Articles Tagged With: FHA Refi

January 24, 2014

FHA Loan Reader Questions: Employment Requirements

A reader asks, “Can a borrower get a FHA loan with less than two years of employment? She has a full time and part time job. However she has only been employed for 6 months on each job.” Let’s examine what FHA loan rules say about this subject. FHA requirements for employment verification are found in HUD 4155.1. In Chapter One, Section B we learn: “The lender is required to verify the applicant’s employment history for the previous two years. For the most recent two years the lender must obtain • copies of W-2s • written VOEs, or • electronic verification acceptable to FHA.” But what about in cases where employment can’t be verified for two years? And do the rules require the applicant to be on the job with | more...

January 17, 2014

FHA Minimum FICO Credit Score: A Reader Question

By Joe Wallace

A reader asks, “I have Bankruptcy discharged June 1 2011. I do not have lots of credit. Have small inheritance from mother. I Want to purchase small house in Cleveland, Georgia. I have joined Equifax (663), TransUnion (718) and Experian (638). When I access each one has a score different than the other credit reporting agency. How can I determine my creditworthiness?” FHA loan rules say that in general, when a FICO score is available, the lender is required to use it to help determine a borrower’s creditworthiness. The credit score alone doesn’t tell the whole story–there are other factors that play a part in whether or not an FHA loan is approved–but it does play an important role The instructions for the lender on how to process credit score | more...

January 14, 2014

Are FHA Loans Assumable?

By Joe Wallace

FHA single family home loans are available to any qualified borrower–there are no “first time home buyer” requirements or similar restrictions. But one feature of the FHA loan program some aren’t aware of is the ability to allow their loan to be assumed by another qualified borrower. Not everyone who buys a home with an FHA mortgage winds up staying in that home for the entire duration of the mortgage. Some sell and move on, others may decide to refinance. Others may encounter situations where they need to allow the loan to be assumed by a qualified third party. What do FHA loan rules say about this process? What kinds of rules govern the assumption of an FHA home loan? FHA loan rules for assumptions are found in HUD 4155.1 | more...

December 2, 2013

FHA Loan FICO Score Requirements: A Reader Question

By Joe Wallace

A reader asks, “What if my credit score is below 600, but am now cleaning up my record so I can purchase a home. Not a pricey home but one I can retire in some day. I checked my credit report and some of the things on it are no longer a problem, and now paid, but they remain on it. I need to know as soon as possible because the small home I am interested in might be sold soon.” Let’s examine what the FHA loan rulebook (HUD 4155.1) says about minimum FHA requirements for credit scores: This table is reproduced directly from HUD 4155.1. Note that the FHA minimum credit score requirements is 500 or above. But does this mean that a borrower with a FICO score of | more...

November 22, 2013

FHA Refinancing Loans With an Appraisal

By Joe Wallace

Borrowers interested in a non-streamline, credit-qualifying FHA refinance loan that features no cash back to the borrower will be interested in knowing some of the basics of this option including the maximum mortgage loan possible and details of the Up Front Mortgage Insurance Premium requirements. The rules that govern these types of refinancing loans are found in HUD 4155.1 in Chapter Three. Borrowers should note that there is no fixed single dollar amount limit for an FHA loan–your loan amount is determined by the fair market value of the home (which is determined by an appraisal) and your loan amount can be affected by the FHA loan guaranty limits in your county, plus any approved add-ons to the mortgage. When it comes to percentages, however, there are specific numbers. According | more...

November 21, 2013

Basic Information on FHA Refinance Loans

By Joe Wallace

When it’s time to refinance a home loan with an FHA loan, borrowers may wonder whether their situation qualifies for an FHA refinance, whether that’s a Streamline Refinance or a Cash-Out refinance loan. Obviously an homeowner with an existing FHA mortgage wouldn’t have a problem getting a streamline refinance loan, but what about those who have conventional or even VA loans? What do FHA loan rules say it takes to qualify for an FHA refinance? FHA loan rules on this subject are found in HUD 4155.1 Chapter Three Section A, under the heading, “General Information on Refinance Transactions”. It says in part: “A refinance transaction is used to pay off an existing real estate debt with the proceeds of a new mortgage for borrower(s) with legal title, and on the | more...

November 1, 2013

FHA Refinancing Loan Basics

By Joe Wallace

There are several different types of FHA refinance loans. One is known as an FHA Streamline Refinance, which is for borrowers with existing FHA mortgages. Another is the FHA’s cash-out refinancing option, and there’s also a no cash-out refinance loan where proceeds of the loan are used to pay closing costs and other expenses related to the new loan. Streamline loans can be offered with or without an appraisal, while cash-out and no cash-out loans both require one. The term of these refinancing loans depends on the type of loan. The FHA loan rules for refinancing loans are found in HUD 4155.1, which says, “The maximum term of any refinance with an appraisal is 30 years. The maximum term of a streamline refinance without an appraisal is limited to the | more...

October 31, 2013

FHA and HUD Update Loss Mitigation Instructions for Lenders

By Joe Wallace

Borrowers who get into financial trouble may have difficulty paying their monthly FHA mortgages. In all cases, the FHA encourages borrowers to get in touch with the lender as soon as possible to make arrangements to avoid going into delinquency and default on an FHA loan. Borrowers who do this have the most options, and find many more doors open to them. Borrowers who wait until it’s too late to prevent going into default may have few choices. What is the lender’s responsibility when a borrower starts missing payments and is in danger of foreclosure? The FHA and HUD have issued updated guidance telling lenders what must be done and what the acceptable course of action is for the financial institution in such cases. These updates were published in FHA | more...

October 15, 2013

FHA Loan Answers: No Cash Out Refinancing With Appraisals

By Joe Wallace

FHA refinancing loan options include the ability to apply for a no cash-out refinancing loan with an appraisal required. For these loans, the FHA loan rules as described in Chapter Three, Section B of HUD 4155.1, addresses a variety of issues including subordinate liens, refinancing to buy out an ex-spouse’s interest in the property, etc. One issue specifically mentioned in these rules is how the lender must handle a no cash out refinancing loan for homes that have been owned for less than one year before the FHA refinancing loan application. Are FHA refinance loans possible in this case? According to Chapter Three: “If the property was acquired less than one year before the loan application, and is not already FHA-insured, the original sales price of the property must be | more...

September 12, 2013

FHA HECM Program Changes: Mandatory Obligations

By Joe Wallace

Recently the FHA and HUD announced changes to the FHA Home Equity Conversion Mortgage, also known as HECM. Those changes include new guidelines for the maximum amount of HECM loan funds that can be transferred to the borrower at the time the HECM loan closes or within the first 12 months of the HECM loan, as well as “what fees and charges are considered Mandatory Obligations” according to the new rules. According to FHA mortgagee letter 2013-27, a new “Single Disbursement” lump sum payment may be possible for borrowers applying for both adjustable and fixed interest rate HECM loans applicable for all FHA HECM loan case numbers assigned on or after September 30, 2013. “This payment option will be limited to a single disbursement at loan closing which cannot exceed | more...