Articles Tagged With: FHA Loan Requirements

August 1, 2014

FHA Loan Income Requirements: A Reader Question

A reader asks, “I am applying for an FHA loan, I left a permanent position of 3 years to do contract work which I have done for over a year now. I am currently on my 2nd assignment which still has another 6 months minimum left on it, with a possibility of an extension – I am a W-2 contractor (not 1099.) Would I be disqualified since I only have a one-year history as a contractor vs being a permanent employee?” Let’s examine what the FHA loan rules printed in HUD 4155.1 say about income and employment verification. To star with, let’s look at the FHA instructions to the lender for analyzing employment: “When analyzing the probability of continued employment, the lender must examine • the borrower’s past employment record | more...

July 29, 2014

FHA Loans, Tax Liens, and Other Credit Issues: A Reader Question

By Joe Wallace

A reader asks, “I’m trying to get my credit re established after a BK in 2011…3.5 years thus far. I’ve had a 12 month secured loan at my credit union, and I’ve had a non secured card for just over 1 yr now, with 2 credit line increases to 2 k in 1 year of payments.” “Also trying to pay off, and get a federal tax lien withdrawn of 9 k to help better score in the meantime. The back tax will be paid in full by Dec 31 -2014…and I’m currently in the direct debit acct, so in 3 months they will withdrawn the lien automatically…After all this projected prep,…what else do I need to get in order by early 2016? to smooth sail for the FHA?” Depending on | more...

July 23, 2014

FHA Loan Income Requirements: A Reader Question

By Joe Wallace

A reader asks, “My spouse is waiting an immigration process. Is there any way we can count all or partial income? My credit is at $800 and we have no other debts.” This is a difficult question to answer without knowing more. The big question is whether the spouse income is verifiable or not–FHA loan rules require all income to be used in the debt to income ratio calculation (which is an important part of the loan approval process) to be verifiable. What does this mean? Verifiable income is defined as earnings that are stable, reliable, and likely to continue. Verifiable income is not always “taxable income”–veteran benefits, for example, may be counted as income even though they are tax-exempt. But some types of income can’t be used. Non-verifiable income | more...

July 21, 2014

FHA Loan Rules For Credit, Short Sales, Foreclosures: A Reader Question

By Joe Wallace

A reader asks, “My husband and I are looking to potentially buy a manufactured home already on some land. The home itself appears to meet the requirements stated above. The mortgage loan officer is stating that we do not qualify for a loan for a manufactured home due to my husband having a foreclosure seven years ago and I have a short sale three years ago. Is this correct, that due to our prior home financing circumstances, we are ineligible for an FHA loan for a manufactured home?” The important thing to keep in mind with regard to questions like this is that FHA loan rules aren’t the only ones that govern the FHA loan transaction–lender standards also play a part. FHA loan requirements for credit and other financial qualifications | more...

July 18, 2014

FHA Loans In Community Property States: A Reader Question

By Joe Wallace

A reader asks, “We have applied for an FHA loan. We live in Texas and my husband has a qualifying score to be approved along with the income. My question is that I have prior to marriage collection accounts and my income along with my credit score cannot be used as my credit score isn’t high enough. Collection accounts are prior to marriage and we have no debt incurred during our marriage.” “We were married in October 2012. My loan officer has stated that my debt prior to marriage will not be included with my husband’s debt to income ratio as it violates Texas state law. TX is a community property state and debt is only to be split within the time of the marriage and not prior. Is it | more...

July 16, 2014

New FHA HECM Deferral Period Rules Take Effect August 4 2014

By Joe Wallace

Recently the FHA and HUD updated requirements to the FHA Home Equity Conversion Mortgage (HECM) program to include something known as a deferral period for surviving non-borrowing spouses of those with HECM loans. What does this mean? According to the FHA official site, “For any HECM with a case number issued after the effective date of this Mortgagee Letter, in order to be eligible for FHA insurance, the HECM must contain a provision deferring the due and payable status that occurs because of the death of the last surviving mortgagor, if a mortgagor was married at the time of closing and the Non-Borrowing Spouse was identified at the time of closing.” “Specifically, the HECM documents must contain a provision deferring due and payable status until the death of the last | more...

July 8, 2014

FHA/HUD Announce Settlement In Discriminatory Ads Case

By Joe Wallace

The FHA and HUD have announced a settlement in a case involving discriminatory ads for housing. According to the press release found on the FHA/HUD official site, “The U.S. Department of Housing and Urban Development (HUD) announced today a Conciliation Agreement between the Connecticut Fair Housing Center (CFHC) and respondents Lil-1 Associates, AllPoints Realty and realtor Lillian Polak. The real estate companies will pay more than $24,000 to settle allegations that they published discriminatory listings and advertisements for condominiums specifying that children were not permitted.” Borrowers who want to buy a condo unit with FHA mortgage loans don’t always experience this type of illegal discrimination, but it’s good to know that if it does occur, FHA borrowers (or anyone looking to purchase a home or rent one) do have recourse | more...

July 7, 2014

FHA Loan Reader Questions: Bankruptcy and Foreclosure

By Joe Wallace

A reader asks, “I had a FHA mortgage with my previous home. Because of circumstances beyond my control, I had to file bankruptcy and my home was foreclosed on. It has been almost 2 years since the bankruptcy was discharged. Would I be eligible for another FHA mortgage and if so, when could I apply? Also my sister wants to buy the new home with me. Could she be a second borrower?” FHA loan rules are different depending on what kind of bankruptcy was filed. In some cases the borrower may not only be subject to a minimum waiting period, but also may need to get court permission in order to be obligated on the new home loan. For example, look at the rules covering Chapter 7 bankruptcy and a | more...

June 30, 2014

FHA Loan FICO Score Rules: A Reader Question

By Joe Wallace

A reader asks, “How low can a credit score be? i know mine is about 540. If it is for low income people with BAD credit why should the score matter at all?” The FICO score question has two important aspects borrowers should be aware of. FHA loan rules establish a minimum FICO score requirement. HUD 4155.1 includes a chart to show the FICO minimums and how maximum financing is affected depending on what the borrower’s FICO score is within these ranges: FHA minimum scores are just that–the minimum numbers required. Lenders can and often do have more strict FICO score rules than what you see printed above. There’s no such thing as a “bad credit FHA home loan”. Borrowers who do not meet the minimums listed above can’t be | more...

June 27, 2014

FHA Appraisals and Required Corrections: A Reader Question

By Joe Wallace

A reader asks about a refinance loan situation where “an appraisal is done there’s a recommendation of installing an electric line water heater and roof sealing, can the loan be approved without doing these improvements or can the cost be added to the mortgage loan to do so?” If the FHA appraiser recommends corrections or alterations, these are usually done as a condition of loan approval and may require a compliance inspection to insure they have been accomplished. However, the second part of this reader question does offer the borrower some possibilities when the borrower is required to pay for the fixes. According to the FHA loan rules published in HUD 4155.1 Chapter Two, Section A, under the heading titled, “Adding Repair and Improvement Costs to the Sales Price” we | more...