Articles Tagged With: FHA Loan Rules

March 12, 2015

FHA Loan Eligibility Rules: Divorce and Foreclosure

A reader asks, “Foreclosure exception question. Say a couple was looking to purchase a home, but the husband had a foreclosure which occurred under his name. Would they be able to qualify for a NJ mortgage using divorce as the exception to the three year rule, especially when the divorce decree is dated for one specific year but the foreclosed mortgage loan is from two years after the divorce???” “I am very curious as to this because to me it wouldn’t make sense that the divorce circumstance for exception would be an option due to the fact that this person took out a mortgage for a property which he was not living in two years after his divorce took place, and placed it solely in his name? I would think | more...

March 11, 2015

FHA Loans and Debt-To-Income Ratio: A Reader Question

By Joe Wallace

A reader asks, “Our daughter and son in law are trying to obtain a FHA loan. They are only using my son in law for the loan because our daughter’s credit score is too low. However his income/debt ratio is too high because of a car loan.” “We have agreed to pay off the car to lower the monthly income/debt ratio. Their combined income is enough to cover the mortgage and pay us back. How will this affect their loan application?” Unfortunately, there’s no clear way to address this question for a variety of reasons. There are many variables including whether or not the couple resides in a community property state, where state law will have a say in how the lender may or may not consider the FHA loan | more...

March 10, 2015

FHA Appraisals: A Reader Question

By Joe Wallace

A reader asks, “FHA mortgages, at one time,required the properties to meet stringent guidelines for habitability; (ie)roof, heating and other standards were the seller’s responsibilities, before escrow closed…. Are these parameters no longer an issue? Can a government secured loan be approved without these conditions being met?” FHA loan rules still require an appraisal of any home to be purchased with a new purchase single family FHA mortgage and certain types of FHA refinancing. The FHA appraisal is required to establish the fair market value of the property and to make sure the home meets basic FHA minimum property requirements. FHA appraisals should not, however, be misconstrued as a seal of approval from the FHA. Just because a home passes the FHA appraisal process with few or no required corrections | more...

March 9, 2015

FHA Loan FICO Scores: A Reader Question

By Joe Wallace

A reader asks, “My husband and I are wanting to buy our 1st home this year! I have a credit score of 736 while my husbands is currently 621. We are working on his a lot. I’ve read that people have been approved for FHA at a 580 score. Can this really happen and is there a way to know which lenders would approve with a lower credit score? We already have a $15,000 down payment.“ Potential FHA borrowers should know that the FHA minimum FICO score for maximum financing is 580. However, this does not take into consideration what a lender might require; the lender is free to require a higher FICO score. Lender standards vary and a borrower will need to research the lender offering the most competitive | more...

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

March 9, 2015

FHA Loan Questions: Seller Concessions

By Joe Wallace

A reader asks., “I saw a listing agent who stated in an MLS listing that the seller can only contribute up to 1% of sales price to an FHA qualified buyer’s closing costs. (She was implying not to ask for over 1% seller concession because of this FHA requirement). Is that correct? On your site I read that figure to be a maximum of 6%. Can you clarify please. The home is in Apache Junction, AZ (Phoenix suburb and county of Maricopa).” FHA loan rules state that any seller concession that exceeds six percent is considered an inducement to purchase and will result in a dollar-for-dollar reduction in the loan amount. This is true for all states, not just the one in the reader question, but it is important to | more...

March 6, 2015

Reader Questions About FHA Loan Appraisals: When Do They Expire?

By Joe Wallace

A reader asks, “How long do FHA Appraisals stay with the property in Georgia?” A search of the FHA official site at www.FHA.gov reveals a Frequently Asked Questions page that answers this query, but know that this FHA loan rule applies to all FHA loan appraisals, not just those that are completed in the state of Georgia. According to the FHA FAQ page titled, “Do FHA Appraisals Expire?” we learn the following: “The FHA appraisal validity period is 120 days for existing, proposed or under construction properties. If the Homeownership Center (HOC) determines that soft market conditions exist in certain areas or markets, it may shorten the term of appraisals for substantial rehabilitation upon advance notice to lenders.” When does the 120 day period an FHA appraisals begin? According to | more...

March 6, 2015

FHA Loan Questions: Going Back To Full-Time Employment After Owning a Small Business

By Joe Wallace

A reader asks, “Can I qualify for a Back to Work Loan if I lost a job and then when I couldn’t find work, started a business with a partner. Two years later the partnership breaks up and I am forced to pursue full-time employment.” “During the time that I operated the business, my draws reflected a greater than 20% net loss. Now that I am employed full-time, my earnings are the same or greater than the earnings I made prior to losing my job. Also the business is still operated by my former business partner.” Questions like these are difficult to answer except in general terms. The lender’s standards will play a role in loan approval, so it’s unclear above and beyond FHA loan minimum requirements what the answer | more...

March 5, 2015

FHA Loan Income Verification–What You Should Know

By Joe Wallace

If you are considering an application for an FHA loan or an FHA refinance loan, you might wonder about some of the details of your application. One area some get concerned over is the income and employment section–specifically how the lender will verify both income and employment. When it comes to your income, the lender will request pay stubs–your most recent verification of deposit or other proof of income that can function as a pay stub. In most cases the lender will request documentation that is the most current, but in some cases can be no more than 120 days old. For employment verification, the lender will contact the employer (or request added documentation if you are self employed). According to the FHA loan rules found in HUD 4155.1, the | more...

March 5, 2015

FHA Loan Reader Questions: Chapter 13

By Joe Wallace

A reader asks, “I am a bit confused. My Chapter 13 was discharged in February 2014. Since then I have re-established my credit and my score is at 660 and no late payments. What is the sooner I will be able to pre-qualify for a loan and/or close on a FHA.” Chapter 13 bankruptcy is addressed specifically in FHA loan rules. FHA loans are still possible for qualifying borrowers, but the following rules apply. “A Chapter 13 bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage, provided that the lender documents that • one year of the pay-out period under the bankruptcy has elapsed • the borrower’s payment performance has been satisfactory and all required payments have been made on time, and • the borrower has received written | more...

March 4, 2015

FHA Loan Approval or Rejection: The Notification Rules

By Joe Wallace

When a borrower applies for an FHA home loan for the first time, it’s normal to wonder how long it might take and how the borrower might be contacted when the decision has been made. When it comes to the length of time to process the loan, there is no set answer–it can depend a great deal on the lender’s workload, how easy or difficult it is to track down a borrower’s credit information, etc. But once a decision has been made, FHA loan rules in HUD 4155.1 tell the lender how to proceed. Once the decision has been reached, FHA loan rules state, “The lender is responsible for notifying the borrower of the approval, either in writing or verbally, immediately after receipt of the underwriter’s decision.” That is found | more...