Articles Tagged With: FHA Loan Limits

November 12, 2013

Current FHA Loan Rules For Applying For A New Loan After a Short Sale

Mortgage loan rules can change over time for a variety of reasons. Borrowers who researched their loan options a year or more ago may be surprised to learn that the rules that applied at the time they explored their options may have changed due to regulatory requirements, financial institution policies, or FHA program rule updates. With that in mind, here is the current FHA guidance regarding a borrower’s options for applying for a new FHA mortgage loan following a short sale. FHA loan rules published in HUD 4155.1 state that while having a short sale on your financial record is not grounds in itself for disqualifying a borrower, certain requirements and restrictions may apply. “A borrower is not eligible for a new FHA-insured mortgage if he/she pursued a short sale | more...

November 8, 2013

FHA HECM Loans

By Joe Wallace

FHA Reverse Mortgages, also known as Home Equity Conversion Mortgages or HECM loans, are designed for qualified borrowers aged 62 or older who own their home or have very few payments left on the home. There are three basic types of FHA HECM loans: Traditional (Equity in current property used to obtain a new HECM loan) Purchase (HECM loan proceeds used to purchase a principal residence) Refinance (Refinance of an existing HECM loan with a new HECM loan) The FHA loan rulebook, HUD 4155.1, says of HECM loans that the following properties can be used to secure the reverse mortgage/HECM: 1 Unit (Single Family Residence) 2-4 Unit with one unit occupied by the borrower HUD-approved Condominium Project Manufactured home built after June 15, 1976 Borrowers who are age-eligible to | 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 18, 2013

FHA Loans and Credit Disputes: A Reader Question

By Joe Wallace

A reader asks, “My plan is to buy the house I’m leasing, my 3 scores are 616, 621 and 619. Will I qualify for an FHA loan? I have a student loan that i haven’t paid on my credit report it states its on dispute, will this disqualify me from an FHA?” The answer to this question depends greatly on what is meant by the “unpaid” student loan. Does that mean the borrower has not made any payments? Or does that mean payments are being made but the loan hasn’t been paid in full? Are there missing or delinquent payments in dispute? When there are disputed items on a credit report, the lender is required to learn more in order to process the FHA loan application. FHA loan rules found | 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...

October 3, 2013

FHA Loan Interest Rate Locks

By Joe Wallace

In recent weeks, we’ve seen a steady drop in mortgage loan interest rates, with VA and FHA mortgage loan rates going as low as 4.0% in some cases (though that rate is not available from every lender or to every borrower). FHA mortgage loan rates tend to be lower than conventional loan rates in terms of the “ideal rate” for well qualified borrowers with very good FICO scores and credit repayment history. But even for borrowers who don’t have spotless credit, the recent mortgage loan rate recovery has offered some applicants a better deal than they could have gotten a few months ago when interest rates were climbing steadily over a period of weeks. One question some borrowers have about period like these when rates are higher in some months | more...

September 19, 2013

FHA Home Loan Debt To Income Ratio Rules: A Reader Question

By Joe Wallace

A reader asks, “I have significant student loans, but my parents make all payments on the loans because they had promised to provide my education as a gift (this was a commitment they made before I made the decision to pursue my education).” “They have made timely payments for three years, and they intend to continue to make payments until the loans are paid off. Can they guarantee future payments so that I can remove the loans from my debt-to-income ratio?” There are two basic factors at work when the lender is reviewing a borrower’s debt-to-income ratio. One is the borrower’s current debt load compared to the amount of income coming in. The other is how the new FHA loan payment would affect that debt load. Since the debts in | more...

September 17, 2013

FHA Reverse Mortgage (HECM) Guidelines: Credit Issues

By Joe Wallace

Recently the FHA issued new rules and instructions to the lender that affect how FHA Reverse Mortgages or Home Equity Conversion Mortgages are processed. According to FHA Mortgagee Letter 2013-28, effective for all HECM case numbers assigned on or after January 13, 2014, the lender, “must perform a financial assessment of all prospective mortgagors on all HECM transaction types, i.e., traditional, refinance, and purchase.” What does that mean for the HECM loan applicant? For starters, when you apply for an FHA reverse mortgage or HECM, the lender is charged with doing the following things with your application data according to Mortgagee Letter 2013-28: performing the credit history analysis. performing the cash flow/residual income analysis; documenting and verifying credit, income, assets and property charges evaluating extenuating circumstances | more...