Articles Tagged With: FHA Loan Regulations

October 9, 2014

HUD Settles “Redlining” Discrimination Complaint

Have you ever wanted to apply for an FHA home loan only to experience what may be illegal discrimination forbidden by the Fair Housing Act? In some cases the discrimination may not even reach the borrowers themselves, as evidenced by a recent settlement announced by the HUD official site. According to a October 2014 press release issued on the FHA/HUD official site, “The Department of Housing and Urban Development (HUD) announced today that it has negotiated a Conciliation Agreement with Illinois-based Midland States Bancorp, resolving allegations that the bank avoided doing business in predominantly African American and Hispanic neighborhoods in St. Louis, Missouri and northern Illinois.” Federal Fair Housing Act laws state that it is illegal to, “deny or discriminate in the terms and conditions of a mortgage or loan | more...

August 29, 2014

FHA Maximum Loan Amounts: Some Basics

By Joe Wallace

FHA loan applicants often want to know how much they can borrow with an FHA mortgage. There’s no set answer to that question since the FHA loan amount depends on the appraised value of the home and other factors. Borrowers will need the amount of the sale price of a home before a loan amount can be properly calculated. Some borrowers want to know if they can apply for more than the sale price of the home with the intent of taking the excess funds for other purposes. This is not permitted for FHA home loans, so borrower who ask “how much can I borrow?” with that idea in mind should know it’s not a possibility. But the FHA loan basics for maximum loan amounts are spelled out for the | more...

August 28, 2014

FHA Loan Questions: Loan Changes

By Joe Wallace

A lengthy reader question came in recently, which we have edited for space and brevity’s sake. The reader asks, “I am a first time homebuyer & the originator of my FHA loan was (lender name deleted). In qualifying, it was clear my max affordable payment, including principle & interest, escrow, MIP, & interest was $1500 per month.” “During the underwriting process I kept in touch with the broker to ensure no substantial increase in my monthly payment. On the day of closing my payment came in over $400 higher than originally quoted due to an increase in escrow estimation. My broker acted like he was surprised, then told me he later his primary concern was getting my loan closed within 90 days to prevent a new credit report being pulled | more...

July 2, 2014

FHA Refinance Loans and FICO Scores: A Reader Question

By Joe Wallace

A reader asks, “Would I qualify for and FHA Loan refinance with a credit score of 589 with no credit card debt, and all house payments have been made on time for the last three years? I really need to refinance. Please help!” FHA loan rules published in HUD 4155.1 state that a borrower with a credit score above 500 is technically eligible for a VA loan, though between the range of 500 and 579 the borrower is not eligible for maximum FHA financing–it’s limited to 90%. That means a 10% down payment is required at a minimum according to FHA regulations for new purchase home loans. For refinance loans, the implications are different–speak to your loan officer about what might apply in terms of an FHA cash-out refinance. The | more...

June 20, 2014

FHA Issues Clarifications On HECM Loan Rules

By Joe Wallace

FHA Mortgagee Letters are issued from time to time from the FHA/HUD to clarify policies, set up new rules, or prepare borrowers and lenders for changes in the FHA program as dictated by law or other means. Two new FHA Mortgagee Letters were issued recently that discuss changes to the rules and regulations covering the FHA’s Home Equity Conversion Mortgage loan program (HECM). There are some important changes that affect the HECM program’s basic design and options for qualified borrowers, plus clarification on how the HECM program may be marketed and warnings against deceptive advertising or marketing practices. One of the most important changes to the FHA HECM program announced by the recent Mortgagee Letters involves limitations to fixed interest rate HECM loans. According to FHA Mortgagee Letter 2014-11: “FHA | more...

May 22, 2014

FHA Loan Rules: Employment

By Joe Wallace

When you apply for an FHA mortgage loan, you’re required to submit a variety of data including your employment history. It’s the FHA loan officer’s job to insure an applicant has sufficient income to afford the loan, and to make sure that income is likely to continue. How does the lender do this? FHA loan rules spell out clearly what’s to be done–HUD 4155.1 Chapter One, Section B explains how it works. To begin: “The lender must obtain the most recent pay stub showing year-to-date earnings of at least one month, and one of the following to verify current employment: • a written VOE verbal verification of employment, or • electronic verification acceptable to FHA.” The pay stub is documentation that the applicant is currently employed. But when it comes | more...

March 12, 2014

FHA Loan Answers: Can I Skip Payments On My Mortgage If I Refinance?

By Joe Wallace

When considering your FHA home loan refinance options, there’s a list of common questions many borrowers need answers to before deciding on the right FHA refinance loan. One such question involves the state of the current mortgage before the new loan is approved. Can a borrower skip a payment on an FHA or conventional mortgage as the new FHA refinancing loan is approved? FHA loan rules address this issue in HUD 4155.1, Chapter Three, Section A. It says: “The borrower must be current on the loan being refinanced for the month due prior to the month in which he/she closes the refinancing, and for the month in which he/she closes. Example: If the borrower is closing on April 8, he/she must have made the March payment within the month of | more...

January 8, 2014

FHA Loan Rules For Non-Traditional Credit

By Joe Wallace

One common type of question about FHA home loan applications involves how the lender process credit information. When a borrower wants to apply for an FHA loan and has plenty of “traditional credit”, there’s no problem developing and processing the loan application. But what about borrowers who come to the FHA loan process with little or no credit history or only what’s termed “non-traditional credit”? Some borrowers don’t want or use credit cards, which makes establishing a typical credit history more difficult. That may lead some to believe that a lack of credit card can hurt your chances for FHA loan approval. But that’s not necessarily true. The FHA has rules and instructions for the lender in cases where the borrower has non-traditional credit. We find those rules and guidelines | more...

December 12, 2013

FHA Loan Credit Score Rules: A Reader Question

By Joe Wallace

A reader asks, “If my credit score is currently between 618 and 630 why can’t I qualify for a loan? Does it have to be 700?” The answer to this question may not be as simple as citing FHA loan policy on credit scores, but it’s a good place to begin. Credit score minimums, according to the FHA loan rules found in HUD 4155.1, are as follows: These are MINIMUMS found in the FHA loan rulebook, and there’s nothing that says a lender cannot require a higher minimum score as long as those requirements are applied in accordance with Fair Housing Act laws. But credit scores alone don’t determine whether a borrower is eligible for an FHA home loan. Credit repayment history is also a factor. If a borrower comes to | more...

January 3, 2013

FHA Case Number Cancellation: A Reader Question

By Joe Wallace

A reader asks, “Is it possible for the previous lender to cancel the FHA Case Number?” There is a bit of detail missing from this question that makes it a bit difficult to answer properly–is the reader asking whether a lender may cancel an FHA case number (or should) when the loan is transferred from one bank to another? Is the question simply asking whether it’s possible to cancel an FHA case number as opposed to letting it expire? Assuming this question involves a borrower who tried one lender, but decided to go with another, what do the FHA and HUD have to say about FHA case number cancellation? The rules are clear–lenders do not cancel FHA case numbers in these cases, they are expected to cooperate in the transfer | more...