Articles Tagged With: FHA Loan Rules

September 14, 2016

FHA 203(k) Rehab Loan Options

The FHA has a program that allows borrowers to apply for a mortgage loan in order to improve a property. The FHA 203(k) rehab loan is intended for borrowers who want to buy or refinance property and repair them, but not all borrowers have big rehab projects or work that requires a huge sum of money. What are the FHA 203(k) options for borrowers? There are two different types of 203(k) loans-the typical version is available, but there is also a “limited” 203(k) for projects that require a smaller amount of funds. The FHA official site describes the limited 203(k) as follows: “FHA’s Limited 203(k) program permits homebuyers and homeowners to finance up to $35,000 into their mortgage to repair, improve, or upgrade their home. Homebuyers and homeowners can quickly | more...

What You Need To Know About Your FHA Home Loan

September 13, 2016

FHA Loan Reader Questions: “Identity of Interest” And Below-Market Rents

By Joe Wallace

A reader asks, “My wife and I have resided in a three family home for 29 years. We have paid significantly below market rate rent for all these years because 1) initial elderly landlords just wanted good tenants and they liked us, 2) we looked after the elderly landlord after her husband died for many years and 3) the current owner was always appreciative for what we did for her mother (landlord has since passed and property is in Family Trust, their daughter is the trustee).” “She put the property up for sale and we submitted the winning bid. Now, two weeks before closing, the underwriter has said that because we paid less than market value for all those years that now we have an Identity of Interest and required | more...

How much can I borrow with an FHA refinance loan?

September 12, 2016

FHA Loan FICO Score Rules: What You Should Know

By Joe Wallace

What does it take to get approved for an FHA mortgage? There are a variety of factors that go into mortgage loan approval, and the borrower’s FICO score is just one of those factors. However, your credit report and credit score are an important ones and there can be confusion over how this score is reviewed. What do FHA loan rules tell the lender about FICO scores? HUD 4000.1 instructs the lender about reviewing credit scores, and since a borrower can have three different FICO scores, this is an important part of the rules to be aware of; how does the lender proceed when reviewing more than one credit score? Let’s examine what HUD 4000.1 says on this issue, starting with a definition. All three of a borrower’s credit scores | more...

September 7, 2016

FHA Loan Rules For Residency: A Reader Question

By Joe Wallace

One not-so-commonly asked questions about FHA loans is still an important issue to address. Here’s a recent reader question on a borrower’s ability to be approved for an FHA mortgage without being a U.S. citizen: “Ive just moved to the US from the UK on a K-1 Fiance Visa. Ive been here around 5 months. Just received my work authorization card through the mail, waiting for my social security number now. Ive been working voluntarily since I arrived…would we qualify for an FHA Mortgage Loan? Ive contacted two lenders who have told us that we might be entitled to a loan but they’re unsure.” The short answer to this questions is that technically speaking, non-U.S. citizens are eligible for FHA home loans unless they are in the United States illegally. | more...

When Is An FHA Loan Better Than A Conventional Loan?

September 7, 2016

FHA Loans After Foreclosure

By Joe Wallace

There are many foreclosure avoidance programs available for consumers struggling to make their mortgage payments; the Obama mortgage, the FHA HAMP program, mortgage loan modifications offered by the lender apart from government programs, etc. But in some cases foreclosure might be unavoidable. The borrower in these circumstances may wonder how long it could take to recover from such a “negative economic event” and become a home owner once more. FHA loan rules specifically address this issue in HUD 4000.1. Page 247 of HUD 4000.1 refers to situations that involve foreclosure or a deed-in-lieu of foreclosure. We learn: “A Borrower is generally not eligible for a new FHA-insured Mortgage if the Borrower had a foreclosure or a DIL of foreclosure in the three-year period prior to the date of case number | more...

September 6, 2016

FHA Loan Questions: Chapter 13 Bankruptcy

By Joe Wallace

Here’s a good example of the type of question we are commonly asked about credit history issues and FHA home loans: “I had my chapter 13 dismissed and continue to pay and rebuild my credit. It has been 6 months and I plan to buy a home within the next 6months. Will qualify to buy a home with an FHA loan?” FHA loan rules in HUD 4000.1 address bankruptcy issues, and the rules can vary depending on the type of bankruptcy. In general (we’ll look at specific FHA loan rules in a moment) you can expect to wait a minimum of 12 months with any type of bankruptcy under FHA loan minimum standards. We emphasize “FHA standards” here because additional lender standards can and often do apply. The FHA minimum | more...

September 2, 2016

Foreclosure Avoidance on FHA Mortgages: The Trial Payment Plan

By Joe Wallace

The FHA recently announced changes to its policies designed to help those who purchased homes with FHA mortgages and have since fallen into financial trouble to avoid foreclosure. There are many government programs to help borrowers keep their homes in hard times including the Obama mortgage, and the FHA Home Affordable Modification Program or HAMP. If you have fallen behind on your mortgage payments on an FHA mortgage, the information here will be of special interest to you. Those who are under consideration for HAMP may learn they have to complete a trial payment plan before the HAMP modification can be finalized and approved. But what does this trial payment plan (also referred to as TPP) entail? The FHA announced modifications to the HAMP program this summer, and in FHA | more...

September 1, 2016

FHA Loan Reader Questions: Judgments and Loan Approval

By Joe Wallace

A reader asks, “I have a judgment for a car that was repossessed in May 2010. It was a car purchased by my husband with myself as cosigner. I didnt plan on paying it off as we are waiting on a divorce and he has no plans to help pay it off. Will I be able to get a FHA mortgage with this lingering on my credit? I do have credit scores in the 650 range and higher.” Community property laws in a given state, where applicable, may affect the answer to this question, but in general, FHA loan rules in HUD 4000.1 state that judgments on a borrower’s credit history must have some kind of resolution. On pages 177 and 178 of HUD 4000.1 we learn a great deal | more...

September 1, 2016

FHA Home Loans: General Rules

By Joe Wallace

FHA home loans are unique compared to conventional loans due to the lower down payment and more forgiving credit requirements. There are some basic rules governing FHA mortgage loans you should know about going into the process; keeping these in mind will save time and help you better prepare for the loan. One of the key issues for FHA mortgages is the location of the home. According to HUD 4000.1, “The Property must be located within the U.S., Puerto Rico, Guam, the Virgin Islands, the Commonwealth of the Northern Mariana Islands, or American Samoa.” That’s a very basic requirement, but FHA loan rules do get more specific from there. A property must be situated in a reasonable owner-friendly location. For example: “The Mortgagee must determine if a Property is located | more...

August 31, 2016

FHA Loan Debt To Income Ratio Rules: Student Loans

By Joe Wallace

When the lender is adding up an FHA loan applicant’s income and monthly financial obligations for the purpose of calculating debt ratios, there are some debts that can be more complicated than others. Student loans, for example, can be tricky because a borrower may have student loan debt that is in “deferred” status, while others may be paying on their loans at the time of the loan application or soon thereafter. Here’s a recent reader question on the subject: “I cannot find anything that talks about NON deferred student loans. I have a client with a $63 payment on their credit report ($25,000 student loan balance). The loan is NOT in deferment, he pays $63 per month. The u/w is telling me I must use the greater of 1% of | more...