Articles Tagged With: FHA Loan Application

July 31, 2013

FHA Loan Answers: Alimony and Child Support as Verifiable Income

FHA loan rules say that a borrower’s income must be verified in order for it to count when the lender makes debt-to-income ratio calculations necessary for approving (or denying) the mortgage loan. Verifiable income is defined basically as earnings that are stable, reliable, and likely to continue. A borrower’s full or even part-time employment would count in most cases. But the money a borrower makes, for example, by selling items on eBay, would likely not pass the “stable” or “likely to continue” requirements. When it comes to non-job “income” such as child support or alimony payments, FHA loan rules make provisions that allow this income to be counted under the right conditions. A borrower does not have to declare child support income under the Fair Housing Act, but it is | more...

July 26, 2013

FHA Loan Downpayment Sources: A Reader Question

By Joe Wallace

A reader asks, “Can I use money from a residential loan or my thrift savings towards a FHA downpayment and closing costs?” The rules that cover down payment funds for FHA insured mortgages are found in HUD 4155.1, Chapter Five. That chapter begins by stating, “Under most FHA programs, the borrower is required to make a minimum downpayment into the transaction of at least 3.5% of the lesser of the appraised value of the property or the sales price. Additionally, the borrower must have sufficient funds to cover borrower-paid closing costs and fees at the time of settlement. Funds used to cover the required minimum downpayment, as well as closing costs and fees, must come from acceptable sources and must be verified and properly documented.” Specifically, the reader wants to | more...

July 15, 2013

FHA Loan Reader Questions: Mortgage Insurance and Down Payments

By Joe Wallace

A reader asks, “If a buyer is making a 25% down payment on a home purchase, is the mortgage insurance premium mandatory? This down payment is for a home sale that is appraised for the sale price or higher.” FHA loan rules for mortgage insurance premiums changed in early 2013. There were several changes, but one of them was to eliminate the exemption for mortgage insurance for those making a large down payment. According to the FHA/HUD official site, FHA mortgagee letter 2013-04 “rescinds the automatic cancellation of the annual MIP collection” announced in previous mortgagee letters (ML) and also “rescinds ML 2011-35, under which mortgages with terms of 15 years or less and LTVs of less than or equal to 78 percent at time of origination were exempt from | more...

July 9, 2013

FHA Cash-Out Refinancing Loan Amounts

By Joe Wallace

When borrowers choose the refinance a home loan using an FHA cash-out refinancing loan, many come to the application process not sure how much they can apply to borrow. For FHA cash-out refinance loans, there are specific rules found in HUD 4155.1 that govern the amount of the loan. There’s no single, set dollar amount limit placed on cash-out refinancing. Instead, the FHA/HUD provide a set of guidelines that determine the maximum loan-to-value percentage based on how long the borrower has owned the home and lived there as the principal residence, and how much the home has been valued at based on a new FHA appraisal. HUD 4155.1 Chapter Three Section B states, “If the property has been owned by the borrower as his/her principal residence for 12 months or | more...

July 8, 2013

FHA Loan Rules For Earnest Money

By Joe Wallace

In previous posts, we’ve discussed the rules for FHA loans when it comes to the sources of your required minimum cash investment or downpayment. But did you know the FHA has rules concerning the source of your earnest money, too? In some cases the source of your earnest money may be scrutinized in a manner similar to the verifications required for down payment funds. FHA loans require downpayments from approved sources such as personal savings, cashed-in investments, bona fide gifts that meet FHA loan rules, etc. So what are the rules for earnest money paid for a home to be purchased with an FHA mortgage? According to the FHA loan rules found in HUD 4155.1 Chapter Five, Section B, “The lender must verify and document the deposit amount and source | more...

July 3, 2013

FHA Loans: Broker and Agent Fees

By Joe Wallace

As with many other aspects of the FHA home loan process, there are rules and regulations that cover broker and real estate agent fees. Those rules are spelled out in Chapter Five of HUD 4155.1. In a section titled “Settlement Requirements Needed To Close” we find detailed rules on how such fees can be issued and paid. For example, FHA loan rules require real estate broker fees to be included in the HUD-1 settlement statement. The specific rule says, “If a borrower is represented by a real estate broker and must pay any fee directly to the broker, that expense must • be included in the total of the borrower’s settlement requirements, and • appear on the HUD-1 Settlement Statement.” The rules are different when the seller is paying a | more...

July 3, 2013

FHA Loan Reader Questions: FHA Rules on “Flipping”

By Joe Wallace

A reader asks, “Hello, can you help us with a couple of questions please. What does the FHA consider as a “Flip-it” property? How many days does this involve from an original sale of a property?” “Flipping” is defined by the FHA as the sale of a home purchased with an FHA loan within 90 days of the original sale. Under normal circumstances the FHA has anti-flipping rules in place that forbid this practice with homes purchased with an FHA-insured mortgage. But the FHA issued a waiver to these rules back in January 2010. It has since been extended more than once and the current waiver of FHA anti-flipping rules doesn’t expire until 2014. According to a November 2012 edition of The Federal Register, “FHA is extending the availability of | more...

July 2, 2013

FHA Loans and the Cash Needed At Closing Time

By Joe Wallace

When it’s time for you to close your FHA home loan, you’ll be required to pay cash up front for certain items not to be included in the loan amount. These items include Up Front Mortgage Insurance Premiums or UFMIP, and the down payment. But there’s also an issue related to any “per diem interest” that might occur if the loan did not close on the original date agreed upon. When it comes to that per diem interest, borrowers should know the FHA loan rules (spelled out in HUD 4155.1) governing the money paid at closing time. Chapter Five of HUD 4155.1 states: “The lender must use a minimum of 15 days of per diem interest when estimating prepaid items on the Good Faith Estimate (GFE). To reduce the burden | more...

June 28, 2013

FHA/HUD Announce Relief For Alaska Flood Victims

By Joe Wallace

The FHA and HUD have issued a press release announcing relief for victims of recent flooding in Alaska. According to HUDNo.13-100, released Thursday June 27, 2013, “U.S. Housing and Urban Development Secretary Shaun Donovan today announced HUD will speed federal disaster assistance to the State of Alaska and provide support to homeowners and low-income renters forced from their homes due to recent flooding.” This assistance came after the President made an announcement declaring parts of Alaska affected by the flooding to be federal disaster areas. According to the press release, “President Obama issued a disaster declaration for Alaska Gateway Regional Educational Attendance Area, Copper River Regional Educational Attendance Area, Lower Yukon Regional Educational Attendance Area, Yukon Flats Regional Educational Attendance Area and Yukon Koyukuk Regional Educational Attendance Area.” The federal | more...

June 26, 2013

FHA Loan Rules For Down Payments: Gift Funds and Approved Sources of Those Funds

By Joe Wallace

In a recent post we examined the FHA loan policy about down payments for new purchase home loans. FHA loan rules require all new purchase loans for single family residences to include a minimum cash investment from the borrower of 3.5%. That 3.5% must come from an approved source including the borrower’s own cash reserves, cashed-in investments, savings bonds or other holdings. The required down payment cannot come from what the FHA labels “non-collateralized loans” such as a payday loan, credit card cash advance, etc. The down payment money is permitted to come from a third party as a bona fide gift, as long as the source of that gift is acceptable under FHA loan rules. What are considered acceptable sources of gift funds for down payments? Before we can | more...