Articles Tagged With: FHA Loan Questions

FHA Loans And Natural Disasters: What You Should Know

October 5, 2016

Cash To Close: Investments, Private Savings Clubs

In our last blog post we discussed FHA loan closing costs and down payments-specifically the rules found in HUD 4000.1 that governs the sources of the funds for cash to close (down payments and closing costs). The lender is required to verify the source of all funds for down payments and closing costs, and the procedure can vary depending on the source of the funds, lender standards, state law, etc. Last time we examined the rules for funds that come from savings and checking accounts, but these aren’t the only types of sourcing options. For example, cash to close may come from investments such as stocks or bonds, or money saved up in private savings clubs. HUD 4000.1 instructs the lender on how to proceed with these types of sources. | more...

October 4, 2016

FHA Loan Facts And Fiction: First Time Home Buyers

By Joe Wallace

First time home buyers come to the FHA loan process with many questions. There are some long-held misconceptions about FHA mortgages that borrowers should know long before they fill out a loan application. Let’s examine some of them. One myth about FHA loans, and one of the most common, is that the FHA itself lends money to loan applicants. This is not true. Instead, the borrower must find a participating FHA lender, who has been certified by the FHA to issue home loans under the FHA single-family loan program. Another misconception has to do with the nature of the FHA loan program itself, which offers affordable home loans to all qualified applicants regardless of their status as a home buyer. That means that first time home buyers and those who | more...

September 15, 2016

More On The FHA Limited 203(k) Rehab Loan

By Joe Wallace

Recently we wrote about the FHA 203(k) rehab loan and the FHA 203(k) limited rehab loan. With the “standard” rehab loan, borrowers can make major improvements to a property with a minimum of $5,000 required. The limited version of the FHA 203(k) rehab loan differs in several ways, but to start with there is no minimum dollar amount for the loan. HUD 4000.1 has rules that apply to the FHA requirements for 203(k) limited rehab loan. Those include a list of ineligible projects for the limited version of this type of mortgage loan: “The Limited 203(k) mortgage proceeds may not be used to finance major rehabilitation or major remodeling. FHA considers a repair to be major when any of the following are applicable: -the repair or improvements are expected to | more...

Can I buy a manufactured home with an FHA loan?

September 8, 2016

FHA Loans For Mobile Homes and Manufactured Homes: A Reader Question

By Joe Wallace

A reader asked recently, “Why does FHA not finance single wide mobile homes?” This question reveals one of the most common misconceptions about FHA loans-that the FHA itself will process your home loan paperwork. It does not; instead, participating FHA lenders will furnish, process, and approve or deny your mortgage application. In some cases the lender may be required to submit this paperwork to the FHA for review before a final decision is made, but the lender is the borrower’s point of contact for the transaction. With that in mind, let’s examine what HUD 4000.1 says about mortgage loans for mobile homes/manufactured housing: “Manufactured Housing refers to Structures that are transportable in one or more sections. They are designed to be used as a dwelling when connected to the required | more...

September 7, 2016

FHA Loan Rules For Residency: A Reader Question

By Joe Wallace

One not-so-commonly asked questions about FHA loans is still an important issue to address. Here’s a recent reader question on a borrower’s ability to be approved for an FHA mortgage without being a U.S. citizen: “Ive just moved to the US from the UK on a K-1 Fiance Visa. Ive been here around 5 months. Just received my work authorization card through the mail, waiting for my social security number now. Ive been working voluntarily since I arrived…would we qualify for an FHA Mortgage Loan? Ive contacted two lenders who have told us that we might be entitled to a loan but they’re unsure.” The short answer to this questions is that technically speaking, non-U.S. citizens are eligible for FHA home loans unless they are in the United States illegally. | more...

September 1, 2016

FHA Loan Reader Questions: Judgments and Loan Approval

By Joe Wallace

A reader asks, “I have a judgment for a car that was repossessed in May 2010. It was a car purchased by my husband with myself as cosigner. I didnt plan on paying it off as we are waiting on a divorce and he has no plans to help pay it off. Will I be able to get a FHA mortgage with this lingering on my credit? I do have credit scores in the 650 range and higher.” Community property laws in a given state, where applicable, may affect the answer to this question, but in general, FHA loan rules in HUD 4000.1 state that judgments on a borrower’s credit history must have some kind of resolution. On pages 177 and 178 of HUD 4000.1 we learn a great deal | more...

August 31, 2016

FHA Loan Debt To Income Ratio Rules: Student Loans

By Joe Wallace

When the lender is adding up an FHA loan applicant’s income and monthly financial obligations for the purpose of calculating debt ratios, there are some debts that can be more complicated than others. Student loans, for example, can be tricky because a borrower may have student loan debt that is in “deferred” status, while others may be paying on their loans at the time of the loan application or soon thereafter. Here’s a recent reader question on the subject: “I cannot find anything that talks about NON deferred student loans. I have a client with a $63 payment on their credit report ($25,000 student loan balance). The loan is NOT in deferment, he pays $63 per month. The u/w is telling me I must use the greater of 1% of | more...

August 25, 2016

Identity Of Interest Transactions: Another Reader Question

By Joe Wallace

A reader asks, “I have a client that inherited property along with 2 siblings from the Mothers estate. The client has resided in the subject property for 1 year and now wants to buy the other siblings out. Is it correct, that this scenario would meet the exempt status of identity of interest guidelines?” The reader is asking this question in reference to an earlier post we wrote about FHA loans and identity of interest transactions. An FHA mortgage typically requires a minimum 3.5% down payment for new purchase loans. But the required down payment can be higher if there is an “identity of interest” as described in HUD 4000.1: “An Identity-of-Interest Transaction is a sale between parties with an existing Business Relationship or between Family Members. Business Relationship refers | more...

August 24, 2016

FHA Loan Basics You Should Know

By Joe Wallace

If you are thinking about buying a home and are weighing your options for an FHA home loan, there are some basics you should know about FHA mortgages that can help you better prepare for an FHA loan application. FHA home loans are for all financially qualified applicants; there are no income minimums OR maximums. Borrowers should know that FHA mortgages are designed to help borrowers at all income levels find an affordable home. Your debt to income ratio (the amount of money coming in each month compared to your monthly expenses and financial obligations) is an important factor in loan approval, but you will not be disqualified because of an income threshold based on your annual income or monthly income alone. FHA mortgages allow you to purchase a home | more...

August 23, 2016

FHA Loan Questions: Identity Of Interest

By Joe Wallace

A reader asks, “I am intending on purchasing a home from my boyfriend’s father. He bought the home for 70k and he is willing to sell it to me for 75k. We are in no way related. Is our relationship an identity of interest?” The “identity of interest” issue arises when a family member wants to sell a property to another family member who is using an FHA mortgage to buy the home. An identity of interest transaction can also be between two people who are business associates. HUD 4000.1 defines an identity of interest transaction as follows: “An Identity-of-Interest Transaction is a sale between parties with an existing Business Relationship or between Family Members. Business Relationship refers to an association between individuals or companies entered into for commercial purposes.” | more...