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Articles Tagged With: FHA Loan News

New FHA Loan Rules For Deed-in-Lieu and Pre-Foreclosure Sale Options

The FHA and HUD recently updated the rules for “non-home retention options” for borrowers at risk of going into default and/or foreclosure on FHA mortgage loans. Two of those options are deed-in-lieu (DIL) of foreclosure and the pre-foreclosure sale (PFS). Under FHA loan rules, the borrower must be evaluated for eligibility for one or both of these options, as described in FHA Mortgagee Letter 2014-15: “If none of FHA’s loss mitigation home retention options are available or appropriate, the mortgagee must evaluate the borrower for a non-home retention option. The priority order of FHA’s Loss Mitigation non-home retention options requires that a mortgagor in default or at imminent risk of default be evaluated for a PFS transaction before being evaluated for a DIL transaction. Therefore, the mortgagee must first determine | more...

 

FHA Loan Reader Questions: Bankruptcy and Foreclosure

A reader asks, “I had a FHA mortgage with my previous home. Because of circumstances beyond my control, I had to file bankruptcy and my home was foreclosed on. It has been almost 2 years since the bankruptcy was discharged. Would I be eligible for another FHA mortgage and if so, when could I apply? Also my sister wants to buy the new home with me. Could she be a second borrower?” FHA loan rules are different depending on what kind of bankruptcy was filed. In some cases the borrower may not only be subject to a minimum waiting period, but also may need to get court permission in order to be obligated on the new home loan. For example, look at the rules covering Chapter 7 bankruptcy and a | more...

 

FHA Loan FICO Score Rules: A Reader Question

A reader asks, “How low can a credit score be? i know mine is about 540. If it is for low income people with BAD credit why should the score matter at all?” The FICO score question has two important aspects borrowers should be aware of. FHA loan rules establish a minimum FICO score requirement. HUD 4155.1 includes a chart to show the FICO minimums and how maximum financing is affected depending on what the borrower’s FICO score is within these ranges: FHA minimum scores are just that–the minimum numbers required. Lenders can and often do have more strict FICO score rules than what you see printed above. There’s no such thing as a “bad credit FHA home loan”. Borrowers who do not meet the minimums listed above can’t be | more...

 
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FHA Appraisal Rules For Foundations: A Reader Question

A reader asks, “We are up for a FHA refinance and the appraiser noted that we have a crack in our foundation. We have never had water in the basement ever and it hasn’t moved since i originally purchased the home. We are waiting to hear back from our lender. What is the likelihood this loan will be denied?” There are several issues that apply in a situation like this including the severity of the foundation problem. Not knowing that specific information makes it hard to know which way the call might go but it’s impossible to speculate what one financial institution might do. But that’s not the most relevant issue at work here. State or local building code may address the foundation issue specifically. If the home is not | more...

 

FHA Refinance Loan Rules For Payments Before and After The New Loan

FHA refinance loan advice includes a variety of recommendations about creditworthiness. For example, you should make sure you have 12 months of on-time payments on your credit record before you apply for a refinance loan, especially when applying for cash-out refinancing loans. But what about the timeliness of your original mortgage payments? Borrowers who have made all their payments on time and are about to refinance may wonder if, because of the timing of an FHA refinance transaction, two payments might be required in a single month. Can’t the borrower skip the final payment on the old mortgage before the new one kicks in? The rules for refinance loans found in HUD 4155.1 Chapter Three instruct the lender to make sure the borrower is current and paid up all the | more...

 

FHA Loan Documentation Standards: What’s Required, What’s Not Permitted

In order to get the FHA loan application approval process moving, the lender may need authorization from the borrower to check credit reports, individual creditors, employers, even current or former landlords. In order to do this, your loan officer may need you to sign paperwork showing the financial institution has the authorization needed to request personal data. There are strict rules that govern this process. They are found in HUD 4155.1 Chapter One, Section B, which starts off by stating: “The lender may ask the borrower to sign a general authorization form that gives the lender blanket authority to verify information needed to process the mortgage loan application, such as • past and present employment records • bank accounts, and • stock holdings. If using a blanket authorization form, the | more...

 

FHA Loans, Credit Reports, And Late Payments On Your Record

Some borrowers come to the FHA loan application process worried that late payments on their credit history might jeopardize their chances at FHA loan approval. What do FHA loan rules say about late payments and how does the FHA loan rulebook address this issue? HUD 4155.1 Chapter Four Section C has guidance for participating FHA lenders about late payments. Chapter Four says, “The lender must document the analysis of delinquent accounts, including whether late payments were based on • a disregard for financial obligations • an inability to manage debt, or • factors beyond the borrower’s control, such as delayed mail delivery, or disputes with creditors.” That can be comforting for borrowers who do have some minor credit issues in their past. FHA loan rules actually go a bit further | more...

 

FHA Loan FICO Score Requirements: A Reader Question

A reader asks, “I have an average FICO OF #709. My EQUIFAX is #686, TRANSUNION is #695, and my EXPERIAN IS #748. What lenders will use my average FICO to determine my FHA LOAN eligibility?” FHA loan rules about credit scores are found in HUD 4155.1. While we cannot speak for individual financial institutions, in general, lenders seem willing to work with borrowers with an average FICO score of between 620-640 or better. How does the FHA determine what the average FICO score is when the borrower has different scores from each of the three major credit reporting agencies? HUD 4155.1 Chapter Four Section A addresses this under the section titled, “Definition of Minimum Decision Credit Score”. According to Chapter Four, “If a credit score is available, it must be | more...

 

FHA HECM Loan Changes: A Reader Question

A reader asks, “I have reviewed the new changes regarding protecting the surviving spouse on a reverse mortgage. My husband and I took out a reverse mortgage in 2012 and was told that when I turn 62 in 2015, that I could be added to the loan and be safe.” “Since then I have found out that is not true. We would have to refinance, however, there may be a large amount of money needed to do this. Now we are worried that I may not get on this loan and I could be in danger if my husband dies before me. Will this new ruling protect me?” This reader question refers to our previous blog post about changes to the FHA HECM program which now offer non-borrowing spouses protection | more...

 

FHA Loan Reader Questions: Complaints About Substandard Work

A reader asks, “I am looking for how to report substandard work with FHA home loan and FHA inspection being done by pictures. I purchased my home in November of 2013 and still have not received the needed corrections on the home that in turn is adding more cost to me for repairs.” There are several possibilities based on the reading of this question. Is the reader complaining about an FHA appraisal that had required corrections that never took place? Or does the reader’s mention of an “FHA inspection” mean that the borrower paid for a home inspection that made recommendations that were never carried out to the borrower’s satisfaction? In the case of the latter, if the borrower contracted for home repairs based on the recommendation of a privately | more...