Articles Tagged With: FHA Loan Rules

October 1, 2014

FHA Single-Family Home Loan Occupancy Rules

FHA loan rules for single family home loans include an occupancy requirement. This requirement is designed to encourage single-family borrowers and exclude investors from using single-family FHA mortgage loans to purchase investment property. Why? The intent of the single-family home loan program is to help eligible borrowers get into affordable housing using a low-cost, lower-than-conventional loan interest rate. These rates are not intended to help investors buy property for non-occupying rental or outright sale. What are the FHA loan rules for occupancy? The full explanation of the rules can be found in HUD 4155.1 Chapter Four Section B, which starts off by defining what a “principal residence” is. A home purchased with a VA mortgage is required to be used as the principal residence, so it’s good to know what | more...

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

September 30, 2014

FHA Mortgage Insurance: A Reader Question

By Joe Wallace

A reader asks, “Mortgage companies have kept sending letters/emails, saying ‘You no longer pay MIP because FHA MIP policy has been changed since May 2014. You have paid unnecessary MIP payments because since you has refinanced for your home 2012.'” “I refinanced my home mortgage through FHA in Mar.2012 and since then I have paid MIP until principal reach less than 78%. It will be by 2019 according to my mortgage company. Can you clarify ‘Revision of Federal Housing Administration (FHA) policies concerning cancellation of the annual Mortgage Insurance Premium (MIP) and increase to the annual MIP’? Dose cancellation of MIP mean ” home buyers who apply finance through FHA do not need to pay MIP? Should I stay with my current mortgage or refinance?” This reader question refers to | more...

September 29, 2014

FHA Loan Terms and Payment Plans: A Reader Question

By Joe Wallace

A reader asks, “I am trying to relocate to a new home with my three small children and would like to use an FHA loan to purchase it. I was told about a 40 yr note with yearly payments? Is there such a program? I am currently enrolled in school, working towards my bachelor’s degree in nursing. I have access to some funding for a down payment, approx $30,000. I have also located a home that I want to purchase. 3 bed, 3 bath on 25 acres, approx value of $89,900. Can someone please help me find the right loan to purchase this home? FHA loans have specific rules about the term of the loan. According to HUD 4155.1, under the section titled Maximum Loan Limits, Mortgage Amounts and Mortgage | more...

September 25, 2014

FHA Loan Occupancy Requirements: A Reader Question

By Joe Wallace

A reader asks, “I currently have a 3 year old VA mortgage on my home. Will this disqualify me for a FHA loan on a second home?” FHA loan rules state that the borrower must certify he or she will occupy the home to be purchased with an FHA mortgage as the primary residence. A borrower who purchased a home with a VA mortgage loan is also required to certify in such a manner, but if the applicant closes the deal on the VA loan, moves into the house and uses it as the primary residence, the occupancy requirement is considered fulfilled in the eyes of the VA. The means that if the borrower is financially qualified for the FHA mortgage and can certify the new home will be the | more...

September 24, 2014

FHA Appraisals and Loan Approval: A Reader Question

By Joe Wallace

A reader asks, “In our contract, we agree and stated the sale was as is. The price had been adjusted for this. We listed that the a/c needed repair on the disclosure. I did not want to spend the money to repair it because I live alone and put in window units, plus my buyer said she planned on replacing it anyway.” “This was noted on our contract. 3 months later the lender says the a/c has to be in working order, even though the window units work fine and the central heat did work. I had it fixed, $825.00 for a circuit board! What a waste of money. I would rather have given it to my buyer to replace the whole thing! Since they knew about this upfront, should | more...

September 23, 2014

FHA Loan FICO Score Requirements: A Reader Question

By Joe Wallace

A reader asks, “I have a plan to pay off my student loan this year which is 18,000.00. My credit score is 565. This will leave me with 0 debt. Will it also improve my credit score and chances of getting a home loan?” These types of questions are difficult to answer because credit reporting agencies have their own criteria for evaluating credit, and apply their own standards for factors that might affect scores pushing them higher or lower. You may find that your FICO score reported by one agency are not the same as reported by another. That’s why FHA lenders look for a FICO score average to determine eligibility. Having no debt is certainly a plus for an FHA loan application, but a borrower’s credit activity in the | more...

September 18, 2014

FHA Minimum Property Requirements: Central Air

By Joe Wallace

A reader asks, “I am trying to purchase a home with an FHA loan. The central air in the house I’m trying to purchase is not working, however, the owner has window units in each room. They all work and cool the house very nicely. I was planning on replacing the central air after purchasing the home. I’ve been told the house will not qualify because the central air is not working. Won’t the window units suffice as meeting the minimum standards of living?” One interpretation of the FHA minimum property standards in this situation would be that it’s not the presence of the window units in the home that would be the issue, but rather than an installed appliance/system in the home is not functioning properly. The home may | more...

September 12, 2014

FHA Down Payment Rules: When More Is Required

By Joe Wallace

We get frequent questions about FHA loan rules concerning down payments. Borrowers want to know how much money down the FHA requires for a single family home loan transaction, and unfortunately some borrowers mistakenly believe there is a single dollar amount that must be paid. The reality is that the required FHA down payment amount is a percentage of the loan rather than fixed dollar amount. That means every FHA loan down payment can be different depending on the transaction. Typically the FHA down payment requirement is 3.5%. That down payment requirement can be higher if the borrower has marginal credit qualifications that might force the lender to seek “compensating factors” in order to justify the loan. A bigger down payment can be one of those compensating factors. Another reason | more...

September 11, 2014

FHA Loan Myths: Refinancing With Your Existing Lender

By Joe Wallace

So you have a home loan–a conventional mortgage, VA loan or even an existing FHA loan–and you want to refinance. Some borrowers go right for their existing lender to apply, even if the interest rate or terms & conditions aren’t as advantageous as those offered elsewhere. Are you REQUIRED to use your existing lender for a refinance loan? No. Borrowers are free to refinance an existing home loan with another financial institution. This is true even of an existing FHA mortgage that you might be paying on–if you wish to refinance, you can search for another participating FHA lender who can work with you and your circumstances. The key to getting a better deal on your interest rate and terms is to comparison shop between your existing lender and any | more...

September 10, 2014

FHA Loan Reader Questions: Bank Statements

By Joe Wallace

A reader asks, “Is a bank statement, showing the amount needed at closing, required with my application? What is a lender required to ask me for?” In some cases the FHA gives the lender the option of collecting a bank statement, and in others the bank statement is FHA-required. Lender standards may insist on bank statements, so what the FHA allows and what the lender requires may differ; the FHA may not require a bank statement in some cases, but the lender is free to. We can find evidence of this in HUD 4155.1 Chapter Five Section B under the heading, “Cash and Savings/Checking Accounts as Acceptable Sources of Funds” states: The lender must verify and document the deposit amount and source of funds, if the amount of the earnest | more...