Articles Tagged With: FHA Loan Questions

April 6, 2015

FHA Loan Employment Verification Rules: A Reader Question

A reader asks, “I was trying to get a FHA loan however once all my documentation was sent to the underwriter she denied me, because I am employed by my mother and he VOE was filled out by her. They denied my because they could not use that income. I have my pay stubs & my w-2′s. Where they telling my the truth or just didn’t want to give me the loan because i am only 21. I feel like they didn’t want to give me the loan because i am so young. Everything checked out however they just refused to approve me because my mother filled out the VOE.” Unfortunately there is a great deal of information missing from this reader question that makes it impossible to speculate as | more...

March 31, 2015

FHA Clarifies Rules For FHA HECM Loans

By Joe Wallace

The FHA and HUD have clarified rules that govern how FHA Home Equity Conversion Mortgage Loans are handled with regard to “life expectancy set-asides” and calculation of property taxes as part of a borrower’s debt-to-income ratio. FHA Mortgagee Letter 2015-09, “establishes a monthly growth rate for Life Expectancy Set-Asides and clarifies a discrepancy between the HECM Financial Assessment and Property Charge Guide and the model HECM Financial Assessment Worksheet transmitted with Mortgagee Letter 2014-22.” What is a “life expectancy set-aside” and how does the new clarification affect it? According to the FHA, “The Life Expectancy Set-Aside (LESA) is used for the payment of property taxes, and hazard and flood insurance premiums, and will increase each month at a rate equal to one-twelfth of the sum of the mortgage interest rate | more...

March 31, 2015

FHA Short Refinance Program: A Reader Question

By Joe Wallace

A reader asks, “Will the FHA Short Refinace Program give the lowest interest rate? Secondly, will there be a refinance charge? Does this work with Fannie Mae?” This reader question refers to the FHA Short Refinance Loan Program which was extended last year to 2016 and is intended for borrowers who find theselves “upside down” or “underwater” on their home loans. According to an FHA fact sheet published at FHA.gov: “FHA’s Refinance of Borrowers in Negative Equity Positions (“Short Refinance”) is available to help people who owe more on their mortgage than their home is worth because their local markets have seen large declines in home values. The temporary enhancements to the existing refinance program apply to loan applications with FHA case numbers issued on or after September 7, 2010 | more...

Can I buy a manufactured home with an FHA loan?

March 30, 2015

FHA Loan FICO Score Minimums: A Reader Question

By Joe Wallace

A reader asks, “My husband recently contacted quicken loans which do fha loans, they pulled his credit and said he was short one point with a score of 619? If you guys are showing you can do loans with scores in the 500s. Why would he of been denied?” One thing potential FHA borrowers should remember about FICO score requirements on FHA home loans is that FHA minimums are just that–the minimum requirement. An individual lender as mentioned in the reader question is free to require a higher FICO score in order to get a loan with that financial institution as long as that higher requirement is applied in accordance with federal laws. It’s true that the FHA loan rules printed in HUD 4155.1 state that a borrower with a | more...

March 30, 2015

FHA Loan Rules: Back To Work

By Joe Wallace

A reader asks, “I have taken the ‘back to work’ counseling class twice. the first one expired but we found a house after it expired. Do you know if FHA can or will waive or make an exception on ‘being completed a minimum of thirty (30) days’ rule. The house is a ‘Fanny Mae’ house and is in Foreclosure. We don’t want to lose it.” The reader is referring to an earlier blog post we wrote about the FHA’s Back To Work Program which may permit, depending on circumstances, a borrower who has experienced foreclosure, bankruptcy or some other negative “economic event” to apply for an FHA home loan once more. According to the FHA official site, “FHA recognizes the hardships faced by these borrowers, and realizes that their credit | more...

March 27, 2015

FHA Home Loan LTV Calculations: A Reader Question

By Joe Wallace

A reader asks, “Is the LTV calculated on the total loan amount (base loan+MIP), or the base loan amount only?” FHA loan rules covering the subject of loan-to-value calculations are found in HUD 4155.1 Chapter Two Section A, which states: “The maximum mortgage amount that FHA will insure on a purchase is calculated by multiplying the appropriate loan-to-value (LTV) factor by the lesser of the property’s –sales price, subject to certain required adjustments, or –appraised value. In order for FHA to insure this maximum loan amount, the borrower must make a required investment of at least 3.5% of the lesser of the appraised value or the sales price of the property.” The 3.5% investment, better known as the borrower’s down payment, is also covered in Chapter Two Section A with | more...

March 25, 2015

Significant Changes In Borrower Financial Status: An FHA Loan Question

By Joe Wallace

A reader asks, “I am in the process of buying a new home which is scheduled to be closing is by April 30th.My loan processor had just asked me last week to write a letter explaining why there is a significant overdraft fees on my checking account?. i am worried. please advise.” In the same way that borrowers are advised not to apply for new lines of credit leading up to a home loan application, they are also urged to maintain a record of steady, on-time payments until loan approval. The reason for this is simple–the lender is required to document and make loan approval decisions based on any “significant changes” to a borrower’s financial position. A home loan is a major financial commitment and a borrower who has significant | more...

March 24, 2015

Basic FHA Loan Eligibility Requirements

By Joe Wallace

We get many questions about FHA loans–questions about FICO score requirements, questions about credit and income, residency, etc. The FHA official site (www.fha.gov) has many answers to these questions–but what ARE the basic requirements for an FHA mortgage? FHA loan rules specify a minimum FICO score needed to qualify for maximum financing, and a minimum FICO score for basic eligibility with a larger down payment in cases where the applicant’s FICO score is close to the margins of acceptability. “FHA insures mortgages” the official site says, “made by approved lenders to individuals and nonprofit and government agencies that are approved to participate in HUD’s programs; HUD does not loan money to homebuyers.” The FICO score requirements mentioned previously (580 for maximum financing, and FICO scores above 500 for program eligibility | more...

March 20, 2015

FHA Loan Questions: Tax Records

By Joe Wallace

A reader asks, “Is an fha requirement for a home buyer to have two years of taxes?” This is a difficult question to answer in general except to say that borrowers should be prepared to include tax information as part of an FHA loan application. The actual requirement can vary depending on lender standards, state law, and whether the borrower is self employed or not. Consider what FHA loan rules found in HUD 4155.1 Chapter Four Section D have to say about self-employed FHA loan applicants, or those who own a family business: “Self employed borrowers must provide –signed, dated individual tax returns, with all applicable tax schedules for the most recent two years –for a corporation, “S” corporation, or partnership, signed copies of Federal business income tax returns for | more...

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

March 20, 2015

FHA Loan Closing Costs

By Joe Wallace

A reader asks, “Is the seller of a home to a buyer that is financing with a FHA loan required to pay the buyers closing costs?” FHA loan rules do not say the seller is required to pay closing costs on behalf of the borrower; in any case the seller’s contribution to the sale whether that is in the form of paying closing costs or other incentives is limited to six percent of the sales price of the property. Here’s a quote from the HUD booklet titled, “Shopping For Your Home Loan” which includes the following under Settlement Costs: “You can negotiate which settlement costs you will pay and which will be paid by the seller. The seller may contribute a lump sum amount or may agree to pay for | more...