Articles Tagged With: FHA Loan Rules

September 30, 2015

FHA Single Family Home Loan Policies: Credit Qualifying Under HUD 4000.1

With the publication of HUD 4000.1 in its entirety, FHA single family home loans have a new policy handbook. It contains existing policy, revised or amended loan rules, and other changes that are relevant when it comes to applying for a single family home loan or refinance loan. With the new rule book, we’re examining the contents of those rules in a variety of areas to show the current state of FHA loan rules, credit requirements, appraisal rules and other important topics. Let’s examine some basics of qualifying for an FHA mortgage under the new rulebook. In general, HUD 4000.1 instructs the lender, referred to here as “the mortgagee”, as follows: “The Mortgagee must obtain a credit report for each Borrower who will be obligated on the mortgage Note. The | more...

September 29, 2015

FHA Loan FICO Scores And Payment History

By Joe Wallace

When the FHA loan rule book (HUD 4000.1) lists its minimum FICO score requirements, some people forget that these requirements are minimums and that participating lenders are free to require higher FICO scores, and often do. We get plenty of reader questions about FHA FICO score requirements–here’s a recent example: “I have my 3 FICO scores they are 633,601, and TransUnion is 565…I have credit but some late payments the last being December 2014…My question is do you think I could get a FICO loan for the mortgage or would I need to bring my FICO up?” The answer to the reader’s question is complex for two reasons–lender standards apply and while based on what’s listed here the reader technically qualifies for an FHA mortgage loan, the lender’s FICO score | more...

September 28, 2015

FHA HECM Loans and Death Of The Primary Borrower

By Joe Wallace

We get many questions about FHA HECM loan rules. Some of those questions have to do with the legal rights and/or obligations associated with HECM loans for primary borrowers and what happens to the non-borrowing occupant if the borrower dies (in terms of ownership and occupancy of the property). Here’s a recent question that showed up in the comments section: “Several years ago my father and I took out a Reverse Mortgage on our home. He had to be the primary borrower because of his age and I was and still am not 62. I am a co-owner of the house and my name is on the deed. I had to go through the counseling and I had to sign all papers that he signed. My question is when something | more...

September 26, 2015

FHA Loan Rules In HUD 4000.1 And Past Mortgagee Letters From FHA/HUD

By Joe Wallace

When the new FHA single-family home loan policy hand book (HUD 4000.1) took effect, it became the official go-to reference for FHA single family new purchase loans and refinance loans. That means that the old FHA loan rule books for single family transactions, including HUD 4155.1 and HUD 4155.2, became inactive as of the launch date for HUD 4000.1. It also means that a large amount of previous FHA/HUD correspondence also became inactive. The FHA/HUD official site has an archive of all FHA mortgagee letters (ML for short, which feature policy changes, updates, modifications, etc.) but there are many of those that are now inactive, superseded by HUD 40001. There is no way to list all the mortgagee letters, handbooks, and other items that have been made inactive, but the | more...

September 25, 2015

HUD 4000.1 Questions: FHA Loans For Homes In Flood Zones, Flood Insurance

By Joe Wallace

With the publication of HUD 4000.1, the new Single Family Home Loan handbook, there have been plenty of changes, alterations, restatements of policy and other issues borrowers and lenders alike should be aware of. We’re examining some of the most frequently asked questions about policies found in HUD 4000.1 to help borrowers and lenders know what current policy, as found in the new handbook, is on specific issues. One of those issues has to do with flood insurance and flood zone determination. FHA loan rules have standards for new construction and existing construction homes; let’s examine what the rules in HUD 4000.1 say about flood insurance for existing construction. According to the FHA official site, rules for flood insurance include the following requirement of the lender: “The lender must determine | more...

Can I buy a manufactured home with an FHA loan?

September 25, 2015

FHA Loan Applications and Repayment Issues

By Joe Wallace

We get many questions from readers about FHA loans in our comments section. Some of those questions refer to specific credit issues such as the one that came in recently asking: “My loan is currently processing. There is a problem with being 30 days late on my rent last year. Will this totally effect my changes of being approved???” The answer to this question isn’t as simple as quoting a passage from the new FHA loan rulebook, HUD 4000.1. The answer depends greatly on the borrower’s other financial qualifications. FHA loan rules state that a one-time lapse is not necessarily enough to dismiss the applicant as a bad credit risk. The lender will be looking for patterns that indicate whether the borrower has a reliable payment history on financial obligations. | more...

September 24, 2015

FHA Loan Income Requirements: A Commission Question

By Joe Wallace

We recently got a question regarding commission income and how it may be reviewed by the lender. More specifically, the question is about whether the nature of the reader’s income is truly “commission income” and how the lender might view that on the FHA loan application. The reader asks: “On my pay stub next to earnings it says commission, but this actually isnt true commission pay. We arent selling anything, we deliver to stores. Its just how my company decided to pay us. So my question is do I fall under this category of commission based salary, where I would need a year of income or would that not matter in my case?” Unfortunately, the answer to this question would come from the lender. The loan officer’s job is to | more...

September 24, 2015

Mortgage Rate Trends: Holding Steady

By Joe Wallace

Wednesday saw mortgage loan rates holding steady, more or less, following some improvement from the previous day. There was some weakness in bond markets that affect mortgage loan interest rates, but in spite of that Wednesday is what many in the business call a “sideways” day. 30-year fixed rate conventional mortgages held steady, best execution at between 3.75% and 4.0%. According to our sources only a small number of lenders may have offered the very bottom end of that range, with 3.875% more typical in a best execution scenario. FHA mortgage loan rates hold fast at 3.75% and as always, that best execution rate may vary more among participating FHA lenders. Best execution rates assume ideal conditions–borrowers with outstanding financial qualifications may have access to rates at or near these | more...

September 23, 2015

HUD 4000.1 Questions: Occupancy

By Bruce Reichstein

With the publication of the new FHA Single Family Home Loan guidebook, HUD 4000.1, there have been some changes, updates, revisions and restatements of existing FHA loan policy. We’re examining the new rule book over time to discover what borrowers and lenders alike may need to know about FHA home loans under the new handbook. Occupancy is an important question/issue connected with FHA home loans. HUD 4000.1 states that there is a definite occupancy requirement for new purchase single-family home loans: “At least one borrower must occupy the property as their principal residence within 60 Days of signing the security instrument and intend to continue occupancy for at least one year.” There is also a requirement on non-occupying co-borrowers–they don’t have to live in the home but must meet the | more...

September 22, 2015

FHA Loans And Federal Debt

By Joe Wallace

Here is a common type of question about applying for an FHA mortgage loan when you have owe a debt to the federal government: “Can anyone tell me what the guideline for FHA loans regarding payment plan with IRS when you do not own property and you owe taxes? ” FHA loan rules here are basically concerned with giving lenders a yardstick to measure a borrower’s creditworthiness with regard to federal debt–and that means that a lender is responsible for insuring the borrower is not delinquent on the payments of that debt. Borrowers who are delinquent and are shown to be delinquent through the lender’s due diligence are not eligible for an FHA mortgage loan until such time as they have corrected the delinquency to the satisfaction of the government. | more...