Articles Tagged With: FHA Requirements

June 28, 2013

FHA/HUD Announce Relief For Alaska Flood Victims

The FHA and HUD have issued a press release announcing relief for victims of recent flooding in Alaska. According to HUDNo.13-100, released Thursday June 27, 2013, “U.S. Housing and Urban Development Secretary Shaun Donovan today announced HUD will speed federal disaster assistance to the State of Alaska and provide support to homeowners and low-income renters forced from their homes due to recent flooding.” This assistance came after the President made an announcement declaring parts of Alaska affected by the flooding to be federal disaster areas. According to the press release, “President Obama issued a disaster declaration for Alaska Gateway Regional Educational Attendance Area, Copper River Regional Educational Attendance Area, Lower Yukon Regional Educational Attendance Area, Yukon Flats Regional Educational Attendance Area and Yukon Koyukuk Regional Educational Attendance Area.” The federal | more...

June 26, 2013

FHA Loan Rules For Down Payments: Gift Funds and Approved Sources of Those Funds

By Joe Wallace

In a recent post we examined the FHA loan policy about down payments for new purchase home loans. FHA loan rules require all new purchase loans for single family residences to include a minimum cash investment from the borrower of 3.5%. That 3.5% must come from an approved source including the borrower’s own cash reserves, cashed-in investments, savings bonds or other holdings. The required down payment cannot come from what the FHA labels “non-collateralized loans” such as a payday loan, credit card cash advance, etc. The down payment money is permitted to come from a third party as a bona fide gift, as long as the source of that gift is acceptable under FHA loan rules. What are considered acceptable sources of gift funds for down payments? Before we can | more...

June 25, 2013

FHA Loan Answers: All About Seller Concessions

By Joe Wallace

Seller concessions are a commonly asked-about topic related to FHA home loans. FHA loan rules permit a seller (or a “third party”) to contribute up to six percent of the sales price or appraised value of the property toward closing costs, discount points or “other financing concessions” according to the FHA official site. The six percent limit would be the lesser of the two amounts–the sale price or appraised value. What specifically can the seller or third party contribute? According to FHA loan rules spelled out in Chapter Two of HUD 4155.1, that six percent limit may include: third party payment for permanent and temporary interest rate buydowns, and other payment supplements payments of mortgage interest for fixed rate mortgages mortgage payment protection insurance, and payment of the upfront mortgage | 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 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 14, 2013

HUD Updates Good Neighbor Next Door Policy

By Joe Wallace

The Department of Housing and Urban Development has updated its policy on the Good Neighbor Next Door program, which offers homes at a major discount to qualifying borrowers. According to HUD, the program “offers HUD owned single family (one-unit) homes to eligible participants at a 50% discount” to “law enforcement officers, teachers and firefighters/emergency medical technicians and who meet all other requirements of the program”. The HUD Good Neighbor Next Door program is available to those who want to purchase using an FHA insured mortgage. Recently the FHA and HUD have issued guidance about the Good Neighbor Next Door Program, which includes clarification on the mortgage insurance premium for the loan. According to FHA Mortgagee Letter 2013-20, “The purpose of this Mortgagee Letter is to: Clarify that the mortgage insurance | more...

June 13, 2013

FHA Loan Rules on Verifiable Income: Commissions

By Joe Wallace

FHA loans require the lender to verify the applicant’s employment, credit history, and income. When it comes to income verification, the FHA requires the lender only to use “verifiable income” when calculating a borrower’s creditworthiness. When an FHA loan applicant has ordinary hourly or salary income, it’s simple to establish what verifiable income might be using pay stubs, income tax reports, and other documentation. But what about when a mortgage loan applicant has a job that pays a commission instead of a salary? FHA loan rules have provisions for commission-based income, as described in HUD 4155.1 Chapter Four. There, you’ll find the following: “Commission income must be averaged over the previous two years. To qualify with commission income, the borrower must provide • copies of signed tax returns for the | 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 12, 2013

FHA Loan Reader Questions: Appraisals, Moldy Bathrooms, and Dirt Floor Basements

By Joe Wallace

A reader asks, “Can I get an FHA loan if the home has a dirt floor basement and mold in the bathroom?” There are two important things FHA loan applicants should know about the FHA appraisal process. One is that the FHA does not have a complete, exhaustive list of every type of issue a home might have that could disqualify it from FHA loan approval. Second, the FHA requires homes be in compliance with state and local building code. Any situation that is not code compliant for the state or local authority would not pass for the FHA, either. In such cases the FHA appraiser might require corrections, repairs, or other modifications as a condition of FHA loan approval. In other cases the problems may be so bad that | more...

June 5, 2013

FHA Loan Answers: First Time Homebuyers

By Joe Wallace

A reader asks, “I have a Chapter 7 bankruptcy a yr ago w/a score 589 and as a veteran honorable recieving SS benefit income of $735.00/month, and together with my wife, employed 5/yrs with an income is $1,920.00 a month, with a score 580. We have been renting for 5yrs without missing or late payments with the same landlord in Fla. Can we qualify as a first time home buyer?” There are two basic issues related to this reader question. The reader asks if there’s a chance to qualify “as a first time home buyer”. The FHA does not, contrary to popular belief, require applicants to be first time home buyers in order to get an FHA home loan. By the same logic, there is no benefit or preference given | more...