Articles Tagged With: FHA Loan Application

September 27, 2013

FHA Loans, Credit Scores, and Your Repayment History

One common type of question we’ve been asked as of late has to do with a borrower’s chances at getting an FHA loan approved in spite of bad credit, past financial difficulty, or a combination of both. There are many important things to understand about credit, but one of the most important for any borrower interested in an FHA should know about? The FHA’s attitude towards on-time bill payment, past financial difficulty, and related issues. The FHA loan rulebook, HUD 4155.1 says in Chapter Four, Section C, “Past credit performance is the most useful guide to • determining a borrower’s attitude toward credit obligations, and • predicting a borrower’s future actions.” That’s a basic general guideline, as is the next line from Chapter Four. “Borrowers who have made payments on | more...

September 24, 2013

FHA Updates Foreclosure Prevention Program

By Joe Wallace

On Friday September 20, 2013, the FHA issued a Mortgagee Letter that updates its Loss Mitigation program options. The new Mortgagee letter, ML 2013-32, overrides a previous mortgagee letter issued in 2012. The changes are designed to, “help reduce the number of full claims against FHA’s Mutual Mortgage Insurance Fund by assisting a greater number of distressed mortgagors in retaining their homes; thus, Mortgagee Letter 2012-22 will remain effect until servicers are able to fully implement this Mortgagee Letter.” The Loss Mitigation Program was established by the FHA in 1996, “to ensure that distressed FHA mortgagors were afforded opportunities to retain their homes and to assist in minimizing losses to FHA’s Mutual Mortgage Insurance Fund”. The most recent changes include a variety of program modifications. Keep in mind that the | more...

September 16, 2013

FHA Loan Credit Questions–What Affects Your Chances Besides FICO Scores?

By Joe Wallace

A reader asks a question about FHA credit requirements, and starts out by quoting one of our past replies to a reader question about FHA credit rules. Here’s the quote: “FICO scores are not the only issue examined on a credit application. To infer that simply by raising FICO scores for the loan application in question, the loan might be approved with the minimum down payment in this case would be misleading–there are many factors that affect your credit worthiness in the eyes of a lender, FICO scores are just one of those factors…..” The reader asks, “Which factors exactly affect one’s creditworthiness in the eyes of a lender besides FICO scores?” There are many factors that could affect a lender’s view of an individual borrower’s creditworthiness. Some are known | more...

September 12, 2013

FHA HECM Program Changes: Mandatory Obligations

By Joe Wallace

Recently the FHA and HUD announced changes to the FHA Home Equity Conversion Mortgage, also known as HECM. Those changes include new guidelines for the maximum amount of HECM loan funds that can be transferred to the borrower at the time the HECM loan closes or within the first 12 months of the HECM loan, as well as “what fees and charges are considered Mandatory Obligations” according to the new rules. According to FHA mortgagee letter 2013-27, a new “Single Disbursement” lump sum payment may be possible for borrowers applying for both adjustable and fixed interest rate HECM loans applicable for all FHA HECM loan case numbers assigned on or after September 30, 2013. “This payment option will be limited to a single disbursement at loan closing which cannot exceed | more...

September 10, 2013

HUD Announces Changes To FHA Home Equity Conversion Mortgage Program

By Joe Wallace

The FHA and HUD have announced changes to the FHA Home Equity Conversion Mortgage program designed to manage risks and make the program more secure. According to a press release issued recently, the new rules will, “manage risk associated with the Federal Housing Administration’s (FHA) reverse mortgage or Home Equity Conversion Mortgage (HECM) Program. This is part of the Department’s continuing effort to reform, strengthen and protect FHA’s Mutual Mortgage Insurance (MMI) Fund” “The changes being announced today will realign the HECM program with its original intent which will aid in the restoration of the MMI fund and help ensure the continued availability of this important program,” said Federal Housing Commissioner Carol Galante. “Our goal here is to make certain our reverse mortgage program is a financially sustainable option for | more...

What you should know about FHA 203(h) Loans For Disaster Victims

September 5, 2013

FHA Loan Credit Score Issues: A Reader Question

By Joe Wallace

A reader asks, “My husband and I are working on improving our credit, but still have low scores, mine being in the 530s and his in the 640s. Although we’re working on improving it, we aren’t to our ideal score yet…Does anyone have suggestions on lenders that will work with lower credit scores AND a lower down payment? (~5% based on the houses we’ve looked at so far).” Borrowers who find themselves in situations like these should do one very important thing before going any farther–contact the FHA directly by calling 1-800 CALL FHA and ask for a referral to an FHA-approved housing counselor. FHA approved housing counselors can offer advice and suggestions for improving creditworthiness before filling out an FHA loan application, and give advice on how to best | more...

September 4, 2013

FHA Loans, Bankruptcy, and Back To Work

By Joe Wallace

A reader asks, “I heard it is no longer required to wait three (3) years after a foreclosure before getting an FHA loan, true? Three years will be October 2014 but I’d rather not wait that long, we’d like to get a house July 2014. I am still in Chapter 13 bankruptcy scheduled to be over December 2014.” “I have been on my job two years, make plenty of money, and have been on time with my chapter 13 payments. I have a credit score of 650 and building. I’ll have about 10% down. Do you think it would be possible to get an FHA loan in July 2014 (3 months before the 3 year mark)?” In the past several weeks, we’ve written about the new FHA program called Back | more...

September 3, 2013

Qualifying For an FHA Loan, “Minimum Income”, and Your Monthly Debt

By Joe Wallace

One common misconception about FHA home loans is that there’s a set, minimum income amount a borrower must have in order to qualify for the home loan. This is not true. The FHA does not set minimum income requirements or have rules about how much a borrower can make before he or she is no longer eligible to apply for an FHA mortgage. In short, the actual dollar amount of your income doesn’t matter. What does is whether you can afford the loan based on the amount of debt you have versus the amount of money you bring in every month. Your lender is required to calculate your debt to income ratio to make sure you can afford the FHA loan along with all your other financial obligations. Here’s an | more...

August 30, 2013

FHA Loan Short Sale Eligibility Rules

By Joe Wallace

We get many questions about borrowers who want to apply for an FHA loan in the wake of a short sale. What do FHA loan rules, as described in HUD 4155.1, say about applying for an FHA mortgage after a short sale? Much depends on whether your previous loan was current or delinquent when the short sale occurred. Borrowers who were current on all mortgage payments at the time of the short sale may find a lender willing to work with them based on HUD 4155.1 Chapter Four Section C, which states: “A borrower is considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage, all • mortgage payments on the prior mortgage were made within the month due for the 12-month | more...

August 28, 2013

FHA Loan Reader Questions: The Nature of FHA Loans

By Joe Wallace

A reader asks, “I am currently buying a home on a land contract and was hoping maybe I could get it run through FHA the pay off is I think around 19,000.00 it is a trailer with a garage on it. My credit isn’t good enough to run it through the bank. I’m hoping you can help me. I have been paying on it for about 4 & 1/2 years. Please if you can help me I would appreciate it. I live off SSI because I became disabled in 1995, and have been drawing my SSI since 1996. Thank you for your time and consideration.” This reader question is a good reminder that there are still plenty of myths floating around out there about FHA mortgages and the nature of | more...