Articles Tagged With: FHA Loan Questions

August 21, 2015

FHA Mortgage Rate Trends: Lower After Fed Minutes Are Released

Mortgage loan rates have been in a back-and-forth mode this week. One day they rise, altering closing costs for the most part rather than the actual best execution rate, the next day they fall, with the same result. On Wednesday all eyes were on the release of Fed minutes, which detail the meeting held last month. The details of that report sent investors into activity that benefits mortgage rates, and while the best execution numbers we reported in our last blog post haven’t changed, some borrowers may notice the alterations in the form of lower closing costs as previously mentioned. 30-year fixed rate conventional mortgages were reported at 4.0% best execution at mid-week, with some lenders coming in at sub-four percent best execution rates. Best execution rates are not available | more...

August 20, 2015

FHA Loan FICO Score Requirements: Your Mileage May Vary

By Joe Wallace

One of the most common questions about FHA home loans centers around FICO scores. Many borrowers wonder why their FICO scores may or may not be good enough to get FHA loan approval. FHA loan rules have minimum FICO scores defined in HUD 4155.1, but the confusion comes when a borrower who knows these minimums gets told their scores aren’t high enough for maximum financing or loan approval, depending on circumstances. The reason for this is simple: FHA loan minimums aren’t necessarily the lender’s minimum standards for FICO scores. The lender is free to require higher FICO minimums as long as that requirement is enforced in compliance with federal law. The minimum FHA FICO score requirement of 580 or better for maximum financing isn’t always what the lender will require–your | more...

What happens to my FHA loan in a natural disaster?

August 19, 2015

FHA Loan Rules For Debt-To-Income Ratios Versus “Total Mortgage Amount”

By Bruce Reichstein

In our previous blog post about FHA loans and debt-to-income ratios, we mentioned two calculations the lender makes to determine whether or not an FHA loan applicant can truly afford the mortgage loan. One of those calculations matches the applicant’s total “gross effective income” versus the amount of the total mortgage payment to make that determination. According to HUD 4155.1, Chapter Four, “The relationship of the mortgage payment to income is considered acceptable if the total mortgage payment does not exceed 31% of the gross effective income.” Naturally the FHA does make some exceptions for that 31% cap. “A ratio exceeding 31% may be acceptable only if significant compensating factors, as discussed in HUD 4155.1 4.F.3, are documented and recorded…” and the FHA also permits a higher debt to income | more...

August 17, 2015

Qualifying Income For FHA Loans: Required Paperwork

By Joe Wallace

We’ve written in recent weeks about the process of verifying income for an FHA home loan–the nature of your employment, additional income, and other financial factors that might contribute to your debt to income ratio are required to get scrutinized by the lender. The lender’s process for verifying income is spelled out in HUD 4155.1 Chapter One Section B, but there’s one part of the rules we haven’t covered in our other blog posts–the Verification of Deposit requirement. Chapter One Section B states that the lender must get documentation in writing for all “assets to be used in qualifying” for the FHA mortgage. Borrowers should expect to furnish verification in writing for the last three months worth of qualifying at a minimum. The borrower can provide either a written Verification | more...

When Is An FHA Loan Better Than A Conventional Loan?

August 11, 2015

FHA Loans And More Situations That Affect Loan-To-Value: Building On Own Land

By Joe Wallace

We’ve been discussing factors that can require an FHA borrower to make a large payment. Such factors can include loans where there is a non-occupying co-borrower, loans where there is an “identity of interest”, and situations where a parent is both the seller and the co-borrower on an FHA single family home loan. What other factors can require a larger down payment on your FHA home loan? In certain instances where an FHA borrower is building a home on his/her own land, the down payment requirement may change depending on specific details of the loan. HUD 4155.1 Chapter Two Section B states of these transactions: “A borrower is eligible for maximum financing if he/she acts as a licensed general contractor and is building a home on land that he/she already | more...

August 6, 2015

Participating FHA Lenders: Direct Endorsement Versus Conditional Approval Authority

By Joe Wallace

There are two types of participating FHA lenders. One has “automatic authority” or “direct endoresement” (DE) authority to approve your FHA loan application in most cases, and the other has “conditional approval” authority which requires the lender to submit your FHA loan paperwork to the FHA for final review before the loan can be closed. FHA loan rules for these two different types. Found in HUD 4155.2 Chapter One Section A, we learn the following: “Under FHAs Direct Endorsement (DE) program, approved lenders may underwrite and close mortgage loans without FHAs prior review or approval. This includes all aspects of the mortgage loan application, property analysis, and borrower underwriting.” Chapter One includes a note, adding: “This assumes that the lender is a DE lender with unconditional approval. If the lender | more...

August 3, 2015

FHA Reverse Mortgages and the FHA Back To Work Progam

By Joe Wallace

A reader got in touch with us recently about the FHA’s Back To Work program, which was announced in 2013 as a way for lenders to offer FHA mortgage loans to people who have had financial hardship in the past that might otherwise disqualify them from a home loan. Back To Work requires the borrower and lender to work together to document the causes of a pre-foreclosure sale, foreclosure, bankruptcy or other financial hardship to show that the issue was circumstantial and not representative of a borrower’s actual credit worthiness. The following guidance to lenders is from FHA Mortgagee Letter 13-26: “As a result of the recent recession many borrowers who experienced unemployment or other severe reductions in income, were unable to make their monthly mortgage payments, and ultimately lost | more...

August 3, 2015

Applying For An FHA Loan

By Joe Wallace

When you apply for an FHA home loan, what is your lender going to require of you besides the information you put on the application itself? Some requirements may vary from lender to lender, but in general you will need to be prepared to furnish bank statements, tax data, and information on any additional sources of income you want to be counted along with your primary earnings. The lender will ask for tax data for a variety of reasons, but the tax data is especially important if you are an independent contractor, freelancer, or small business owner. Your bank statements can also be important–the lender may require two months or more in order to get a more complete picture of your spending habits. Your income needs to be verifiable–any part | more...

July 31, 2015

FHA Loans and “Pre-Payment”

By Joe Wallace

One of the important selling points of an FHA mortgage loan is the basic differences FHA mortgages have from conventional loans; the lower down payment, more forgiving credit requirements, and a rule that a borrower is able to freely dispose of the property in any way he or she sees fit once the deal is closed and the borrower has taken up residence in the home. But there’s another important difference between some conventional mortgages and FHA loans. Did you know that under the FHA loan program you cannot be penalized or charged for early payoff of the loan? HUD 4155.2 Chapter Three has a section that governs what the FHA terms, “pre-payment”. It says that a borrower may pre-pay an FHA mortgage “in whole or in part”. It also | more...

July 30, 2015

FHA Loan Settlement Dates, Per Diem Interest At Closing

By Joe Wallace

The rules for FHA home loans regarding closing dates and related details are found in HUD 415.2 (at the time of this writing) in Chapter Six under the heading, General Loan Closing Requirements. There are a few items in this section that should be noted in case FHA borrowers have questions–including the basic definition of a closing date as described in the rulebook: “The date of closing/settlement is generally considered the date on which the note and mortgage are signed by the borrower. This is also the date defined as the settlement date on the HUD-1 Settlement Statement. However, the 60-day endorsement submission clock begins on the date that the lender relinquishes control of the loan proceeds (disburses the mortgage funds), for both purchase money mortgages and refinance transactions.” FHA | more...