Articles Tagged With: FHA Loan Rules

May 1, 2014

FHA Energy Efficient Mortgage Loans: A Reader Question

A reader asks, “Can an FHA EEM loan be a stand alone or does it need to be a part of a purchase money loan or a refinance loan?” The FHA Energy Efficient Mortgage program allows a borrower to add money to a new purchase home loan or an FHA refinance loan–money that is intended to be used for approved energy efficient upgrades to the home. The rules governing FHA EEM loans are found in HUD 4155.1 Chapter Six Section D, which states in part: “New and existing one to four unit properties, including one unit condominiums and manufactured housing properties, are eligible for the Energy Efficient Mortgage (EEM) Program. EEMs may be used for both purchases and refinances, including streamline refinances, with • Section 203(b) • Section 203(k) rehabilitation | more...

April 30, 2014

FHA HECM Loan Changes: A Reader Question

By Joe Wallace

A reader asks, “I have reviewed the new changes regarding protecting the surviving spouse on a reverse mortgage. My husband and I took out a reverse mortgage in 2012 and was told that when I turn 62 in 2015, that I could be added to the loan and be safe.” “Since then I have found out that is not true. We would have to refinance, however, there may be a large amount of money needed to do this. Now we are worried that I may not get on this loan and I could be in danger if my husband dies before me. Will this new ruling protect me?” This reader question refers to our previous blog post about changes to the FHA HECM program which now offer non-borrowing spouses protection | more...

April 29, 2014

FHA Loan Reader Questions: Qualifying For an FHA Loan With Substantial Cash Reserves

By Joe Wallace

A reader asks, “I have low income but sufficient to qualify, credit score qualification and a low amount of debt. I also have significant savings (over $150,000) in a money market acct from a property settlement agreement. Does my large savings disqualify me? Is there a limit to the amount of assets one can own and still qualify?” This is a common misconception about FHA home loans–the notion that FHA loans are only for first-time home buyers, or only for those who might be considered at an economic disadvantage of some kind. The truth about FHA loans is quite different. FHA mortgages have no minimum income requirement. Instead they are approved based on a borrower’s FICO scores, debt-to-income ratio and other financial factors. There is also no maximum income limit. | more...

April 24, 2014

FHA Loan Rules: Seller Paid Closing Costs

By Joe Wallace

The FHA loan rulebook, HUD 4155.1, has rules about how much a seller or other third party can contribute to the closing costs of a borrower purchasing a property using an FHA mortgage. According to the rules, it is possible for a seller to contribute toward closing costs, but there are limits. “The seller and/or third party may contribute up to six percent of the lesser of the property’s sales price or the appraised value toward the buyer’s closing costs, prepaid expenses, discount points and other financing concessions.” Six percent of the sales price or appraised value (whichever amount is lower) also includes the following: third party payment for permanent and temporary interest rate buydowns, and other payment supplements payments of mortgage interest for fixed rate mortgages mortgage payment protection | more...

April 24, 2014

FHA Loan Reader Questions: Closing Cost Caps?

By Joe Wallace

A reader asks, “Is there a cap on what borrower can pay in order to close an FHA loan? In other words, after the down payment, is borrower limited in what they can pay to close the deal?” There’s no set dollar amount limit on closing costs per se–all home loans are different–but FHA loan rules as spelled out in HUD 4155.1 do explain what expenses a borrower can be charged and what he or she is not allowed to be charged. For example, in Chapter Five, Section A, we learn: “Lenders may charge and collect from borrowers those customary and reasonable costs necessary to close the mortgage loan. Borrowers may not pay a tax service fee.” Additionally, “FHA no longer limits the origination fee to one percent of the | more...

April 16, 2014

FHA Loan Answers: Do Student Loans Count Against Your Debt-To-Income Ratio?

By Joe Wallace

When you apply for an FHA loan, your lender must calculate the amount of income you have versus the amount of debt you currently pay on and factor in the amount of your projected mortgage. The amount of debt is compared to your income to determine whether or not you can afford the loan based on FHA guidelines. In general, borrowers should have less that 40% of their income taken up by recurring financial obligations. FHA rules explain exactly how much debt to income you can have and still qualify for an FHA mortgage. These ratios can vary depending on the borrowers status as a self-employed person or other factors. The overall debt picture is important when the lender is trying to figure out if a borrower is a good | more...

April 11, 2014

FHA Loan Rules For Occupancy: A Reader Question

By Joe Wallace

A reader asks, “Nowhere does it say in the HUD document what the penalty is for not physically making your FHA home a primary residence within 60 days. What if it is 90 days or 120? What if you choose to renovate?” This is something a borrower should discuss prior to the loan closing with the lender, or with a legal expert who may be able to give sound advice based on case law or years of experience. We can’t offer legal advice, but the one thing we can advise is that the borrower be as familiar as possible with the language of the loan agreement. When it comes to renovations planned immediately after loan closing, you may have to make arrangements with the lender. Does your FHA home loan | more...

April 10, 2014

FHA Loan Reader Questions: What’s The Definition of a Condominium?

By Joe Wallace

A reader asks, “How can a person go about proving that a particular development is not a condo development? Realtors and others in our area typically call any attached housing development ‘condos’ when they are looking to sell them.” “I am specifically looking at a neighborhood of attached sing-story homes that has a HOA, charges fees for common maintenance, but when you buy a unit you also buy the ground under the unit, and an undivided percentage of the common area. The developer declares they are townhomes and not condos.” This can be a tricky question to answer for a variety of reasons, including the fact that state and/or local laws might come into play in these cases. FHA loan rules alone may not be enough to get the whole | more...

April 8, 2014

FHA Loan Income Requirements: Projected Income

By Joe Wallace

FHA home loan rules say the lender must verify a borrower’s income and employment as a qualifying factor for the loan. A borrower who lists his or her income as X amount of dollars will have that figure verified–the lender will check pay statements, review tax records, and possibly even speak with an employer in some cases to verify the information. But what about borrowers who don’t have income at the present time, but have “projected income” based on a job that is about to start soon, or income that is about to increase because of a promotion, pay raise, etc? Does the FHA loan rulebook make any provisions for these circumstances? According to HUD 4155.1, Chapter Four Section E, “Projected income is acceptable for qualifying purposes for a borrower | more...

April 2, 2014

FHA Loan Reader Questions: “Low Income” Loans For Modular Housing/Mobile Homes

By Joe Wallace

A reader asks, “I am on disability and receive a fixed income of 788.00 monthly. I would love to be able to get a loan for a mobile or modular home. Can I be qualified for a low-income loan?” Single-family FHA loans don’t have income requirements in terms of minimum or maximum incomes per se. It’s a common misconception that you must earn a minimum amount of money or NOT earn too much money to qualify for an FHA mortgage. But if there are no minimums and no maximums, how do participating FHA lenders determine who qualifies for an FHA single-family home loan? The borrower’s income and monthly obligations are analyzed to see if the borrower can afford the loan. If a borrower’s debt-to-income ratio is within the right tolerances | more...