Articles Tagged With: FHA Refinance Options

September 12, 2013

FHA HECM Program Changes: Mandatory Obligations

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...

August 15, 2013

FHA Extends Unemployment Foreclosure Avoidance Program Indefinitely

By Joe Wallace

The FHA has extended a program designed to help unemployed borrowers avoid FHA loan default and foreclosure. A recent FHA mortgagee letter announced, “the extension of the unemployment special forbearance policies detailed in Mortgagee Letter 2011-23, Unemployment Special Forbearance: Temporary Program Changes and Clarifications.” This program allowed FHA borrowers, “having trouble making their mortgage payments due to unemployment postpone or reduce their monthly mortgage payment while they look for work” according to a letter by Assistant Secretary For Housing Carol J. Galante, who also writes, “Beginning in August 2011, HUD required FHA servicers to offer suspended or reduced payments for at least 12 months or until the struggling borrower found a job.” That FHA loss mitigation program was set to expire August 1, 2013. But now, that program has been | more...

August 12, 2013

FHA Loan Questions: Applying For a Loan Following a Chapter 13 Bankruptcy

By Joe Wallace

A reader asks, “I was just released from Chapter 13 Bankruptcy and I would like to buy a house. What do I have to do to achieve this? My credit score is 635, 635 and 643.” FHA loan rules printed in HUD 4155.1 state that simply having a Chapter 13 bankruptcy does not disqualify you from getting an FHA loan, but there are certain standards a borrower needs to meet which must also be documented by the lender. Specifically, HUD 4155.1 Chapter Four Section C states, Chapter 13 bankruptcy”does not disqualify a borrower from obtaining an FHA-insured mortgage provided that the lender documents that: • one year of the pay-out period under the bankruptcy has elapsed • the borrower’s payment performance has been satisfactory and all required payments have been | more...

August 7, 2013

FHA Mortgage Insurance Rules

By Joe Wallace

FHA mortgage insurance rules changed earlier this year–there were a variety of alterations that included a “lifetime of the loan” mortgage insurance premium requirement. Starting in June of 2013, all FHA with case numbers assigned on or after June 3 will be charged annual mortgage insurance premiums “for the maximum duration permitted under statute.” In FHA Mortgagee Letter 2013-04, the new rules state, “For all mortgages regardless of their amortization terms, any mortgage involving an original principal obligation (excluding financed Up-Front MIP (UFMIP)) less than or equal to 90 percent LTV, the annual MIP will be assessed until the end of the mortgage term or for the first 11 years of the mortgage term, whichever occurs first.” Additionally, “For any mortgage involving an original principal obligation (excluding financed UFMIP) with | more...

August 5, 2013

FHA Loan Questions: Outstanding Judgments

By Joe Wallace

A reader asks, “I have an outstanding judgment in the amount of $8000. Can I still get a loan?” There are two very important considerations in situations like this, where the loan applicant has concerns about a credit issue blocking his or her approval for an FHA mortgage loan. One consideration is the FHA loan program’s rules and regulations. The other is the lending standards and requirements of the participating FHA lender. The FHA loan program is voluntary–that is to say that not all lenders choose to participate, and the ones that do have to abide by FHA minimum requirements. But lenders are not prevented from requiring higher standards as long as those standards are applied fairly and in accordance with Fair Housing laws. We can’t comment on what an | more...

July 31, 2013

FHA Loan Answers: Alimony and Child Support as Verifiable Income

By Joe Wallace

FHA loan rules say that a borrower’s income must be verified in order for it to count when the lender makes debt-to-income ratio calculations necessary for approving (or denying) the mortgage loan. Verifiable income is defined basically as earnings that are stable, reliable, and likely to continue. A borrower’s full or even part-time employment would count in most cases. But the money a borrower makes, for example, by selling items on eBay, would likely not pass the “stable” or “likely to continue” requirements. When it comes to non-job “income” such as child support or alimony payments, FHA loan rules make provisions that allow this income to be counted under the right conditions. A borrower does not have to declare child support income under the Fair Housing Act, but it is | more...

July 19, 2013

FHA Loan Reader Questions: Social Security Income

By Joe Wallace

A reader asks, “My husband and I have never owned a home. He is a Veteran. He is receiving Social Security. I will also be receiving Social Security. Would we be able to receive a FHA Loan?” FHA loan rules do address Social Security income as a potential source of verifiable income that can be used to qualify for an FHA mortgage loan. For example, in HUD 4155.1 in a section titled “Income Analysis: Individual Tax Returns (IRS Form 1040)” we find the following in the section for IRA Distributions, Pensions, Annuities, and Social Security Benefits: “The non-taxable portion of these items may be added back to the adjusted gross income, if the income is expected to continue for the first three years of the mortgage.” Also, in a section | more...

July 17, 2013

FHA Streamline Refinance Loans: Adding or Deleting Borrowers To The Title

By Joe Wallace

When borrowers with existing FHA mortgages want to apply for streamline refinancing, one question that sometimes comes up is whether or not a borrower is permitted to add or delete someone from the title of the loan at the time of refinancing. FHA loan rules do address this issue. Those rules are found in HUD 4155.1, Chapter Six, Section C under a section titled Borrower Additions or Deletions to the Title on a Streamline Refinance. The concern for some borrowers is whether or not adding or deleting someone might trigger the due-on-sale clause making the entire loan amount payable according to the terms of the clause. The FHA does permit additions and deletions to the title as described in Chapter Six: “Individuals may be added to the title on a | more...

July 16, 2013

FHA Streamline Refinances: Does The FHA Require An Appraisal?

By Joe Wallace

Borrowers who apply for FHA home loans to buy their dream home have to have that property appraised as a part of the loan process. The appraisal helps insure the property lives up to FHA minimum standards and establishes the fair market value of the property. When it’s time to refinance, depending on the lender and the type of refinance loan you may be required to get a new appraisal–FHA cash-out refinancing, for example. In order to determine the loan amount, the current market value of the property is required. But what about refinancing that has no cash back to the borrower and is only intended for a lower interest rate or monthly payment? The FHA refinance loan program known as Streamline Refinancing, for example, which does just that. A | more...

July 12, 2013

FHA Loan Reader Questions: Is There A List Of Acceptable Down Payment Sources?

By Joe Wallace

A reader asks, “I am trying to find the complete FHA list of acceptable sources for down payments. For example, can a client refinance an existing land or home loan as a source of obtaining the necessary funds needed for downpayment?” FHA loan rules are very specific about acceptable sources of down payment funds. A borrower is required to make a minimum cash investment or down payment of at least 3.5% for a typical new-purchase FHA mortgage. That 3.5% can come from the borrower’s own funds, or be a bona fide gift, or come as the result of the borrower cashing out investments, bonds or other resources. What exactly IS the down payment a percentage of? How does the borrower know what to expect in this area? The FHA loan | more...