January 21, 2019
Happy Martin Luther King, Jr. Day! Banks and markets are closed today to observe the holiday and we too feel it’s very important to remember this important day. America owes a great deal to Dr. Martin Luther King, Jr. and we are proud to observe this day dedicated to him. We pause are regular coverage of FHA news and FHA loan topics to observe the holiday. We resume our usual schedule of posts tomorrow. Thanks for reading!
December 26, 2017
Do you know the FHA loan rules for appraisal standards and compliance with building code? As a borrower, you may not need to know every single aspect of the FHA loan rules for appraisals, but understanding the basic concepts can help you make a more informed decision when it’s time to choose a home and a home loan. FHA Appraisal Rules: Some Basics The FHA appraisal is a tool for your lender to establish the fair market value of the property and to establish the adjusted value of the home for purposes of setting the loan amount. The appraisal is not a complete, in-depth, top-to-bottom inspection of the property and should never be used by the borrower as such. Only the optional, borrower-arranged and borrower-paid home inspection can do this. | more...
December 6, 2017
Is it possible to be approved for an FHA home loan using part-time employment income? There are indeed FHA loan rules for this type of income and instructions to the lender for how it is to be reviewed. HUD 4000.1, the FHA home loan handbook, states that all verifiable income must meet certain FHA minimum requirements including the ability to verify two years of employment (not necessarily with the same employer). One area some borrowers may be concerned with in this area is part-time income. Does the FHA allow a lender to verify and count as income the earnings from a part-time job? The rules for this are found on page 200 of HUD 4000.1, which begins by defining what the FHA considers part-time income: “Part-Time Employment refers to employment | more...
December 5, 2017
Do you ever wonder about applying for an FHA Loan while having charge-off accounts in your credit history? Is it possible to get approved for an FHA home loan even though you have some negative credit information in your background? This is a question many ask, and the answer can be complicated depending on how old that negative credit data is, and whether or not it indicates an overall pattern of credit behavior. When you fill out an FHA loan application, your loan officer will need to examine your credit history, FICO scores, and other areas to determine your credit worthiness. Some borrowers come to the loan process with outstanding credit, others may have old issues or even currently disputed items on their credit reports that make them worry about | more...
November 29, 2017
What are the FHA loan standards for appraising the foundation and basement of a home to be purchased with an FHA mortgage? The FHA appraisal process is designed to insure that specific standards in this area are met. When problems are detected in an appraisal, they are noted for correction or other appropriate action. The appraisal process covers everything from the electrical system to the roof-the home and its various systems must be within a certain range of good repair and sustainability. For example, there can’t be exposed wiring in the home that would pose a hazard to the future occupants. The roof must not leak or otherwise allow moisture to enter the house. When it comes to the standards for foundations and basements, the FHA has a clear set | more...
November 29, 2017
FHA loan rules for loan approval include instructions to the lender about unpaid federal debts and tax liens. Your chosen participating FHA lender is responsible for verifying your income, employment record, and your monthly financial obligations-which may include tax obligations such as a lien, or a federal debt. Unresolved taxes and federal debt can be a serious issue that will affect a home loan application. The status of such debt is one of the most important factors. According to HUD 4000.1, “Mortgagees are prohibited from processing an application for an FHA-insured Mortgage for Borrowers with delinquent federal non-tax debt, including deficiency Judgments and other debt associated with past FHA-insured Mortgages.” The FHA loan rules in this section also add that the lender is required to determine “whether the Borrower(s) have | more...
November 27, 2017
We are often asked about FHA loan rules governing home loans for those with a bankruptcy on their credit reports. These types of questions vary, but often feature a common theme: “I had a bankruptcy discharged in July 2014. How long do I have to wait to purchase another home with 10% down payment with a credit score of 590?” After a bankruptcy is discharged, rebuilding good credit is one of the most crucial issues related to this question. A borrower must work hard, post-bankruptcy, to establish the best credit possible in order to qualify for a new home loan. You may find that participating FHA lenders are willing to work with borrowers with credit scores starting at around 620 or higher. That FICO score of 620 is not listed | more...
November 27, 2017
What do FHA loan rules say about using rental income to qualify for an FHA home loan? Is it possible to use rental income according to the FHA loan handbook, HUD 4000.1? The short answer is that it depends on whether or not the rental income meets FHA loan minimum standards. When processing your home loan application, your participating FHA lender will request copies (never originals) of the relevant paperwork associated with your employment and income, including tax documents, W2 forms, pay stubs, etc. If your income is derived in whole or in part by rent payments, the lender will need to see documentation for that, too. FHA loan rules in HUD 4000.1 address this on page 202, starting with the definition of what is considered rental income under the | more...
November 24, 2017
What constitutes flipping? It is a housing market practice generally discouraged by FHA loan rules found in HUD 4000.1, but what is flipping in the eyes of the FHA and HUD? According to the FHA loan handbook: “Property Flipping refers to the purchase and subsequent resale of a Property in a short period of time.” Also found in the FHA loan handbook, this further explanation of what the FHA considers to be property flipping: “Property Flipping is indicative of a practice whereby recently acquired Property is resold for a considerable profit with an artificially inflated value.” What is the basic FHA loan guideline for a transaction that could be identified as flipping? Situations where the home has been owned for 90 days or less. Some FHA loan rules in this | more...
November 13, 2017
FHA loan rules for One-Time Close / Single-Close construction loans include a set of requirements the finished property, which must meet both state/local building code and FHA loan minimum property standards. Those FHA standards include a set of requirements for access, utilities, and water quality which must be met as a condition of loan approval. It’s surprising to some FHA loan applicants that certain features of a new construction home are A) regulated and/or B) allow things like septic tanks or wells. But not all properties are the same, and some construction issues are present in some housing markets that aren’t a consideration elsewhere. Well water is a great example. When a resident of a large metropolitan areas thinks of a new construction home, it’s likely that issues surrounding wells | more...