Articles Tagged With: FHA Loans

April 17, 2017

FICO Scores And FHA Loan Approval

How do FICO scores affect your FHA home loan application? A reader got in touch this week to ask a question in this area: “Hello, my credit score is between high 500s, low 600s. I make $8,000 a month. My mother in law said she would co-sign for my wife and I, her score is near perfect. Is this situation possible to get a loan for a home? She manages an apartment complex and pays no rent. Thanks for your time.” FHA loan rules in HUD 4000.1 state that a borrower is technically qualified for maximum financing (with a required minimum 3.5% down payment) with FICO scores at 580 or higher. Borrowers with FICO scores between 500 and 579 are technically eligible for FHA loans with a 10% minimum required | more...

What You Need To Know About Your FHA Home Loan

April 13, 2017

FHA Loan Limits: Low-Cost Areas, High-Cost Areas

By Joe Wallace

FHA loan limits can be puzzling to those unfamiliar with how the program works. FHA loans are calculated based upon the appraised value of the property or the sale price, whichever is lower. There are other factors that will help determine the final amount of the home loan including whether approved closing costs have been rolled into the loan, approved energy efficient upgrades, etc. But housing markets vary across the nation. What is an affordable, modest price for a house in one area won’t be enough to purchase property in a high-cost area. So how does the FHA determine what the proper loan amount should be with this factor in mind? HUD 4000.1 has the answers, listing FHA loan limits, and their requirements and loan guaranty limits for low-cost areas | more...

April 13, 2017

Mortgage Rate Trends: Still Moving Lower

By Joe Wallace

Mortgage rate trends this week have been dragging rates to their lowest levels of the year. Around election time last year, we began to see the stage being set for some upward trending that pushed mortgage loan interest rates out of their three percent ranges and back into four percent territory. At one point it seemed likely that the mid-fours could be the range for the new year. But now, at least in the short term, we are seeing rates creep back down, closer to where they were pre-election (assuming the downward trend persists). There are several reasons for this, including bond market activity, geopolitics, and most recently a reaction to statements from the White House that the dollar is performing too robustly (paraphrasing ours). To learn more about what | more...

April 12, 2017

FICO Scores and FHA Loans: A Reader Question

By Joe Wallace

Can a co-borrower make up for another borrower’s FICO score issues? A reader asked us a question along those lines in our comments section recently: “My credit is not good enough to get a home loan. However, if my sister was willing to cosign for me to get a home can she sign? What are the requirements” FHA loan rules require all borrowers to be obligated on the mortgage to credit qualify. We get a glimpse at FHA loan policy in HUD 4000.1 page 132 which discusses “Minimum Decision Credit Scores” for all borrowers: “The Minimum Decision Credit Score (MDCS) refers to the credit score reported on the Borrowers credit report when all reported scores are the same. Where three differing scores are reported, the middle score is the MDCS. | more...

April 11, 2017

Mortgage Loan Interest Rate Trends: Higher

By Joe Wallace

Since our last report, mortgage loan interest rates have risen slightly but overall remain within the same range as we’ve been reporting on now for several weeks. Both Friday and Monday saw rates moving higher in spite of conditions that have in the past contributed to helping rates move lower. This is not unusual, but it happens infrequently enough to raise eyebrows among those who aren’t used to watching these ups and downs. The contrarian moves in rates as of late gives market watchers reason to be lukewarm on “floating” or holding off on a mortgage loan interest rate lock with a lender in hopes that rates may go lower before the lock agreement is finally made. The moves higher aren’t enough to create the impression that we’re headed into | more...

April 10, 2017

Seller Contributions on FHA Loans

By Joe Wallace

A reader asks a question about seller contributions on an FHA mortgage loan. “What is included in seller contributions with a max of 6%?” The question refers to something informally known as the “six percent rule” on FHA mortgages, which limits the contributions of an “interested party” to six percent of the sale price of the home. This rule is found on page 232 of HUD 4000.1, which defines both interested parties and their contributions to the sale as follows: “Interested Parties refer to sellers, real estate agents, builders, developers or other parties with an interest in the transaction. Interested Party Contribution refers to a payment by an Interested Party, or combination of parties, toward the Borrowers origination fees, other closing costs and discount points.” What are the FHA loan | more...

April 10, 2017

FHA Mortgage Occupancy Rules

By Bruce Reichstein

A reader asked us a question this weekend about FHA mortgage loan occupancy rules. “I purchased a home with an FHA loan and intended to live in it for 4 years until my fiancee got orders to relocate with the Air Force. Wellhe got orders to move from Colorado to Florida but I just purchased my house 3 months ago. Can I not leave Colorado and move with my fiancee?” HUD 4000.1, the FHA single-family home loan rule book, addresses situations like these, stating: “Borrowers who are military personnel, who cannot physically reside in a Property because they are on Active Duty, are still considered owner occupants and are eligible for maximum financing if a Family Member of the Borrower will occupy the subject Property as their Principal Residence, or | more...

April 7, 2017

FHA Loan Rules: Borrowers, Co-Borrowers, Co-Signers

By Joe Wallace

Do you know what the FHA loan rules are for borrowers, co-borrowers, and/or co-signers? What are the requirements for each and how is your lender required to proceed with each? The FHA home loan rule book for single family mortgages, reverse mortgages, and refinance loans is HUD 4000.1 It instructs the lender that borrowers have an occupancy requirement-the borrower must agree to take ownership of the home and use it as her or his primary residence after loan closing. Usually the borrower will have to move in within 60 days of closing. HUD 4000.1 also tells the lender that borrowers may only purchase homes with FHA loans within the United States or its’ territories. Purchase of non-U.S. real estate is not permitted with an FHA mortgage. All parties to be | more...

April 6, 2017

Pre-Foreclosure Sales and New FHA Loans

By Joe Wallace

Many potential FHA borrowers want to know how long they must wait following pre-foreclosure sales in order to successfully apply for a new mortgage. There is a specified “seasoning period” (industry jargon for the amount of required waiting time following pre-foreclosure sales) required of borrowers after a short sale, bankruptcy filing, etc. The amount of that required waiting time will vary based on a number of factors including lender standards, so borrowers should keep in mind that the FHA loan rules we’re about to mention are only one of the sets of rules that must be followed for such transactions. That said, HUD 4000.1 instructs the lender on how to proceed in these cases, beginning with a definition of pre-foreclosure sales: “Pre-Foreclosure Sales, also known as Short Sales, refer to | more...

Can I buy a manufactured home with an FHA loan?

April 4, 2017

Commission Income and FHA Loans: A Reader Question

By Joe Wallace

A reader asked about the FHA loan rules governing commission income this week in our comments section: “My employer recently (1yr) switched the pay scale to a base/commission/bonus format. Basically we now get paid per load instead of hourly. Since weve only received commission for 2016 and not 2015, should my itemized job related expenses for 2015 count against my income over the previous two years?” FHA loan rules in HUD 4000.1 address this issue, but may not be the only rules at work-lender standards would also apply as well as any applicable state law. Here’s what HUD 4000.1 states about commission income: “The Mortgagee must calculate Effective Income for commission by using the lesser of (a) the average net Commission Income earned over the previous two years, or the | more...