Articles Tagged With: FHA Loan Questions

April 21, 2014

FHA Loan Down Payments

One important question about any home loan transaction involves the down payment. How much should a borrower save? When it comes to FHA home loans, there are rules about the minimum required “cash investment” (down payment) specified in HUD 4155.1 Chapter Two. The amount of the down payment depends on the appraised value and/or the sale price of the home. According to Chapter Two, the maximum amount the borrower can get with the FHA loan guarantee is calculated as follows “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.” The next step according to this portion of Chapter Two is calculating | more...

April 18, 2014

FHA Loan Reader Questions: Complaints About Substandard Work

By Joe Wallace

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...

April 14, 2014

Applying For An FHA Loan Without A Credit History

By Joe Wallace

Take a look at what the FHA loan rulebook, HUD 4155.1 Chapter Four, Section C says about how lenders must treat borrowers who come to the FHA loan process without a credit history: “The lack of a credit history, or the borrower’s decision to not use credit, may not be used as the basis for rejecting the loan application. Some prospective borrowers may not have an established credit history. For these borrowers, including those who do not use traditional credit, the lender must obtain a non-traditional merged credit report (NTMCR) from a credit reporting company, or develop a credit history from • utility payment records • rental payments • automobile insurance payments, and • other means of direct access from the credit provider, as described in HUD 4155.1 4.C.1.e.” Why | more...

April 7, 2014

FHA Loan Reader Questions: Building Code and FHA Minimum Property Requirements

By Joe Wallace

A reader asks, “I have a front porch that is 40 feet long and 12 feet wide and is about 3 1/2 to 4 feet high, would FHA require banisters around this porch? It has steps with railings on each side to come onto the porch…” The main problem with addressing specific appraisal questions like this is that FHA loan rules do have some general guidelines (as well as more specific ones in some cases) but the FHA minimum property requirements are not the only rules that must be complied with in order for a home to pass the FHA appraisal. Federal, state, and local building code requirements may also apply, and the property that is not in compliance with these requirements may need corrections or repairs before the FHA | more...

March 26, 2014

FHA Loan Rules: Does Commission Income Count As Verifiable Income?

By Joe Wallace

For an FHA home loan, the participating FHA lender is required to verify the borrower’s employment and income. Only verifiable income can be used to calculate the borrower’s debt-to-income ratio and there are instructions for the lender on how to determine if certain types of income can be used and under what circumstances. Commission income is a very good example. Not all commission income may be eligible to be used for the debt to income ratio. How does the lender determiner what’s permissible and what’s not? There are instructions to the lender in HUD 4155.1, Chapter Four, Section D under the heading, “Salary, Wage, And Other Forms Of Income”. It begins by saying: “Commission income must be averaged over the previous two years. To qualify with commission income, the borrower | more...

March 19, 2014

FHA Loans and Borrower Credit

By Joe Wallace

Some borrowers get nervous when applying for an FHA mortgage loan because of the credit check. There can be many reasons for this–some come to the house buying process with some history of credit problems, others may have disputes with creditors or other problems. Having credit issues in the past is not necessarily a barrier to an FHA loan in the present. But there are FHA guidelines for the lender you should be aware of that can help you better prepare for an FHA loan. The rules for FHA home loans found in HUD 4155.1 include instructions to the lender for analyzing borrower credit. Chapter Four of HUD 4155.1 has a section titled, “Past Credit Performance” and includes the following: “Past credit performance is the most useful guide to • | more...

March 17, 2014

FHA Loan Rules: Title Issues For Non-Borrowing Co-Owners

By Joe Wallace

There are plenty of situations that come up when more than one person wants to borrow on an FHA home loan, but there are just as many circumstances where two people may want to own a property purchased with an FHA mortgage, but only one of the two is applying for the loan itself. FHA loan rules for this are found in HUD 4155.1 Chapter Four under the heading, “Title Issues Regarding Non- Borrowing Spouses or Other Parties in Interest”. The rules here state: “If two or more parties have an ownership interest in the property, but only one of the parties is applying for the loan (and credit qualifies for the loan on his/her own), it is not required that the non-applicant individual(s) execute the mortgage note and security | more...

March 14, 2014

FHA Maximum Loan Amounts For Cash Out Refinancing

By Joe Wallace

FHA home loans and non-FHA mortgages can be refinanced using an FHA cash-out refinance loan. Cash-out refinancing guaranteed by the FHA always require a new credit check and a new appraisal, so borrowers should anticipate the costs of these when preparing for the new loan. One of the first question a borrower need answered when considering this refinance option is naturally, “How much can I borrow”? According to the FHA loan rule published in HUD 4155.1, the answer to that question depends on how long the borrower has owned the home. Chapter Three, Section B of this manual under the heading “Cash Out Refinance Transactions” instructs the lender as follows–if the borrower has owned the property for 12 months or less prior to the new loan application, the loan is | more...

March 10, 2014

FHA Loan Reader Questions: Employment Verification

By Joe Wallace

A reader asks, “I have been employed at a job for 5 years, and another for 1yr 3 months and looking to quit both for a 3rd job I have been employed at for 4 months. the third job is currently under the table until I am able to be full time. we are looking to buy our house in April. Should I wait to quit the other jobs or will I be okay?” We can’t give advice on whether to keep or quit a job (that’s outside the topics we cover here) but one thing that’s important to remember in these types of situations is the lender’s requirement to verify both income and employment. Any job that is, as the reader question puts it, “under the table” would be | more...

February 26, 2014

FHA Loan Reader Questions: Roof Requirements

By Joe Wallace

A reader asks, “For an FHA loan, are there roof requirements on a detached garage or do the requirements solely apply to the roof over the home?” FHA loan rules for property analysis can be found in HUD 4150.2. Under the “Roof” section we find the following: “The covering must prevent moisture from entering and must provide reasonable future utility, durability and economy of maintenance. When re-roofing is needed for a defective roof that has three layers of shingles, all old shingles must be removed before re-roofing…The appraiser must observe the roof to determine whether the deficiencies present a health and safety hazard or do not allow for reasonable future utility.” The rules do not make a distinction between attached garages or detached garages, but the line about future utility | more...