Articles Tagged With: FHA Requirements

January 11, 2013

FHA Loan Credit Issues: A Reader Question

A reader asks, “I have poor credit. I am a single mother of 4 and need to buy a bigger home. I have noticed reading several posts, that the lowest credit score FHA will accept is 580. Is this true in every case? After I was divorced my credit score dropped, big time. Everything was divided in court but at the time I was not working and it ruined my credit.” The answer to this question is likely one the reader doesn’t want to get. The reader asks if the FHA minimum credit score requirement is true in every case, and the short answer is “No”. However, the reason is due to the lender’s additional requirements for credit scores, not a more lenient loan policy on the FHA’s part. 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 9, 2013

FHA Loan Reader Questions: Can Another Homeowner Co-Sign My Loan?

By Joe Wallace

A reader asks, “Can my mother co-sign an FHA mortgage for me even if she has a veteran’s loan for her home? Will they use my credit, or just hers, or both? I am confused. My credit is not so good but she is willing to help so I don’t know…” FHA loans require credit, income and employment data on all parties financially obligated on the mortgage. What specifically does the FHA require from co-signers or co-borrowers? Here’s some information from the FHA official site, which states: “Co- borrowers take title to the property and are obligated on the mortgage note and must also sign the security instrument. The co-borrower’s income, assets, liabilities, and credit history are considered in determining creditworthiness.” Additionally, “Co-signers do not hold ownership interest in a | more...

January 9, 2013

FHA Loan Rules For Self-Employed Borrowers: A Reader Question

By Joe Wallace

A reader asks, “Are there specific rules for applicants who are self-employed or independent contractors and receive a 1099 instead of a W-2?” Yes. Self-employed borrowers and independent contractors must have their income verified the same as more traditionally employed borrowers. For self-employed FHA loan applicants this may include additional paperwork; tax statements, proft-and-loss sheets, even business plans or other related documentation depending on the lender’s requirements. Self-employed and contract workers have specific criteria that must be observed. What defines “self employed” as opposed to “contract”? You may be considered self-employed if you have a 25% or greater controlling interest in a business. The lender has to determine your level of ownership in a company. A contract employee may not be required to submit the same documentation as a self-employed | more...

January 8, 2013

FHA Loan Reader Questions: Manufactured Home Rules

By Joe Wallace

A reader asks, “What requirements does a factory built home (manufactured or modular)have to meet to qualify for FHA financing? I am particularly interested in any “age” limitations/recognitions/requirements/etc.” It’s true that there are FHA loans for certain types of mobile homes/manufactured homes, modular homes, etc. During the housing crisis, these loans were more difficult to come by; many lenders were not willing to underwrite FHA loans on these types of properties. But with a recovering housing market and rising property values, some borrowers are finding their lenders willing to consider these types of FHA loans once more. To answer the reader’s question, it was necessary to reference the Department of Housing and Urban Development’s Frequently Asked Questions database, which states; “To determine basic eligibility for FHA mortgage insurance, all manufactured | more...

January 7, 2013

Adding Repair Costs To An FHA Home Loan

By Joe Wallace

When you want to purchase a home with an FHA guaranteed home loan, the property you want to buy must be appraised to determine its eligibility for the loan. A home that does not meet FHA minimum property requirements may not necessarily be ruled out for an FHA loan–an appraiser may note certain corrections that should be made to bring the home up to standard. In such cases, the loan may be approved contingent on those corrections being made. But can the expense of those corrections, when not paid by the seller, be included in the FHA loan amount? FHA loan rules provide for this, stating under what circumstances repair or improvement costs can indeed be added to the loan. According to HUD 4155.1 Chapter Two, “Repairs and improvements may | more...

January 4, 2013

Bank Of America Settles In FHA Sexual Orientation Discrimination Case

By Joe Wallace

A press release issued on January 2, 2013 announces a settlement between the Department of Housing and Urban Development and Bank of America regarding a discrimination case filed by the government. According to HUDNo.13-001, “The U.S. Department of Housing and Urban Development today announced an agreement with Bank of America (BOA) to settle a claim that the mortgage lender refused to provide financing to a lesbian couple. The agreement is the first enforcement action taken against a lender involving HUD’s recent rule ensuring that the Department’s core housing programs be open to all eligible persons, regardless of sexual orientation, gender identity, or marital status.” The case involves alleged violations of the HUD rule “Equal Access to Housing in HUD Programs Regardless of Sexual Orientation or Gender Identity” which prohibits lenders from | 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 27, 2012

FHA Loan Applications: Verification of Employment

By Joe Wallace

From time to time we get questions about FHA loans including variations on the commonly asked, “How long do I have to spend on the job to get an FHA loan?” The short answer is that FHA loan rules require the lender to verify at least two years of employment, though not necessarily two years with the SAME employer. According to HUD 4155.1 Chapter One Section B, “The lender must obtain a Verification of Employment (VOE), and the borrower’s most recent pay stub” as part of this verification. But there are alternatives to this; FHA loan rules say “As an alternative to obtaining a written VOE, the lender may obtain the borrower’ s: • original pay stub(s) covering the most recent 30-day period, and • original IRS W-2 forms from | 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...