Articles Tagged With: FHA Loan Requirements

August 20, 2015

FHA Announces New Initiative To Help Expand Credit To Borrowers

The FHA has announced a new initiative designed to help the agency review lending practices of participating lenders and expand credit to potential FHA borrowers. According to HUDNo.15-107,”The Federal Housing Administration today announced a new method for evaluating the lending practices of FHA-approved lenders and understanding the sorts of borrowers they are serving.” That new standard, known as the FHA Supplemental Performance Metric, is designed to enhance the FHA’s existing “compare ratio” and according to the press release, “offer more nuanced insight into a lenders specific performance while encouraging lenders to serve eligible underserved borrowers.” This, the press release says, will assist participating FHA lenders in reviewing the effects of their FHA lending, “at all ends of the credit spectrum in line with FHAs willingness to insure loans to eligible | more...

Can I buy a manufactured home with an FHA loan?

August 19, 2015

FHA Loan Rules For “Qualifying Ratios”: Your Debt-To-Income Ratio

By Joe Wallace

We write a great deal about what it takes to qualify for an FHA loan–income verification, FICO scores, employment history, sources of down payment funds, etc. But there’s a very important part of the FHA loan application data you submit that the lender will review to insure you can actually afford your new loan. Borrowers are required to submit their income and employment data to the lender; the lender is required to do calculations based on that data to see what your debt to income ratio is–the amount of money you have coming in from verifiable sources versus the amount you have going out in monthly financial obligations. If your debt to income ratio is too high, you may have trouble qualifying for an FHA mortgage. But what is the | more...

What happens to my FHA loan in a natural disaster?

August 19, 2015

FHA Loan Rules For Debt-To-Income Ratios Versus “Total Mortgage Amount”

By Bruce Reichstein

In our previous blog post about FHA loans and debt-to-income ratios, we mentioned two calculations the lender makes to determine whether or not an FHA loan applicant can truly afford the mortgage loan. One of those calculations matches the applicant’s total “gross effective income” versus the amount of the total mortgage payment to make that determination. According to HUD 4155.1, Chapter Four, “The relationship of the mortgage payment to income is considered acceptable if the total mortgage payment does not exceed 31% of the gross effective income.” Naturally the FHA does make some exceptions for that 31% cap. “A ratio exceeding 31% may be acceptable only if significant compensating factors, as discussed in HUD 4155.1 4.F.3, are documented and recorded…” and the FHA also permits a higher debt to income | more...

August 18, 2015

FHA Mortgage Rate Trends: Higher Ahead Of Fed

By Joe Wallace

Mortgage loan rates have been trading higher days with lower days; Monday say rates move low enough to wipe out the losses seen on Friday, but Tuesday had rates moving higher, erasing Monday’s progress. For Tuesday, rates moved higher partially in anticipation of the Fed minutes release scheduled for Wednesday. Those minutes will have details of the July Fed meeting and we may gain a bit of insight as to the Fed’s posture on the upcoming meeting. There’s been a lot of “Will they or won’t they?” type talk about a Fed interest rate hike, and any discussion of that hike is a potential market mover. So there’s been a bit of advice against floating into the release of those Fed minutes tomorrow, and it’s easy to see why, given | more...

August 17, 2015

FHA Mortgage Loan Interest Rates

By Joe Wallace

FHA home loans have a set of rules that govern interest rates. HUD 4155.1 explains that lenders must inform the borrower that FHA loan interest rates are negotiable–FHA does not set or regulate the rates, though it does require interest rates on FHA loans to be reasonable and “customary” compared to similar loans of its type. Chapter One of HUD 4155.1 states: “Under all currently active FHA single family mortgage insurance programs, the borrower and the lender negotiate the interest rate and any discount points.” We write regularly about FHA loan interest rate trends, and discuss something called the interest rate lock or interest rate lock-in, which is an agreement between the borrower and lender to commit to a mortgage rate for a specific period of time, to protect the | more...

August 15, 2015

FHA Mortgage Loan Interest Rate Trends: Higher, Lower, Higher, Lower…

By Joe Wallace

Mortgage rates had a back-and-forth week, with rates starting off higher, wiping out the gains seen on the previous Friday. Then on Tuesday, news of China’s currency policies pushed rates back down into the high three percent range (best execution) for 30-year fixed rate conventional mortgage loans. FHA rates stayed in their comfort zone of 3.75% that day in spite of the improvements; FHA rates tend to take longer to adjust until there’s been a sustained move in one direction or the other, or a dramatic change in rates on a single day or two. Overseas currency drama over the value of the Yuan had an effect on rates all week–either waxing or waning influence, depending on the day and sometimes even the time of day. On Wednesday, rates began | more...

August 13, 2015

FHA Loan Rules For Income and Co-Borrowers

By Joe Wallace

When two borrowers want to apply for an FHA loan together, there are often questions about whether one borrower can make up shortcomings for the other. For example, can a borrower who earns less be offset by the borrower who earns more? As with many areas of the FHA single family home loan process, lender standards may apply, but it’s good to know the basic FHA loan requirements that apply. When it comes to income, FHA loan rules found in HUD 4155.1 at the time of this writing address the issue in Chapter Four Section D: “The lender must analyze the income of each borrower who will be obligated for the mortgage debt to determine whether the borrowers income level can be reasonably expected to continue through at least the | more...

August 13, 2015

FHA Loan Employment Rules

By Joe Wallace

One of the most common questions about FHA home loans involves employment issues. How long does the FHA require an applicant to be on the job before he or she is eligible to apply for a loan? What happens is a borrower switches jobs, has a gap of employment between jobs, or has only recently started up with a new employer? The rules that define these issues are, at the time of this writing, found in HUD 4155.1. They will soon be referenced in a new FHA loan handbook, but for now, HUD 4155.1 Chapter Four Section D is the source for these rules. Chapter Four says: “To be eligible for a mortgage, FHA does not require a minimum length of time that a borrower must have held a position | more...

August 12, 2015

FHA Loans, Debt-To-Income Ratios, and Cosigning

By Joe Wallace

We received an excellent reader question recently about how being a co-signer on someone else’s financial obligation might affect a borrower’s chances for an FHA mortgage loan. Does being a co-signer have any influence on how the lender views your credit? Your debt-to-income ratio? FHA loan rules published in HUD 4155.1 address these issues. Chapter Four Section C has a heading titled “Contingent Liability On Cosigned Obligations” and addresses this reader question directly. The rules begin by describing what is considered a contingent liability for the purposes of processing an FHA mortgage loan appication: “A contingent liability exists when an individual is held responsible for payment of a debt if another party, jointly or severally obligated, defaults on the payment.” Simple enough. But the FHA goes further in the next | more...

August 11, 2015

FHA Mortgage Rate Trends: Starting Out Higher

By Joe Wallace

In our last report we mentioned that Friday saw a rally for mortgage rates; the following Monday, August 10, served to wipe out those gains. In spite of that move higher, many lenders are offering best execution rates for 30-year fixed rate conventional mortgages (at the time of this writing) between 3.875% and 4.0%. We’ve had many days of improvement with minor adjustments here and there and a variety of sources report the rate activity we’re currently seeing could be deemed fairly typical. Overseas headlines about the Greek debt crisis have lost their influence on rate activity at home, it seems, but the China stock market woes could easily become an influence again if breaking news that influences investor behavior occurs. FHA mortgage loan interest rates are holding steady in | more...