Articles Tagged With: FHA Loan Rules

June 2, 2014

FHA Loan Rules For Earnest Money Verification: A Reader Question

A reader asks, “My mortgage lender is requiring that I show a bank statement as the only acceptable proof that the earnest money check cleared. Although I have nothing to hide I feel tremendously violated…” “…I feel there are less intrusive ways of showing proof. I have distrust with the system that assumes we are all dishonest and finds the most intrusive way to show something took place. I am frankly shocked to be told that this is a common well accepted practice and the only acceptable manner. Please let me know if indeed there is another way today.” FHA loan rules do require the lender to verify the source of earnest money. HUD 4155.1 states, “If the amount of the earnest money deposit exceeds 2 percent of the sales price or | more...

May 27, 2014

FHA Loan Credit Scores: A Reader’s Question

By Joe Wallace

A reader asks, “Hello, my credit score is 540, I’m a single parent, husband left me with a foreclosed house and a debt of about $135,000+ just from the house no credit cards. I have been separated for 3 years. I want to purchase a home again. Are there any programs for a person like me in this situation?” Borrowers who need assistance with issues like these should first call the FHA at 1-800 CALL FHA to request a referral to a HUD-approved housing counselor who may be able to assist with advice and pre-purchase counseling. There are no specific FHA programs that are offered to borrowers in a specific category (bad credit, foreclosure, bankruptcy, etc) but the FHA and HUD have recently announced a new pilot program aimed at | more...

May 23, 2014

FHA Loan Requirements For Occupancy: What The Rulebook Says

By Joe Wallace

When you want to purchase a home using a single-family FHA home loan, you should know what the FHA loan program’s requirements are for occupancy of the property. Did you know you are required as a borrower to certify you’ll use the home as your personal residence? FHA loan rules in HUD 4155.1 explain these rules and how they apply to the borrower. There are many questions about occupancy including whether or not a borrower can purchase a single family home and rent out individual rooms, or whether a multi-unit property can be obtained and rented out. Essentially, the FHA single-family home loan program rules state the following: “At least one borrower must occupy the property and sign the security instrument and the mortgage note in order for the property | more...

May 22, 2014

FHA Loan Rules: Employment

By Joe Wallace

When you apply for an FHA mortgage loan, you’re required to submit a variety of data including your employment history. It’s the FHA loan officer’s job to insure an applicant has sufficient income to afford the loan, and to make sure that income is likely to continue. How does the lender do this? FHA loan rules spell out clearly what’s to be done–HUD 4155.1 Chapter One, Section B explains how it works. To begin: “The lender must obtain the most recent pay stub showing year-to-date earnings of at least one month, and one of the following to verify current employment: • a written VOE verbal verification of employment, or • electronic verification acceptable to FHA.” The pay stub is documentation that the applicant is currently employed. But when it comes | more...

May 21, 2014

FHA Loan Down Payment Rules: Acceptable Sources

By Joe Wallace

In a recent blog post we were asked about FHA down payment requirements–is there such a thing as a “no down payment” FHA loan? Some borrowers might mistake the VA loan program’s zero down payment option for something the FHA officers, but the truth is that FHA loans require a minimum of 3.5% down for single-family home loans. Not only that, but the money for your down payment has to be documented and come from an acceptable source. The reason for this is twofold–it prevents borrowers from over-leveraging themselves with cash withdrawals or cash advances on credit cards (credit card cash advances can’t be used to make down payments on an FHA home loan) and it keeps people with a financial interest in the transaction from loaning money for the | more...

May 16, 2014

FHA Loan News: Incentives For New FHA Home Buyers Coming in Fall 2014

By Joe Wallace

In a recent blog post we discussed the FHA/HUD announcement to help give help and offer credit to home buyers who are under served by the mortgage industry. The FHA and HUD issued a press release, HUDNo.14–048–to announce a pilot program called Homeowners Armed With Knowledge or HAWK. This pilot program is designed to encourage eligible borrowers to get housing counseling in exchange for discounts on mortgage insurance that could result in a substantial savings over the lifetime of the mortgage. According to HUD, “Under the four-year HAWK for New Homebuyers pilot program notice, homebuyers who commit to housing counseling will qualify for tangible savings on their FHA-insured loans. The average buyer would save approximately $325 a year – or almost $9,800 over the life of their loan.” Furthermore, the | more...

May 12, 2014

FHA Refinance Loans With No Cash Out

By Joe Wallace

There are several FHA refinance loan options. One is FHA Streamline Refinancing, which has no FHA-required credit check or appraisal (though your lender may require one of both). Another is the FHA Cash-Out refinance loan option, where a borrower can take cash back on the loan once the original loan is paid in full. The cash back on such loans can be used for any purpose acceptable under the terms of the new loan agreement. But there’s another refinance loan option available similar to cash-out in that a credit check is required, but without cash back. The no-cash-out FHA refinance loan has rules covered in HUD 4155.1, including maximum loan amounts and what can be added to the new loan amount. FHA loan rules also cover what kinds of liens | more...

May 9, 2014

FHA Loan Rules For Loan Approval: Previous Housing Obligations and Your Credit

By Joe Wallace

When you fill out your FHA loan application paperwork online or in person, it’s obvious that part of the qualification process involves having your credit scores examined and your employment verified. What may not be so obvious is that the lender is also looking for patterns of reliability in areas such as the timely payment of your monthly obligations. Some FHA loan applicants might mistakenly assume that while late or missed mortgage payments might be a factor that missed rent payments aren’t held in the same esteem. Is this true? Not according to HUD 4155.1 Chapter Four, Section C, which has instructions for the lender on checking credit report data. A strict interpretation of Chapter Four reveals no difference between how the FHA or the lender should view late or | more...

May 7, 2014

FHA Loan Documentation Standards: What’s Required, What’s Not Permitted

By Joe Wallace

In order to get the FHA loan application approval process moving, the lender may need authorization from the borrower to check credit reports, individual creditors, employers, even current or former landlords. In order to do this, your loan officer may need you to sign paperwork showing the financial institution has the authorization needed to request personal data. There are strict rules that govern this process. They are found in HUD 4155.1 Chapter One, Section B, which starts off by stating: “The lender may ask the borrower to sign a general authorization form that gives the lender blanket authority to verify information needed to process the mortgage loan application, such as • past and present employment records • bank accounts, and • stock holdings. If using a blanket authorization form, the | more...

May 6, 2014

FHA Loan Reader Questions: Chapter 7 Bankruptcy and Credit Scores

By Joe Wallace

This reader comment raises some very important issues potential FHA borrowers should keep in mind when it’s time to apply for a new home loan, no matter whether applying in the wake of a bankruptcy or not. The reader says: “I was in Chapter 7 on 8/2011 and Discharged 2.5 years ago. I just applied for a loan and when my credit was pulled they found the loan of the home I own as a open account. This loan was closed for several years and it was just put back on in 2/2014 for no reason, which I have proof since I keep all my reports. I disputed it and it was taken off right away.” “Meanwhile it cleared up that problem showing the account closed but it left late | more...