Articles Tagged With: FHA Refinance Options

February 20, 2012

FHA Loan Reader Question: Self-Employed Borrowers

A reader asks, “Is it possible to get an FHA loan if the ‘gap’ in employment was due to starting your own business? I have 1099?s that show income, as well as pay stubs as a contractor with a contract in place. The company paying me wants to hire me full time as a w-2 employee.” FHA home loans require the borrower to verify employment, but the lender does not have to deny a loan simply based on alternative, non-traditional, or self-employment. However, the rules for these types of employment are a bit more stringent so that the loan officer may properly verify income. When you fill out an FHA loan application, you’re required to list your employment prior to the period of self-employment, plus list out specific details of | more...

February 17, 2012

FHA Loan Reader Question: Bankruptcy and Job Loss

By Joe Wallace

A reader recently sent us a lengthy comment as part of a request for assistance on FHA loan topics. He writes, “I had a foreclosure in a bk chap 7 that was discharged in Nov 2009. This was due to a job lost in 2008 like most of the country. I had to get unemployment for I went over one year looking for another job. I went back to work full time in Dec 2009…” We won’t reproduce the entire correspondence here, but we thought it important to address the issues mentioned above as there are plenty of other readers who may be facing similar circumstances. Is it possible to get a new FHA home loan with conditions like the ones previously mentioned as part of the borrower’s history? Let’s | more...

February 14, 2012

FHA Loan Debt To Income Ratios: Do Student Loans Count?

By Joe Wallace

FHA loans require the lender to calculate the borrower’s debt-to-income ratio to determine if the applicant can realistically afford to make a monthly FHA mortgage payment. The borrower’s debts are reviewed and compared to the amount of money coming in–if the ratio is within FHA requirements, the loan can be approved (assuming the borrower meets the other FHA loan criteria). Some borrowers are rightfully concerned about the amount of debt they bring to the bargaining table. Too much debt and the borrower could be denied the FHA home loan. But not all financial obligations are necessarily counted toward the borrower’s debt-to-income calculation. FHA loan rules say some debts, usually with 10 months or less remaining on the payment agreement, do not have to be counted. The lender may choose to | more...

February 7, 2012

FHA Loan Standards: Exceptions to the Rules?

By Joe Wallace

The FHA has standards for qualifying for an FHA insured mortgage including income, employment, credit score and other factors. In most cases, borrowers who don’t meet the minimum required credit score or debt-to-income rations can’t qualify for an FHA loan. But are there exceptions? For example, could a borrower who has a debt-to-income ratio that’s too high still get an FHA loan approved? And why would the FHA approve a loan when the applicant doesn’t meet FHA loan standards? FHA loans include an option for lenders to review any “compensating factors” the borrower might bring to the bargaining table. For example, one such factor has to do with the borrower’s ability to pay–and a history of being able to pay–even though the debt-to-income ratio might exceed FHA standards. According to | more...

February 7, 2012

Can Repair Costs Be Added to the FHA Loan Amount?

By Joe Wallace

The FHA has strict rules about how a loan may be calculated. There’s the minimum cash investment required of the borrower, there are FHA loan limits, and there are rules covering what kinds of incentives a seller may provide in the form of interest rate buydowns and other financial contributions. Did you know that in some cases, the cost of home repairs on a sale property can be included in the sale price of the home for FHA loan purposes? According to Chapter Two of HUD4155.1, “Repairs and improvements may be added to the sales price before calculating the mortgage amount when…the repairs and improvements are required by the appraiser as essential for property eligibility”. These costs must be paid by the borrower, and

January 27, 2012

FHA Loan Restrictions on Cash-Out Refinancing

By Joe Wallace

When borrowers want to refinance an FHA mortgage, there are two basic types of refinancing to choose from; FHA cash-out refinancing loans and those with no cash to the borrower. The FHA loan rules for cash-out refinancing are naturally more stringent than those with no money to the borrower–in cash-out transactions the borrower must qualify under FHA requirements and meet certain standards that may not be the same as for non-cash out transactions. What are the restrictions on FHA cash-out refinancing? For starters, according to the FHA official site at FHA.gov, “Cash out refinance transactions are only permitted on owner-occupied principal residences”. The FHA takes the owner/occupant issue quite seriously, going so far as to add an additional rule stating; “Non-occupant co-borrowers may not be added in a cash out | more...

January 26, 2012

FHA Loan Reader Question: Refinancing a “Private Loan”?

By Joe Wallace

A tricky FHA loan question came in recently asking about FHA refinancing, bankruptcy, and more. The reader asks; “I have a situation where i have filed BK chapter 7 and had my house foreclosed, at the same time i had a money lender purchase a house for me and put it in my name and I make payments to him, I have been making payments for 21 months all on time and with taxes and insurance. I would like to refinance through a regular lender and pay off the original loan…So how do I refinance this loan and when am I eligible to qualify? It has been over two years from filing chapter 7 and it will be two years from the foreclosure in Oct 2012. Any thoughts?” There are | more...

January 25, 2012

FHA Loan Rules VS. Lender Requirements

By Joe Wallace

We encourage readers to submit their questions about the FHA loan process and related issues by using our comments section; as a result we’ve gotten a large number of comments about the difference between FHA regulations and lender requirements. For example, if the FHA requires a minimum FICO credit score, why does the lender require a higher score? Isn’t the borrower qualified at the lower, but still permissible score according to FHA loan rules? This is where a great deal of confusion can and does occur, mainly because of an expectation that the FHA rules have the final say in such matters. But the truth is that FHA lenders are free to require higher credit scores and other criteria so long as such requirements are applied equally for all applicants, | more...

December 20, 2011

When Can I Get an FHA Streamline Refinancing Loan?

By Joe Wallace

Borrowers who take out FHA insured mortgages are eligible to apply for FHA Streamline Refinancing loans, which features reduced paperwork and underwriting requirements in many cases compared to other refinancing options including cash-out refinancing loans and similar transactions. There are plenty of reasons why now might be a good time for some borrowers to consider refinancing an FHA guaranteed mortgage–Streamline Refinancing features a lower monthly mortgage payment, lower interest rates, or both with certain exceptions. For example, if a borrower is refinancing from an adjustable rate mortgage to an FHA fixed-rate loan, the interest rate on the refinanced loan may be higher than the variable rate. These features sound good to many FHA borrowers, but how soon after purchasing a home with an FHA mortgage can a home owner begin | more...

December 19, 2011

FHA Refinancing Loan Requirements

By Joe Wallace

One recurring question in the reader comments section as of late involves the rules of cash-out refinancing loans and streamline refinancing loans insured by the FHA. Some borrowers seek loans on property that no longer has a mortgage, and wonder if FHA refinancing loans can help. Borrowers looking at options including FHA cash-out refinancing or streamline refinancing learn there are important differences between the two. FHA streamline loans require the home to have a lien, otherwise there is no loan to refinance. Without an existing mortgage, there’s no possibility an FHA streamline loan can be underwritten for that property. For example, in the HUD.gov frequently asked questions section, under the heading, “Streamline Your FHA Mortgage”, the site states; “FHA has permitted streamline refinances on insured mortgages since the early 1980’s. | more...