Articles Tagged With: FHA Refinance Options

February 1, 2013

FHA Loan Amounts: A Reader Question

A reader asks, “My son and I have a combined income of $68,000 yearly. His credit score is 643 and mine is 639. I also have a IRA worth $190,000 what do we qualify for from a FHA Loan?” This is a type of question that comes in frequently and unfortunately the answer isn’t as simple as doing the math and returning a loan amount. There are many variables that go into calculating an FHA home loan amount including the borrower’s financial qualifications, the lender’s requirements, the cost of the home and other factors. A house for sale in one part of the country for $150,000 might be worth much or (or less) in another part of the country. Since FHA loans for new purchases are calculated on the fair | more...

January 29, 2013

FHA Refinancing Loans: No Cash Out With An Appraisal

By Joe Wallace

The FHA refinance loan options you have to choose from can include cash-out and no cash out refinance. The FHA has different rules for these types of refinancing; what are the basics of the FHA No Cash Out With Appraisal refinance loans? Maximum Mortgage Loan Amount The maximum you can borrower on a no cash out refinance loan with an appraisal is either: 97.75% Loan-To-Value (LTV) factor applied to the appraised value of the property, or the amount of the existing debt. Whichever amount is lowest between these two will be used to calculate the FHA refinance loan amount. Loan Amounts and UFMIP FHA loan rules state, “The total FHA first mortgage is limited to 100% of the appraised value, including any financed upfront mortgage insurance premium (UFMIP)…Generally, the maximum | more...

January 17, 2013

Paying The Up Front Costs Of Your FHA Loan

By Joe Wallace

The FHA loan program is designed to help borrowers get into an affordable home. However, those new to the FHA loan program might not realize there are up front expenses which must be budgeted for; unlike the VA loan program administered by the Department of Veterans Affairs, the FHA loan program does not feature a “no down payment” option. FHA home loans have a required down payment the FHA regulations describe as a “minimum investment”. FHA loan rules as found in HUD 4155.1 describe the up-front costs of an FHA loan (including the down payment) as follows: “Under most FHA programs, the borrower is required to make a minimum downpayment into the transaction of at least 3.5% of the lesser of the appraised value of the property or the sales | more...

January 16, 2013

FHA Loan Rules For Applications: Your Tax Returns

By Joe Wallace

As part of the home loan application process for FHA insured mortgages, applicants are required to furnish a set of paperwork that includes tax documents. According to the FHA loan rulebook, HUD 4155.1, in a section titled “Federal Income Tax Returns”, the rules tell the lender to get the applicant’s: • federal income tax returns for the most recent two years, both individual and business, including all applicable schedules, for self-employed borrowers, and • individual federal tax returns for commissioned individuals. ” The phrase “all applicable schedules” refers to things like Schedule C and other forms required. If you don’t know what Schedule C is, you likely have not needed to file one. (It’s for borrowers who report business income or self-employment income. FHA loan rules also state that the | more...

January 10, 2013

FHA Streamline Refinance Loans Without An Appraisal

By Joe Wallace

FHA Streamline loans are described in the official rules (HUD 4155.1) as follows: “Streamline refinances • are designed to lower the monthly principal and interest payments on a current FHA-insured mortgage, and • must involve no cash back to the borrower, except for minor adjustments at closing, not to exceed $500.” The no-cash-out rule makes FHA Streamline Refinance loans different than cash-out refinances. Streamline loans may be done with or without an appraisal. According to FHA loan rules, when a Streamline Refinance is done without an appraisal, the following applies: “Generally, the streamline refinance mortgage amount may never exceed the statutory limits, except by the amount of any new upfront mortgage insurance premium (UFMIP). However, the maximum mortgage may exceed the statutory limits on certain specialty products.” Additionally, there are | more...

January 3, 2013

Canceling An FHA Case Number: A Reader Question (Part Two)

By Joe Wallace

In our previous blog post, we addressed a question from a reader who asked, “Is it possible for the previous lender to cancel the FHA Case Number?” FHA case numbers may be canceled–there are rules that govern how this procedure is to be handled by the lender. The case number must be canceled in writing according to the procedure spelled out on the FHA/HUD official site. “The lender must notify the appropriate FHA Homeownership Center in writing to close outstanding files and cancel the FHA case number if the origination and closing of a loan will not be completed or if FHA mortgage insurance endorsement will not be sought.” The rules also remind lenders, “Please note that you cannot request a case number cancellation for an endorsed (insured) loan or | more...

December 31, 2012

FHA Streamline Refinance Loans: Lower Interest and/or Mortgage Payments

By Joe Wallace

With interest rates at lows not seen in many years, many FHA borrowers are considering refinancing their existing FHA home loan even if they have previously refinanced in the last few years. While some consider the term “serial refinancing” to be negative, this practice is in vogue once more as many rush to get better interest rates than they had access to when they first applied for a mortgage loan. Refinancing is especially popular at present due to concerns over the “fiscal cliff” and its potential to affect the average person’s bottom line through higher income taxes, the possible reduction or elimination of certain tax breaks including the mortgage interest deduction. Is now the right time to pre-qualify for an FHA refinance loan or apply for FHA streamline refinancing? That’s | more...

December 26, 2012

FHA Loan Applications: What Your Loan Officer Needs

By Joe Wallace

FHA loan applications are designed to give the lender the information needed to start the approval process. It’s true that a loan application can be lengthy–it’s a major line of credit, after all. What does the bank need from the borrower to move forward? The application is designed to help the lender obtain a range of details including: • general mortgage credit analysis documents • evidence of Social Security Number • verification of deposit • verification of employment (VOE) • federal income tax returns, and • appraisal documentation. That’s reprinted from the FHA loan rulebook for lenders, HUD 4155.1, which adds, “Lenders must obtain the most recent documents required to perform the mortgage credit analysis. “Most recent” refers to the most recent document available at the time the loan application | more...

December 24, 2012

FHA Revises Flood Zone Determination Policy

By Joe Wallace

The FHA and HUD have issued revised and updated guidance for borrowers and lenders regarding its flood zone determination policy. On December 11, 2012, the FHA official site was updated to include Mortgagee Letter 2012-28, which is intended to overrule a previous Mortgagee Letter issued in 2010 on the subject. At one time, those applying for FHA loans were not affected by a mandatory flood zone determination policy. In the past lenders were “strongly encouraged” to get a flood zone determination for home purchased with an FHA insured mortgage. That policy was revised, and is now updated and re-stated in FHA Mortgagee Letter 2012-28. According to the new mortgagee letter, “FHA requires all mortgagees obtain a flood zone determination on all properties. The documentation provided to evidence the flood zone | more...

December 20, 2012

FHA Loan Rules: Third Party Contributions

By Joe Wallace

FHA loan rules state that a borrower must provide a minimum down payment–3.5%–as a requirement of FHA loan approval for a single-family property. For some borrowers, that down payment takes up a good amount of the available cash on hand. What can a borrower do when he or she can afford a down payment, but may struggle to come up with some of the cash needed for closing costs, pre-paid expenses or other costs of an FHA loan? The FHA has a rule stating that the borrower can have assistance in this area in the form of a third party contribution. FHA loan rules state that the seller, “or third party” may contribute, “up to six percent of the lesser of the property’s sales price or the appraised value toward | more...