolish (the original) house and build a completely new one in its place for us to all reside in…what I am wondering is does this kind of demolish and rebuild qualify for FHA loans and with me having to move to do this what kind of eligibility would I have for FHA loans.” The rules for FHA loans where construction would happen on land the borrower already owns can be found in HUD 4155.1, Chapter Two. FHA loan rules allow new purchase loans for single family homes when the borrower wants to build on his or her own land. According to Chapter Two, “A borrower is eligible for | more...

September 30, 2013

FHA Loan Modification Trial Payment Plans-What If The Borrower Fails?

By Joe Wallace

Recently the FHA changed some of its policies related to loss mitigation and foreclosure avoidance on FHA guaranteed home loans. In our last look at these changes, we examine what the latest guidance from the FHA and HUD has to say about borrowers in financial difficulty who cannot or do not successfully navigate a Trial Payment Plan. Borrowers and lenders are advised in Mortgagee Letter 13-32, “If a mortgagor fails to successfully complete a Trial Payment Plan under a Loan Modification or FHA-HAMP, pursuant to 24 C.F.R. § 203.355, mortgagees must still re-evaluate the mortgagor’s eligibility for other appropriate Loss Mitigation Options. If the mortgagor’s circumstances have not changed, the mortgagee must evaluate the mortgagor for FHA Loss Mitigation Home Disposition Options prior to initiating foreclosure.” While the Trial Payment | more...