Articles Tagged With: FHA Loan Rules

March 31, 2014

FHA Updates Official Site On Electronic Signatures Policy

Recently, the FHA updated its electronic signature policy to accept “e-signatures” on a wider range of documents related to FHA home loans. According to the official site at www.FHA.gov, “FHA will accept electronic signatures on the following ‘Authorized Documents’ (see below), provided they are not otherwise prohibited by law, and comply with the standards set forth in Mortgagee Letter 2014-03 and with the Electronic Signatures in Global and National Commerce (ESIGN) Act.” The mortgagee letter issued at the end of January 2014 stated that FHA recognizes electronic signatures within certain limits as defined by the ESIGN act. “The ESIGN Act defines electronic signatures as “any electronic sound, symbol, or process attached to or logically associated with a contract or record and executed or adopted by a person with the intent | more...

What you should know about FHA 203(h) Loans For Disaster Victims

March 28, 2014

FHA Loan Answers: Does Alimony/Child Support Count As Income?

By Joe Wallace

We’ve been discussing topics this week related to FHA loan rules for income and employment. The participating FHA lender is responsible for verifying an FHA loan applicant’s employment and income to make sure it is stable and reliable. Not all forms of income can be used on the FHA loan application. Sporadic income from sales of goods online, for example, may not qualify, and certain types of commissions may not qualify depending on their frequency. GI Bill housing stipends cannot be used because they are not “likely to continue” past a certain number of months. Then there is the common question about child support and/or alimony payments. Can this form of income, if declared on the FHA loan application, be used to qualify for the mortgage? Chapter Four of HUD | more...

March 26, 2014

FHA Loan Rules: Does Commission Income Count As Verifiable Income?

By Joe Wallace

For an FHA home loan, the participating FHA lender is required to verify the borrower’s employment and income. Only verifiable income can be used to calculate the borrower’s debt-to-income ratio and there are instructions for the lender on how to determine if certain types of income can be used and under what circumstances. Commission income is a very good example. Not all commission income may be eligible to be used for the debt to income ratio. How does the lender determiner what’s permissible and what’s not? There are instructions to the lender in HUD 4155.1, Chapter Four, Section D under the heading, “Salary, Wage, And Other Forms Of Income”. It begins by saying: “Commission income must be averaged over the previous two years. To qualify with commission income, the borrower | more...

March 25, 2014

FHA Loan Reader Questions: Income Requirements

By Joe Wallace

A reader asks, “What is the income limit for a loan? My daughter and friend wants to buy a home with a few acres. She started a new job in Nov of 2013. He has a good income and working on his credit rating. They do not have enough for a large down payment.” FHA loans do not feature a minimum or maximum income limit. Instead, the lender must get employment and income information from the borrower(s) and determine the applicant’s debt-to-income ratio. A borrower with too much debt and not enough income will not qualify for the FHA loan. The borrower who has little debt but not enough income to qualify for the loan based on how much debt to income that would apply with the mortgage figured in | more...

March 18, 2014

FHA Loan Rules: Condominiums

By Joe Wallace

FHA loan rules permit single-family mortgages on suburban homes, mixed-use properties that meet FHA loan requirements, townhomes and condominiums. For a condo to qualify for an FHA mortgage, it must be on or be added to a list of FHA approved condo projects. But some borrowers aren’t sure what constitutes a condominium–what do FHA loan rules recognize as a condo unit as opposed to other types of property? As stated above, FHA requires condo units to be approved. The rulebooks states, “FHA must approve condominium projects before a mortgage on an individual condominium unit can be insured.” The rules for FHA loans on what constitutes a condo are found in HUD 4155.1, Chapter Four Section B under the heading “Requirements For Condominium Eligibility”. Those rules begin by stating: “A condominium | more...

March 14, 2014

FHA Streamline Refinance Loan Maximums

By Joe Wallace

If you want to refinance your existing FHA home loan with an FHA Streamline Refinance loan, you likely want to know what the maximum loan amount would be for the transaction. Borrowers who apply for Streamline Refinance loans are often able to do so with no credit check or appraisal (depending on the lender) and there’s no cash back to the borrower for this type of refinance loan. The maximum FHA loan for Streamline Refinance transactions may depend on whether you have a lender-required appraisal or not. According to HUD 4155.1, the maximum FHA mortgage loan for Streamlines without an appraisal are as follows: “The maximum insurable mortgage for streamline refinances without an appraisal cannot exceed the outstanding principal balance • minus the applicable refund of the UFMIP, • plus | 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...

March 6, 2014

FHA Streamline Refinances–What’s Possible?

By Joe Wallace

FHA Streamline refinancing loans are for existing FHA mortgages. They feature no FHA-required appraisal in most cases, and there is no FHA-required credit check in most cases. Some borrowers who want to apply for this type of FHA refinance loan may wonder if the transaction they have in mind is possible under the rules of the FHA loan program. For example, some borrowers want to refinance from a conventional mortgage to an FHA refinance, which is not possible under the FHA Streamline program (but is under FHA Cash-Out Refinancing). What transactions ARE permitted? According to HUD 4155.1, Chapter Six, Section C under the heading “Types Of Permissible Streamline Refinances” we find a list of the following: • no cost refinances • ARM to ARM refinancing • ARM to fixed rate | more...

March 4, 2014

FHA Energy Efficient Mortgages

By Joe Wallace

There is an option for FHA new purchase home loans and refinancing loans called the Energy Efficient Mortgage (EEM). According to the FHA loan rules found in HUD 4155.1, “Under the EEM Program, a borrower can finance 100% of the cost of eligible energy efficient improvements into the mortgage, subject to certain dollar limitations, without an appraisal of the energy efficient improvements. For the EEM Program, the mortgage amount includes the cost of the energy efficient improvements, in addition to the usual mortgage amount normally permitted FHA maximum loan limit for the area may be exceeded by the cost of the energy efficient improvements energy efficient improvements must be cost effective in order to be included into the mortgage, and amount of the cost effective energy package is added to | more...

March 3, 2014

FHA Loan Waiting Periods Post-Bankruptcy: A Reader Question

By Joe Wallace

A reader asks, “In 2007 I applied for bankruptcy and got dismissed in 2008. The creditors didn’t accept my plan. In 2008 house got sold. I need to know the waiting period before applying for an FHA loan.” There are two types of bankruptcy mentioned by name in the FHA loan rules found in HUD 4155.1. One is Chapter 7, the other is Chapter 13. Since the reader didn’t mention which type of bankruptcy, we’ll quote both guidelines. For Chapter 7, HUD 4155.1 Chapter Four states: “A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have elapsed since the date of the discharge of the bankruptcy. During this time, the borrower must have: –re-established good credit, or –chosen not | more...