Articles Tagged With: FHA Loan Questions

February 21, 2014

FHA Loan Answers: Can The Lender Pay Closing Costs On An FHA Mortgage?

There are a lot of rules about the closing costs associated with an FHA mortgage loan. For example, the rules in HUD 4155.1 state that closing costs cannot be considered part of the borrower’s required down payment. The minimum cash investment requirement is separate from the FHA loan closing costs and must be paid in addition to those costs. There are rules governing how much a seller can contribute to closing costs, and there are rules about what costs can and cannot be charged to the borrower. Some FHA loan applicants may wonder if there are any provisions for the lender to pay closing costs; after all, the seller may contribute so why not the lender? This practice is allowed under VA home loan rules–it’s known as “premium pricing” and | more...

February 21, 2014

FHA Loan Reader Questions: Closing Costs Paid By The Seller

By Joe Wallace

A reader asks, “What portion FHA’S closing costs that the buyer cannot pay that must be paid by the seller?” A look at HUD 4155.1 revealed no language that included a requirement for the seller to pay closing costs on behalf of the borrower for an FHA home loan. There IS language in FHA loan rules saying that the borrower cannot be charged certain fees or expenses such as the lender’s legal fees for retaining a lawyer. FHA loan rules in Chapter Five, Section A of HUD 4155.1 also mention the following: “If the seller pays the broker fee as part of the sales commission, it is not considered an inducement to purchase, or part of the seller contributions limitation, as long as the seller is paying only the normal | more...

February 20, 2014

When Filling Out Your FHA Loan Application

By Joe Wallace

When a borrower fills out an FHA home loan or refinancing loan application, some may be tempted to leave out unfavorable information or provide documents to the lender that are not as up to date as they could be, but reflect more favorably than the most current information. When applying for a home loan, honesty is definitely the best policy–FHA loan rules published in HUD 4155.1 require the lender to exercise due diligence where this information is concerned. Chapter One Section B of HUD 4155.1 instructs the lender: “The mortgage loan application package must contain all documentation that supports the lender’s decision to approve the mortgage loan. When standard documentation does not provide enough information to support the approval decision, the lender must provide additional, explanatory statements that are consistent | more...

February 18, 2014

FHA Loan Reader Questions: Credit History Issues

By Joe Wallace

A reader asks, “I meet the income and credit score qualifications for an FHA loan, however I have two collection accounts on my credit report. These accounts were paid in full eight months ago. In addition, I had two credit card accounts 30 days late approximately a year ago. These were remedied within a reasonable time, yet they show on my credit report. I would like to add that these delinquent payments were due to a medical illness that left me disabled.” “I recently applied with a lender for an FHA loan and was told that I did not qualify because of my payment history. I read that, ‘a collection is minor in nature and usually does not need to be paid-off as a condition for loan approval’. If these | more...

January 22, 2014

FHA Loan Reader Questions: Getting Behind on an FHA Mortgage

By Joe Wallace

A reader asks, “Let’s say a borrower misses a month’s payment. The next month, they have enough money for one payment, but not the two months that they owe. Can the lender tell them not to pay until they have enough money for *all* that they owe, preventing them from at least not getting further behind in their payments? This feels unethical; is it legal?” Skipping payments on an FHA loan is a bad idea in general. The reader did the right thing by contacting the lender as soon as there was a problem making the payments–borrowers should always work closely with a lender in order to avoid going into FHA loan default and foreclosure. But in situations where the borrower isn’t sure if the participating FHA lender is helping | more...

December 6, 2013

FHA Loans, Missed Mortgage Payments, and Refinancing Loans: A Reader Question

By Joe Wallace

A reader asks, “I inquired about a refi with [a lender], I have a bankruptcy on my credit report but I have been out of it for three years. I was told that I had two late payment on my report thru my credit union.” “I informed the person that I spoke that my payment to my credit union was automatic payment and that those were no fault of my own. He explained to me that I would have to contact my cu and they would have to call the reporting bureau, he also stated that until that was remove I would not qualify for a loan. Is this true?” This reader question raises a very good point about FHA mortgages all borrowers should keep in mind. Not all lender | more...

November 25, 2013

Are Tax Documents Required For An FHA Loan Application? A Reader Question

By Joe Wallace

A reader asks, “Does FHA use your tax returns in determining your eligibility for qualifying for a loan?” There are many reasons why a participating FHA lender may request your income tax returns as part of the FHA loan application process. FHA loan rules in HUD 4155.1 start, “All borrowers, including United States (U.S.) citizens, must have a valid Social Security Number (SSN) and must provide evidence of that SSN to the lender.” The rules say the lender is responsible for documenting and validating the Social Security Number for each applicant and may do so through a variety of means including income tax paperwork. Specifically, HUD 4155.1 Chapter One Section B states, “The lender is responsible for documenting an SSN for each borrower, coborrower, or cosigner on the mortgage | more...

October 9, 2013

FHA Loan Reader Questions: Do I Qualify For an FHA Mortgage With “Confusing Circumstances”?

By Joe Wallace

A reader asks, “I am formerly self employed with little if any income and own a home purchased prior to marriage and I have a 700+ FICO and perfect debt payment history. My husband is formerly self employed (5 years) and for 6 months now has been re-employed with former employer which laid him off during economic down turn. Husband has little or no credit history. With his rehire we will have to transfer. I don’t know if we can qualify for a home with the rather confusing circumstances. I don’t want to access my credit to find out we don’t qualify. What are our options?” The simplest, most direct answer to this type of reader question is “Call the FHA”. In situations like these, it’s a very good idea | more...

March 8, 2013

FHA Loan Answers About Down Payments

By Joe Wallace

We get reader questions about FHA loan down payments–many people aren’t sure how much they need to pay up front and how much is required by the FHA loan program. Some borrowers mistakenly assume there’s a “no money down” option for first-time FHA loan applicants, and others assume there is a set dollar amount which must be paid regardless of the transaction. What’s the reality? FHA home loans do not feature a no-money-down option. FHA loan rules state that the minimum required down payment is as follows: “For purchase transactions, the maximum LTV is 96.5% percent (the reciprocal of the 3.5% required investment).” The acronym “LTV” stands for loan-to-value and is, in simple terms, the amount of the loan after the down payment has been made. An LTV of 96.5% | more...

January 23, 2013

FHA Loan Credit Requirements: A Reader Question

By Joe Wallace

A reader asks, “My wife’s uncle just passed away not to long ago and I want to keep his property in the family. I make very good money,but i only have a 590 credit score.How can I go about buying his property and keeping everything the way it always has been?” Without addressing the credit score issue, in general one good way to go about buying a home with an FHA home loan is to get pre-approved for a loan amount–fill out the online application at FHALoan.com (a private company, not a government agency) and work with the loan officer to get the property appraised. This process–pre-approval, appraisal, and etc.–is fairly typical for many borrowers. Credit scores are a separate issue. The FHA Loan program has minimum credit score requirements | more...