Articles Tagged With: FHA Loan Rules

January 27, 2014

FHA Loan Answers: Can A Parent Buy A Home With A Child Using An FHA Loan?

Lots of parents want to help their children get a leg up in the early stages of adult life. Some parents pay for their children to go to college, some buy cars, and still others buy homes for their children. Can a parent and child apply for an FHA mortgage together even if the parent doesn’t plan on living in the home? FHA loan rules found in HUD 4155.1 explain what is possible and what is not possible for an FHA loan when it comes to applications with “non-occupying co-borrowers”. In such cases, Chapter Two Section B of HUD 4155.1 says, “A non-occupying borrower transaction involves two or more borrowers where one or more of the borrower(s) will not occupy the property as his/her primary residence. When there are two | more...

January 24, 2014

Can FHA Home Loan Closing Costs Be Financed? A Reader Question

By Joe Wallace

A reader asks, “I have read in several places on the web that it is possible to finance your closing costs into a FHA loan. However, many of these sources are at least a couple of years old. Is this possible?” To start, let’s examine what the FHA official site has to say about FHA loans and closing costs. At www.HUD.gov on the page titled Let FHA Loans Help You, we find the following: “FHA might be just what you need. Your down payment can be as low as 3.5% of the purchase price, and most of your closing costs and fees can be included in the loan. Available on 1-4 unit properties.” Some closing costs may be financed, some may be paid by the seller within the boundaries of | more...

January 24, 2014

FHA Loan Reader Questions: Employment Requirements

By Joe Wallace

A reader asks, “Can a borrower get a FHA loan with less than two years of employment? She has a full time and part time job. However she has only been employed for 6 months on each job.” Let’s examine what FHA loan rules say about this subject. FHA requirements for employment verification are found in HUD 4155.1. In Chapter One, Section B we learn: “The lender is required to verify the applicant’s employment history for the previous two years. For the most recent two years the lender must obtain • copies of W-2s • written VOEs, or • electronic verification acceptable to FHA.” But what about in cases where employment can’t be verified for two years? And do the rules require the applicant to be on the job with | more...

January 22, 2014

FHA Loan Reader Questions: Getting Behind on an FHA Mortgage

By Joe Wallace

A reader asks, “Let’s say a borrower misses a month’s payment. The next month, they have enough money for one payment, but not the two months that they owe. Can the lender tell them not to pay until they have enough money for *all* that they owe, preventing them from at least not getting further behind in their payments? This feels unethical; is it legal?” Skipping payments on an FHA loan is a bad idea in general. The reader did the right thing by contacting the lender as soon as there was a problem making the payments–borrowers should always work closely with a lender in order to avoid going into FHA loan default and foreclosure. But in situations where the borrower isn’t sure if the participating FHA lender is helping | more...

January 21, 2014

FHA and HUD Issue New Foreclosure Avoidance Brochure

By Joe Wallace

The FHA and HUD have issued a new mortgagee letter explaining the replacement of a “saving your home” brochure issued in 2002. According to FHA Mortgagee Letter 14-01, the “How to Avoid Foreclosure” brochure, HUD-PA-426, has been replaced. “The new brochure is the “Save Your Home: Tips to Avoid Foreclosure” brochure, HUD-2008-5-FHA, which is to be sent with a cover letter to delinquent mortgagors pursuant to 24 CFR 203.602.” The FHA and HUD have replaced the old document and have included the following instructions to lenders when sending the new brochure, which is designed to help inform borrowers in trouble on their FHA mortgages about the options available to them. When sending the new brochure, lenders are required to send a cover letter which includes the following “informed borrower” information: | more...

January 16, 2014

Can A Family Member Loan Money For Closing Costs On An FHA Mortgage?

By Joe Wallace

When you apply for an FHA loan, the lender will explain that there are a variety of closing costs to anticipate including the amount of the required 3.5% FHA loan down payment. Some FHA loan applicants may struggle financially with the credit costs and seek to borrow money to cover them. FHA loan rules permit this but only under approved conditions. A borrower’s required funds for down payment, for example, must come from an approved source such as personal savings, investments, or (in cases where a loan is required) from a secured loan. Down payment money cannot come from credit card cash advances, payday loans or other “non-collateralized” loans. Can a family member lend an FHA borrower the funds to close? According to FHA loan rules in HUD 4155.1, Chapter | more...

January 16, 2014

FHA Loans And Energy Efficient Mortgages

By Joe Wallace

Borrowers who choose the FHA Energy Efficient Mortgage (EEM) option as part of their FHA loan can get up to $8,000 in additional funds added to the loan amount for the express purpose of adding approved energy-efficient upgrades. According to the FHA loan rules in HUD 4155.1 , Chapter Six, “Once the borrower and the property are determined eligible for FHA-insured financing, the lender, using the energy rating report and the EEM worksheet, determines the dollar amount of the cost-effective energy package that may be added to the mortgage amount. The cost of any improvement to the property that will increase the property’s energy efficiency, and that is determined to be cost effective, is eligible for financing into the mortgage.The cost that may be added to the mortgage amount is | more...

January 15, 2014

FHA Loan Assumptions: For Qualified Borrowers

By Joe Wallace

Yesterday we discussed FHA loan assumption policies—FHA loans are assumable, provided the lender can determine that the proposed new owner is able to financially qualify for the mortgage. According to HUD 4155.1 Chapter Seven, the following applies to all FHA home loans subject to laws affecting loans closed in 1989 and after: “Under the HUD Reform Act of 1989, mortgages closed on or after December 15, 1989 require credit qualification of those borrowers wishing to assume the mortgage. The creditworthiness review requirement spans the life of the mortgage. This requirement applies to both those borrowers who • take title to a property subject to the mortgage without assuming personal liability for the debt, and • assume and agree to pay the mortgage.” FHA loan rules state that any mortgage falling | more...

January 13, 2014

The FHA Energy Efficient Mortgage Loan

By Joe Wallace

The FHA loan program includes something called an Energy Efficient Mortgage. This program allows the borrower to apply for additional funds in order to make approved energy efficient upgrades to the property to be purchased with an FHA home loan. According to the FHA loan rules in HUD 4155.1 Chapter Six, Section D, the FHA EEM program allows the borrower to 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, Chapter Six Section D says: 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 | more...

January 10, 2014

FHA Loans And Outstanding Debt: A Reader Question

By Joe Wallace

A reader asks, “If you have those (FHA) minimum scores do you still have to pay some remaining debt on your credit report? What if most those are doctor bills, and do they have a special buyers program for people on disability?” Though this reader question isn’t entirely clear, it seems the main issue is whether having outstanding debt might be an issue when applying for an FHA home loan. The real question for the lender in cases like this is whether the debt is typical monthly payments or a delinquency which needs to be resolved. According to FHA loan rules, outstanding debt can be an important factor in FHA loan approval or denial: “Past credit performance is the most useful guide to • determining a borrower’s attitude toward credit | more...