Articles Tagged With: FHA Loan Regulations

Can I buy a manufactured home with an FHA loan?

April 21, 2016

FHA Loan Rules and Individual Lender Standards

A recent question in the comments section reminds us of the need to differentiate between lender standards and FHA loan rules. Both will have a say in loan approval, terms and conditions, and more. The reader asks, “I was just in bank office today and yesterday. Yesterday before the lender saw my pay stubs i was pre-qualified for 70,000, now after seeing my work hours plus my W2. I’m now approved for only 30,000. How did that happen? I lost 40,000 just by not having 80 hours a week.” There are several issues at work here. The first is the nature of being pre-qualified for a mortgage loan. When you pre-qualify, your lender is giving you an estimate of what you may be able to borrow based on some initial | more...

April 20, 2016

FHA Loan Income Rules: Disability Benefits As Verifiable Income

By Joe Wallace

FHA loan rules in HUD 4000.1 have requirements the lender must meet for verification of income-a borrower’s income must be considered verifiable in order to be counted in the debt to income ratio. Page 268 of HUD 4000.1 starts off by explaining what the FHA considers disability income: “Disability Benefits refer to benefits received from the Social Security Administration (SSA), Department of Veterans Affairs (VA), or a private disability insurance provider.” The lender is required to gather documentation to prove the borrower is receiving such benefits, the duration of them, and whether or not they are likely to continue to be paid. The continuation of the benefits are an important part of this equation: “The Mortgagee must verify and document the Borrowers receipt of benefits from the SSA, VA, or | more...

April 20, 2016

FHA Loan Questions: Identity of Interest Transactions

By Joe Wallace

For some FHA home loans, a higher down payment may be required when there is an “identity of interest” transaction. FHA loan rules in HUD 4000.1 define this 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.”An identity of interest transaction requires a 15% down payment unless the borrower qualifies for an exception. With this in mind, let’s look at a recent reader question in our comments section. A reader asks, “My wife and I went under contract on a house that is owned by her stepfather. We just found out yesterday about the FHA identity of interest certification. It is his rental property. Is | more...

April 15, 2016

FHA Loan Rules In HUD 4000.1: Escrow

By Joe Wallace

FHA loan rules in HUD 4000.1 have several things to say about escrow accounts. FHA loan rules don’t require escrow for every single home loan or refinance loan, but there are cases where escrow is a must and there are also lender standards which may require setting up an escrow account to pay certain expenses associated with the transaction. FHA loan transactions may require escrow for payments to builders in association with construction loans, rehab loans or reverse mortgages. The standards and circumstances vary from loan to loan, so if you aren’t sure whether an escrow account is needed for your FHA loan transaction, discuss your situation with the loan officer. In some cases escrow is used to pay property taxes, in others it may be used to disburse funds | more...

March 23, 2016

FHA Loan Questions: Employment Gaps

By Joe Wallace

We get many comments and questions about FHA home loan rules in our comments section. Here’s one of the most recent. “I have some money saved up, however I have not been employed for 2.5 years. I would like FHA loan if possible. My main issue is all my money is cash and not in the bank, and I have NO employment history for the past 2 years.” Basically it seems that the reader is asking whether an FHA loan is possible without a job. This is a complex issue-FHA loans permit the lender to consider public assistance, for example, as income. The source of income must be verifiable by the lender and deemed likely to continue. However, in the case of this reader question, there is no income at | more...

March 2, 2016

FHA Home Loan Rules: Non-Borrowing Spouses

By Joe Wallace

Some legally married couples who want to purchase a home don’t necessarily want to do so with both spouses on the mortgage loan. Does an FHA loan require both spouses to submit to a credit check even though only one will be the borrower? The answer depends not on FHA loan requirements, but whether or not the couple live or are purchasing a home in a state with community property laws that have something to say about the nature of the debts incurred once the couple are legally married. FHA loan rules in this area are found in HUD 4000.1, which has a section dedicated to instructing the lender how to process the credit information for a non-borrowing spouse in community property states. This portion of the FHA loan rules | more...

February 24, 2016

FHA Refinance Loan Types

By Joe Wallace

Do you want to refinance your home loan into an FHA mortgage or refinance an existing FHA mortgage? There are many different types of refinancing options and when HUD 4000.1, the new single family FHA loan rulebook was published in 2015 the entire refinance loan program rules were included in the new volume. That means some policies were updated, some were changed or modified, and some were simply restated. HUD 4000.1 has a comprehensive list of the different types of FHA refinancing options open to those with single-family mortgages. Let’s examine them: FHA Cash-Out Refinancing A Cash-Out Refinance is described in HUD 4000.1 as, “a refinance of any Mortgage or a withdrawal of equity where no Mortgage currently exists, in which the mortgage proceeds are not limited” to specific purposes. | more...

February 22, 2016

FHA Loans Credit Issues: Charge-Offs and Disputed Accounts

By Joe Wallace

There are many questions about FHA loan credit requirements. Some credit issues involve lender requirements which may go above and beyond FHA loan program minimums. Other issues involve FHA loan guidelines themselves-for example, the basic FHA policies toward charge-offs and disputed accounts on a credit report. How is the lender instructed to deal with these issues when processing an FHA loan application insofar as FHA loan minimum standards are concerned? HUD 4000.1 has the answers–we start with a look at the FHA definition of “charge-offs”, which the rule book defines as, “a Borrowers loan or debt that has been written off by the creditor”. If a lender encounters charge-offs in the borrower’s credit history, he or she must determine if the charge-off(s) happened due to one of the following: –the | more...

What if my home was damaged in a natural disaster?

January 27, 2016

FHA 203(k) Rehab Loans: A Reader Question

By Joe Wallace

Recently a reader asked us a question in the comments section about using FHA loans to purchase property to be converted into a residence. “There is an old church for sale near us that we would love to buy and make into a home. Can this be done using an FHA loan? We plan on only using it for residential use. Its been hard to find a home that we love and that falls into FHA standards.” The answer to this question depends greatly on whether or not the property to be purchased is, in the eyes of the FHA, a one-to-four unit property. FHA loans include something known as a 203(k) Rehabilitation loan, which can be used to rehab, refurbish or repair an existing property. According to HUD 4000.1, | more...

January 6, 2016

FHA Home Loan Rules For Employment: Seasonal Work, Family Businesses

By Joe Wallace

In our last blog post we discussed FHA loan rules for employment/income verification for salary, hourly, and part time work. FHA loan rules published in HUD 4000.1 also cover other aspects of income from sources such as family businesses and seasonal work. It might be easy to assume that because a borrower does work that does not last the entire year due to its seasonal nature that a lender might dismiss it–but FHA loan rules anticipate this type of income too, and have specific requirements for lenders to use when considering it for the purposes of a debt-to-income ratio calculation for an FHA mortgage. For seasonal work, FHA loan rules in HUD 4000.1 define the income as follows: “Seasonal Employment refers to employment that is not year round, regardless of | more...