Articles Tagged With: FHA Loan Requirements

March 7, 2015

FHA Loan Rules: Employment Verification

When you want to apply for an FHA home loan, the lender will give you forms to complete that include requests for information on your past and current employment. Employment history is an important part of the FHA loan application review process and the lender is required to verify your employment by contacting your place of work. But what do FHA loan rules specifically require? HUD 4155.1 has the guidelines for lenders. Chapter One Section B of HUD 4155.1 instructs your lender: “The lender is required to verify the applicant’s employment history for the previous two years. However, direct verification is not required if all of the following conditions are met: • the current employer confirms a two-year employment history (this may include a pay stub indicating a hiring date) | more...

March 6, 2015

Reader Questions About FHA Loan Appraisals: When Do They Expire?

By Joe Wallace

A reader asks, “How long do FHA Appraisals stay with the property in Georgia?” A search of the FHA official site at www.FHA.gov reveals a Frequently Asked Questions page that answers this query, but know that this FHA loan rule applies to all FHA loan appraisals, not just those that are completed in the state of Georgia. According to the FHA FAQ page titled, “Do FHA Appraisals Expire?” we learn the following: “The FHA appraisal validity period is 120 days for existing, proposed or under construction properties. If the Homeownership Center (HOC) determines that soft market conditions exist in certain areas or markets, it may shorten the term of appraisals for substantial rehabilitation upon advance notice to lenders.” When does the 120 day period an FHA appraisals begin? According to | more...

March 5, 2015

FHA Loan Reader Questions: Chapter 13

By Joe Wallace

A reader asks, “I am a bit confused. My Chapter 13 was discharged in February 2014. Since then I have re-established my credit and my score is at 660 and no late payments. What is the sooner I will be able to pre-qualify for a loan and/or close on a FHA.” Chapter 13 bankruptcy is addressed specifically in FHA loan rules. FHA loans are still possible for qualifying borrowers, but the following rules apply. “A Chapter 13 bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage, provided that the lender documents that • one year of the pay-out period under the bankruptcy has elapsed • the borrower’s payment performance has been satisfactory and all required payments have been made on time, and • the borrower has received written | more...

March 4, 2015

FHA Loan Approval or Rejection: The Notification Rules

By Joe Wallace

When a borrower applies for an FHA home loan for the first time, it’s normal to wonder how long it might take and how the borrower might be contacted when the decision has been made. When it comes to the length of time to process the loan, there is no set answer–it can depend a great deal on the lender’s workload, how easy or difficult it is to track down a borrower’s credit information, etc. But once a decision has been made, FHA loan rules in HUD 4155.1 tell the lender how to proceed. Once the decision has been reached, FHA loan rules state, “The lender is responsible for notifying the borrower of the approval, either in writing or verbally, immediately after receipt of the underwriter’s decision.” That is found | more...

March 3, 2015

FHA Mortgage Rate Trends: Moving Higher

By Joe Wallace

It looks like an upward trend for mortgage loan rates in general at the time of this writing–we’re seeing some volatility in the rates that might be likely to continue thanks to some anticipated data releases later this week that have potential to move rates higher (based on investor reaction to those reports) including a jobs report and a Non-Farm Payroll report. If rates do move higher in the wake of events like these they could move quickly–some market watchers say if you can’t handle the risk of the rates moving suddenly upward, locking in a mortgage loan rate is a good idea. How are the rates doing? 30-year fixed rate conventional mortgages are edging closer to 4.0% territory–some say the 30-year fixed rates are, best execution, the highest they’ve | more...

March 3, 2015

Interest Rate Caps On FHA ARM Loans

By Joe Wallace

In our last blog post we began discussing FHA adjustable rate mortgages, also known as ARM loans. We talked about how an FHA ARM loan works: “An ARM has four components: (1) an index, (2) a margin, (3) an interest rate cap structure, and (4) an initial interest rate period. When the initial interest rate period has expired, the new interest rate is calculated by adding a margin to the index. Your lender will disclose the margin at time of loan application (margins may vary from lender to lender, so it’s a good idea to shop around for a low margin).” We also mentioned the adjustable nature of the interest rates on these loans. “As the index figure moves up or down, the FHA official site says a borrower’s interest rate, | more...

March 2, 2015

FHA Loans, Missed Payments, and Your Mortgage

By Joe Wallace

FHA borrowers who get in trouble on their FHA mortgages are urged to be proactive about their situation in order to avoid defaulting on the FHA loan and risking foreclosure. The FHA has help available starting with advice for borrowers in this situation–you can find this advice on the FHA official site at http://portal.hud.gov/hudportal/HUD?src=/topics/avoiding_foreclosure . But the FHA has also issued guidance to lenders and loan officers telling financial institutions what the government expects the lender to do in cases where the borrower becomes delinquent on the FHA mortgage loan. Case in point, the recent FHA mortgagee letter titled, “Revised Notification to Homeowners of Availability of Housing Counseling Services”. According to this mortgagee letter, dated February 4 2015, “Mortgagees must provide delinquent borrowers with a notice describing the availability of housing | more...

March 2, 2015

FHA Loan Credit Issues

By Joe Wallace

A reader asks, “My partner had a 642 and i have a 517. I have messed up in the past with my credit,but i am now paying off what i have on my credit report. Would we be able to get a home loan with these scores?” That would depend on the standards of the individual lender. FHA loan rules state that borrowers below a certain FICO score are not eligible for maximum FHA loan financing (which requires the borrower to put down a minimum cash investment of 3.5%). Here’s what the FHA official site says about circumstances like the one in the reader question: “When a credit score is available, it must be used to determine eligibility for FHA insured financing. The score that is used to determine eligibility | more...

February 27, 2015

FHA Loan Questions: Will The Government Grant Me A Mortgage?

By Joe Wallace

A reader asks, “My question is about getting a mortgage. I have paid off my Chapter 13 BK just recently. As part of that I did short sales on 3 properties back in 2010 & 2011. My credit score is at 690 at this point and we are in good financial shape.” “We have $90,000 in our savings account, $380,000 in liquid assets like 401K, owned property, etc. Our monthly income is over $6000, and my wife makes over $66,000 yearly. Will the government or anyone grant us a mortgage?” In general terms, this reader’s situation sounds like he or she would not have difficulty finding a lender willing to at least consider the circumstances and review FHA home loan options. Getting a new FHA mortgage loan after a serious | more...

February 27, 2015

FHA Loan Debt To Income Ratios

By Joe Wallace

A reader asks, “Hi. My wife and I are planning to buy a house. My wife has a stable job for six years as registered nurse and I is currently a homemaker. Both of us has credit score of 720+ and we never missed a single payment in our credit cards and personal loans. What is our chance to be approved if our debt to income ratio is 49%? Can we qualify for a “no-conforming loan”? (Loan amount is $225,000, please note that mortgage interest, principal, taxes, insurance, HOA fee are already included in the DTI.” According to the FHA official site, many FHA loans are underwritten via an automated system. Here’s a quote from an FHA mortgagee letter from 2013 which announced changes to when and how a lender | more...