Articles Tagged With: FHA Loans

When Is An FHA Loan Better Than A Conventional Loan?

March 7, 2017

Back Taxes And FHA Home Loans

Are unpaid back taxes a liability when it comes time to applying for an FHA mortgage or refinance loan? A reader asks, “I am currently paying back taxes on a payment plan but have filed all appropriate tax returns. Is the rule that your taxes must be paid in full prior to applying for an FHA loan or they just have to be filed? In other words, am I still eligible while paying back taxes owed?” FHA loan rules in HUD 4000.1 do address the back taxes issue, primarily from the standpoint of the loan applicant who has delinquent federal tax debt. That is not to imply that the reader asking this particular question is in that category, but rather to point out that FHA loan rules address the issue | more...

March 6, 2017

Mortgage Rate Trends: Higher

By Joe Wallace

Mortgage loan rates have been rising in small increments for the last five business days-Friday’s move upward was small but is still part of that overall upward trends. The Fed is likely to announce an interest rate hike at their meeting on the 15th, which won’t help the mortgage rate environment, but by the time that hike is announced rates are likely to already reflect any negative consequences (on mortgage rates). What is good news for the economy is often bad news for mortgage loan interest rates. The Fed raising rates is an indicator that the economy is stronger, and investor reaction to that climate can and often does have a negative effect on mortgage rates. At the time of this writing, 30-year fixed rate conventional mortgages are reported at | more...

How much can I borrow with an FHA refinance loan?

March 2, 2017

FHA Loan FICO Score Rules

By Joe Wallace

What are the FHA loan program’s FICO score requirements? That’s a common question, and a good one to ask as there are several things to keep in mind about how the FHA and participating lenders will view your credit scores. FHA loan rules say that borrowers with FICO scores between 500 and 579 are technically eligible for FHA mortgages (more on that in a moment) but a higher down payment (10%) is required. For borrowers with FICO scores of 580 or higher on their credit report, maximum financing is allowed with a required down payment of only 3.5%. These are simply FHA loan program minimum standards. Your lender may require higher FICO scores, and typically scores in the mid-600s tend to have a better chance to qualify for loan approval. | more...

March 1, 2017

FHA HECM Loans: A Reader Question

By Joe Wallace

FHA refinance loans include the FHA HECM loan option for qualified borrowers. A reader asked us a question recently on HECM loans; “How does the Non-Borrowing spouse prove or show legal ownership of the property to the lender after the last surviving HECM mortgagor has died?” The reader is referring to an FHA loan rule modification that came out in 2014 about the deferral period for FHA Home Equity Conversion Mortgages that involve a surviving, non-borrowing spouse. Mortgagee Letter 2014-07 states: “In the event the last surviving mortgagor predeceases a Non-Borrowing Spouse, the due and payable status will be deferred for as long as a Non- Borrowing Spouse continues to meet all the qualifying attributes stated in the above section. In addition, such Non-Borrowing Spouse must satisfy and continue to | more...

March 1, 2017

Mortgage Rate Trends: Slightly Higher

By Joe Wallace

We’ve seen three days of improvement, followed by two days of mortgage rates creeping upward. The rate environment at the time of this writing is a bit contrary-we have seen stronger economic news and data this week that traditionally has put upward pressure on interest rates. But the most recent stronger data hasn’t put as much pressure on mortgage rates and for that we can report that number-wise, the best execution rates haven’t budged that much. Affected borrowers will likely see the difference reflected in closing costs. 30-year fixed rate conventional mortgages are holding at a best execution 4.125% at the time of this writing, which is an adjustment from the earlier range between 4.125% and 4.25% best execution. FHA mortgage rates are holding in a range between 3.75% and | more...

February 24, 2017

Child Support Income and FHA Loans

By Joe Wallace

A reader got in touch with us to ask a question about how a participating FHA lender will view child support payments. “My significant other and I want to apply for a house loan together. He technically still pays me child support, but it will end once we own a house together. Can we still count that as part of my income for a home loan? And/or does that effect his income for the loan at all?” There are a variety of factors that could influence the answer to this question. One is state law. Does the borrower live in a community property state? Is the couple legally married and thus subject to such laws where applicable? Does other state law govern how child support and/or alimony can be handled | more...

February 23, 2017

FHA Loan Employment Rules: A Reader Question

By Joe Wallace

A reader asked us a question in the comments section recently about FHA loan rules for employment verification. “I just got denied a FHA loan because I had a gap in employment for only 3 months. I wanted to know does having a gap for only 3 months qualify me for getting denied?” It’s important to remember that FHA loan standards found in HUD 4000.1 (the FHA single family loan rule book) are not the only standards that are recognized or enforced when the lender is processing a home loan application. FHA loan rules, state law, lender standards, and even things that are considered “customary” in the local housing market may all play a part in FHA loan approval and processing. So what’s found in HUD 4000.1 is a good | more...

Can I get an FHA home loan if I owe back taxes?

February 22, 2017

Credit Score Questions

By Joe Wallace

Credit score issues are some of the most popular topics in our comments section-many want to know if their FICO scores are high enough to qualify for an FHA mortgage. One reader asked recently, “(Can) i can buy a (home using) FHA or HUD at a credit score from 500 to 579? With 10% down? How much is 10%?” This reader is referring to a recent blog post about FHA FICO score requirements which included the following: “FHA loan rules state that borrowers with credit scores at 580 or higher are eligible for maximum financing for FHA home loans, which requires a 3.5% down payment from the borrower. For those with credit scores between 579 and 500, 10% down is required.” The short answer to the reader question is that | more...

February 21, 2017

Commission Income and FHA Loans: A Reader Question

By Joe Wallace

How does commission income count when applying for an FHA mortgage? A reader asked us recently, “I was denied a mortgage because of a commissioned salary, even though Im full time and am guaranteed 15.75/hr. Interestingly, everything was all ready to go on my measly 12/hour salary before I got this better job. Now Im thinking that may have been a mistake on the part of the lender…” FHA loan rules governing this type of income (as verifiable income that is stable and likely to continue) are found in HUD 4000.1. The reader question does not state as much, but it seems implied that the commission income situation is recent. If so, the lender may need the borrower to have more time on the job as an employee earning commissions | more...

February 17, 2017

Gaps In Employment, Reductions of Income: FHA Loan Rules

By Joe Wallace

FHA loan rules in HUD 4000.1 for single family home loans and refinance loans include instructions for the lender on how to verify a borrower’s income and employment. There are several reasons why this verification must be made, but one important one is to insure the income used to qualify for an FHA loan is stable, reliable, and likely to continue. The lender is basically looking for indications that this is so, but how does the loan officer interpret financial setbacks such as gaps in employment or reductions of income? What are the FHA requirements in this area? HUD 4000.1 addresses these issues. For example, when it comes to certain gaps in a borrower’s employment history, the following may apply: “For Borrowers with gaps in employment of six months or | more...