Articles Tagged With: FHA Loan Rules

How much can I borrow with an FHA refinance loan?

October 6, 2016

Self-Employed Borrowers: FHA Loan Rules

A growing number of Americans are either self-employed, contract workers, freelance, or otherwise employed in ways that don’t involve being on a company payroll and receiving traditional benefits, and health insurance. FHA home loans are definitely possible for those who are freelance, self-employed, etc. but it’s important to know what the FHA requires on a basic level for applicants who work in this way. HUD 4000.1 has some instructions to the lender for verifying self-employment income, for example, and these instructions may involve more paperwork than for other types of borrowers. To start, HUD 4000.1 spells out its definition of self-employment income: “Self-Employment Income refers to income generated by a business in which the Borrower has a 25 percent or greater ownership interest.” That may seem different than freelance income | more...

October 6, 2016

FHA Loan Employment Rules: Fact and Fiction

By Joe Wallace

FHA home loan employment rules can be easily misunderstood. There is some confusion over the basics of FHA loan policy regarding employment and how that employment must be verified by the lender. One of the most common fictions about FHA mortgage loans is that the rules supposedly require a borrower to be with their current employer for two years or more. This is not true. But there IS a two-year benchmark the FHA uses with respect to employment, as we learn in HUD 4000.1: “For all Employment related Income, the Mortgagee must verify the Borrowers most recent two years of employment and income…” Note that there is no specification for that two years to be with the same company or boss. HUD 4000.1 adds, “Direct verification of the Borrowers employment | more...

October 5, 2016

Cash To Close For FHA Loans: Some Rules

By Joe Wallace

One commonly asked question about FHA home loans involves how the lender verifies the borrower’s sources of cash to close the loan. FHA loan rules in HUD 4000.1 require the lender to verify all sources of cash to close (including your down payment) and when dealing with this requirement the first time, some loan applicants are surprised when the lender asks for specific details such as account numbers, bank statements, etc. In an age where cyber fraud, phone scams, and “phishing” for account numbers make headlines on a near-daily basis, it’s not surprising that bank customers would question a lender’s request for account numbers and other financial data. A version of a common question in this area goes like this: “My lender says she needs verify my cash reserves and | more...

FHA Loans And Natural Disasters: What You Should Know

October 5, 2016

Cash To Close: Investments, Private Savings Clubs

By Joe Wallace

In our last blog post we discussed FHA loan closing costs and down payments-specifically the rules found in HUD 4000.1 that governs the sources of the funds for cash to close (down payments and closing costs). The lender is required to verify the source of all funds for down payments and closing costs, and the procedure can vary depending on the source of the funds, lender standards, state law, etc. Last time we examined the rules for funds that come from savings and checking accounts, but these aren’t the only types of sourcing options. For example, cash to close may come from investments such as stocks or bonds, or money saved up in private savings clubs. HUD 4000.1 instructs the lender on how to proceed with these types of sources. | more...

What if my home was damaged in a natural disaster?

September 28, 2016

FHA Construction Loans: A Reader Question

By Joe Wallace

A reader asks, “Does FHA include loans for a construction to permanent mortgage?If so, can the construction be done by a licensed general contractor that does custom builds or does it have to be done by a licensed general contractor that only does spec builds? Is there other criteria/inspections that are specific to construction to permanent mortgage that are specific to an FHA loan?” This is a complex question, and FHA construction loans have issues far too numerous to address in a single blog post, but we’ll tackle the basics. FHA loan rules do allow for loans for new construction/proposed construction. This type of loan is more complex than a typical FHA mortgage and potential applicants are encouraged to discuss this option with a loan officer to learn what may | more...

September 26, 2016

Well Water And FHA Loans: Another Reader Question

By Joe Wallace

We’ve gotten a number of FHA loan questions lately about well water, and properties that are served by wells. It’s true that a home that is served by an individual well or a shared well can be approved for an FHA mortgage loan, but the well must meet FHA requirements. The latest reader question about wells and FHA mortgage loans asks: “Can a single family residence use a water tank to bring the flow test up? This is highly common in the area.” What the reader is asking about is covered-in part-by an FHA mortgage loan rule found in HUD 4000.1, on page 162. There are varying standards for wells depending on whether the well serves an individual home or is considered a “shared well” that services multiple properties. For | more...

September 26, 2016

Divorce and FHA Loans: A Reader Question

By Joe Wallace

A reader asks, “I am trying to qualify for an FHA Loan. I have been apart from my husband for over 13 yrs but not legally divorced. I am currently applying for an FHA Loan and DO NOT want him to be a part of anything Im doing and have FINALLY filed for divorce. House buying is a short sale and I need a fast approval.” “My divorce will take 3 months, I dont have the time! Do I qualify for any type of exception considering we have been apart for 13 years and the IRS has accepted me as an Innocent Spouse Relief and Separation of Liability and Equitable Relief?” This is a difficult question to answer for one important reason: state law is a determining factor in circumstances | more...

September 23, 2016

Well Water: FHA Loan Questions

By Joe Wallace

A reader asks, “FHA use to only require that these top items need to pass. Lead (first draw), Nitrate, Nitrite, Total Nitrate/Nitrite,Total Coliforms, Fecal Coliforms or E. Coli. Is this still true? I am hearing that a full water panel is required to be done, is this now true and if so,is FHA major focus still on the top items passing? Also what is required by FHA if one of these items fails?” This question is in reference to FHA requirements for properties that are served by wells. In general, the local health authority would set the standards, so the reader would need to consult with the local authority to get the answer to the first part of this question. Health standards, procedures, and requirements can and do vary from | more...

September 21, 2016

FHA Loan Questions: FHA Lenders

By Joe Wallace

A reader asks, “Do you have a local list of approved FHA lenders for first time home owners in the amount of $50,000.00 and lower?” This is a common type of question; we get asked this sort of thing quite frequently in the comments section. There are a variety of reasons why a borrower might wish to apply for a comparatively low-dollar amount FHA loan. One is that some housing markets simply don’t have the higher prices; another is that a borrower wishes to purchase a mobile or manufactured home rather than what’s known as “stick-built” housing which is built on-site. What’s important to know is that lender standards vary from place to place. What’s offered by one lender may not be offered by another. With that in mind, it’ | more...

September 19, 2016

FHA Mortgage Loan Rules: Business Debt

By Joe Wallace

When your loan officer reviews your financial details in order to make sure you are a good credit risk for a mortgage loan, there are many factors to consider. Some borrowers have less debt than others, and some debts are not necessarily personal loans, personal credit cards, etc. Sometimes business debt can factor into the equation. FHA loan rules for calculating certain types of business debt into a borrower’s debt to income ratio are found in HUD 4000.1, which begins on page 185 with a definition: “Business Debt in Borrowers Name refers to liabilities reported on the Borrowers personal credit report, but payment for the debt is attributed to the Borrowers business.” The basic instructions to the lender here are fairly simple: “When business debt is reported on the Borrowers | more...