Articles Tagged With: FHA Refinance Options

July 9, 2013

FHA Cash-Out Refinancing Loan Amounts

When borrowers choose the refinance a home loan using an FHA cash-out refinancing loan, many come to the application process not sure how much they can apply to borrow. For FHA cash-out refinance loans, there are specific rules found in HUD 4155.1 that govern the amount of the loan. There’s no single, set dollar amount limit placed on cash-out refinancing. Instead, the FHA/HUD provide a set of guidelines that determine the maximum loan-to-value percentage based on how long the borrower has owned the home and lived there as the principal residence, and how much the home has been valued at based on a new FHA appraisal. HUD 4155.1 Chapter Three Section B states, “If the property has been owned by the borrower as his/her principal residence for 12 months or | more...

June 24, 2013

FHA Loan Reader Questions: Down Payment Assistance

By Joe Wallace

A reader asks, “I want to move and was qualified for an FHA but needed to know if there is any programs to help assist with the down payment. I know there is an option for sellers to offer 6% sellers assist but is there any else to cover the rest?” The FHA itself does not offer any type of down payment assistance program. In the past there have been down payment assistance programs offered on a state or local level, but some federal laws have banned certain types of down payment assistance. Others not banned by federal law would be obliged to meet FHA loan rules as to the source of down payment money (see below). What does this mean? FHA loan rules require all borrowers to make a | more...

June 21, 2013

FHA Loan Rules: Maximum Loan Amounts and Down Payments

By Joe Wallace

FHA loan rules include guidance for lenders and borrowers about maximum loan amounts and down payment requirements. There’s a myth about today’s FHA home loans that some still repeat–variations on the idea that there may be no down payment required for first-time home buyers. What’s the reality? FHA loans do require a down payment. It’s much lower than the required down payment for many conventional loans, which is why some might believe that the FHA down payment requirement is reduced or eliminated for first-time borrowers. The minimum down payment amount for an FHA new purchase loan is 3.5%. No closing costs can be used to meet this requirement–the down payment is a separate amount from what are called “non-recurring” costs, prepaid expenses, discount points, etc. The down payment amount is | more...

June 19, 2013

FHA Loan Rules for Non-Purchasing Spouses

By Joe Wallace

One of the most commonly asked questions about FHA home loans is whether or not a spouse is required to sign, co-sign, or otherwise be committed to an FHA home loan. Can one spouse by a home with an FHA insured mortgage without participation of the other? That depends greatly on state law. FHA loan rules cannot and do not override state laws, but there are clauses found in the FHA loan rules written in HUD 4155.1 that address this issue. These items are found in Chapter Four, Section A under a section titled Non-Purchasing Spouses. It says in part; “If required by state law in order to perfect a valid and enforceable first lien, a non-purchasing spouse may be required to sign either the security instrument or documentation indicating | more...

June 18, 2013

FHA Loan Reader Questions: Chapter 7 Bankruptcy

By Joe Wallace

A reader asks, “I have a Chapter 7 and I want to apply for a FHA home loan. If my scores are in the high 600′s or 700′s? Do I still have to wait two years after my bankruptcy has been discharged to apply?” FHA loan rules on the subject of getting a loan after a Chapter 7 bankruptcy filing are found in HUD 4155.1 Chapter Four, Section C. The FHA loan rules say borrowers with a Chapter 7 on their credit record are not automatically barred from getting an FHA mortgage, but the following applies: “A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have elapsed since the date of the discharge of the bankruptcy. During this time, | more...

June 13, 2013

FHA Loan Reader Questions: Minimum Employment

By Joe Wallace

A reader asks, “Info to qualify FHA loan–I only have one year proof of taxes (W2). Do I need to finish this year to try to qualify?” While this question isn’t quite clear, it seems safe to assume the reader wants to know whether he or she meets FHA loan approval standards for an FHA mortgage. Let’s examine what FHA loan rules have to say about minimum employment history. Those rules can be found in HUD 4155.1 Chapter Four Section D, which says: “To be eligible for a mortgage, FHA does not require a minimum length of time that a borrower must have held a position of employment. However, the lender must verify the borrower’s employment for the most recent two full years, and the borrower must • explain any | more...

June 6, 2013

FHA Loan Rules: Contingent Liability

By Joe Wallace

FHA loan rules cover a wide range of circumstances and situations. Many of these rules were written in anticipation of needs that, while not as common as some, still might be in demand many times over the course of a single fiscal year based on the sheer volume of FHA mortgage loan applications. One set of rules governs something known as “contingent liability”, which the FHA loan rulebook describes in HHUD 4155.1 Chapter Four, Section C. “A contingent liability exists when an individual is held responsible for payment of a debt if another party, jointly or severally obligated, defaults on the payment.” This sort of obligation may be known as a co-sign agreement, a co-borrower or co-obligor arrangement. FHA loans require any borrower who has a contingent liability to list | more...

May 22, 2013

FHA Loan Reader Questions: Closing Costs

By Joe Wallace

A reader asks, “Can you have the closing costs added to your mortgage loan in California? Or do you have to pay them before escrow closes?” Let’s see what the FHA loan rules, as described in HUD 4155.1, have to say about this. Chapter Five, Section A has a heading titled Settlement Requirements Needed To Close, which states: “Lenders may pay a borrower’s closing costs, and/or prepaid items by ‘premium pricing.’ Closing costs paid in this manner do not need to be included as part of the seller contribution limitation. The funds derived from a premium priced mortgage • may never be used to pay any portion of the borrower’s downpayment • must be disclosed on the GFE and the HUD-1 Settlement Statement • must be used to reduce the | more...

May 16, 2013

FHA Loan Questions: Identity Of Interest Transactions

By Joe Wallace

One common question about FHA home loans involves the FHA rules about who can sell to whom. When it comes to a home owner selling property to someone they do not know, the rules are simple. FHA guidelines don’t allow a home owner with an “identity of interest” in the outcome of the sale to sell to an FHA borrower AND be a co-signer or co-borrower on the mortgage. What does that mean? According to HUD 4155.1 Chapter Four Section A, “A party who has a financial interest in the mortgage loan transaction, such as the seller, builder, or real estate agent, may not be a coborrower or a cosigner.” You can’t be both the buyer AND the seller. But what about in cases where the seller is a relative? | more...

May 15, 2013

FHA Loan Questions: Well Water

By Joe Wallace

A reader asks, “Purchasing an existing home in rural county in Oklahoma. What are the FHA guidelines on water system? No rural water at property. It’s well water. Would FHA loan on that water supply?” It’s important to point out that the FHA does not loan money–the FHA guarantees the loan issued by a private lender. That out of the way, let’s examine what FHA loan rules say about wells in 4150.2, Property Analysis. In the section titled, “Individual Water Supply and Sewage Disposal Systems” we find the following: “If water and sewer systems are not connected to public systems, the water well and/or septic system must meet the requirements of the local health authority with jurisdiction.” That means the FHA won’t guaranty a loan for a property that has | more...