Articles Tagged With: FHA Requirements

February 16, 2012

Historic Settlement Between Federal Government and Five Major Banks

The Department of Housing and Urban Development recently announced a $25 billion settlement between the government and the five largest banks in the U.S. United States Attorney General Eric Holder, Department of Housing and Urban Development (HUD) Secretary Shaun Donovan, Iowa Attorney General Tom Miller and Colorado Attorney General John W. Suthers announced the “landmark $25 billion agreement with the nation’s five largest mortgage servicers to address mortgage loan servicing and foreclosure abuses.” According to the press release, this is the largest federal-state civil settlement ever obtained and is the result of “extensive investigations by federal agencies, including the Department of Justice, HUD and the HUD Office of the Inspector General (HUD-OIG), and state attorneys general and state banking regulators across the country.” The settlement includes Bank of America Corporation, | more...

February 13, 2012

FHA Loan Reader Question: Home Loan Income Requirements

By Joe Wallace

The FHA rules for income verification include a requirement that the lender verify all income sources listed on the FHA loan application. According to the rules for lenders participating in the FHA home loan program, income cannot be counted for purposes of calculating the FHA mortgage loan if it is not stable, verifiable, and likely to continue. One reader asks; “Can a retired person qualify for an FHA mortgage? I recently retired, am in the process of selling my current home, after which I will be relocating to another state. Without employment, my source of income is Social Security and withdrawals from a retirement account. Will these qualify?” Federal housing laws forbid lenders from discriminating against home loan applicants based on age and related factors. The only qualifying data permitted | more...

February 8, 2012

FHA Loans: Is a Down Payment Always Required?

By Joe Wallace

We get many questions about FHA home loans from our readers; some of the most frequently asked include questions about FHA loan down payment issues and the acceptable sources of down payment funds. It’s true that all FHA new purchase home loans require at least a 3.5% down payment. That amount–the 3.5%–is current at the time of this writing. If that FHA mortgage down payment requirement changes, your lender should let you know before you commit to the mortgage in writing. In Chapter 5 of HUD4155.1, the rules state clearly; “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 price.” The reason the FHA requires the | more...

January 31, 2012

FHA Loans, Effective Income, and Alimony

By Joe Wallace

One important section of the rules for FHA loans states a borrower’s income must be verified by the lender as “effective income”. This means that the income must be stable and likely to continue. Some types of income can’t be counted. A part-time business selling goods on eBay, for example, might not qualify. But what about other types of non-employment income like child support, alimony, or maintenance payments? There are plenty of borrowers who receive or are eligible to start receiving these types of payments. Does the FHA recognize them as effective income? In certain cases, yes. Alimony, maintenance payments as part of a divorce decree, and/or child support can qualify and be counted toward a borrower’s debt-to-income ratio provided the payments meet standards set by they FHA. According to | more...

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 23, 2012

FHA Loans Reader Question: Chapter 7 Bankruptcy

By Joe Wallace

There have been many reader questions in the last six months about bankruptcy, foreclosure, and the required waiting period for new FHA home loans after these procedures. One reader asks, “When does the waiting period began per FHA Guidelines? If you included a conventional loan in a Chapter 7 bankruptcy, does the waiting period began at the discharge date? Or does the waiting period began at the trustee sale?” The short answer is that after Chapter 7 bankruptcy, the borrower must wait out the minimum “seasoning” period plus any additional amount required by the lender–three years in many cases though some lenders may be willing to work with qualified borrowers after the FHA two-year minimum for Chapter 7. This waiting period begins from the time the bankruptcy is discharged. Since | more...

January 20, 2012

FHA Loan Reader Question: Why Was I Denied an FHA Home Loan?

By Joe Wallace

Many readers write in with questions similar to the one we received this week, which includes the following: “I am recently divorced. While married, went through two bankruptcies (both discharged) have/had issues with back taxes (installment plans made and determined to be paid in full by ex per divorce decree). Have moved to another state, working (1.5 years), full time student. Was living with children, have moved into an apartment paying $600.00 per month (comfortably), because I could not get qualified for a loan. Have two major credit cards (visa/master credit cards not debts) established in my name for 1.9 years, never late, never over limit. Credit score is 620. Is there a main reason why, I did not or cannot be approved for a FHA loan?” Before addressing an | more...

January 18, 2012

FHA Loan Assumption: An Alternative to Foreclosure

By Joe Wallace

FHA loan assumption is a process which lets one FHA borrower assume the debt on an existing FHA home loan started by another borrower. FHA.gov states,

January 13, 2012

FHA Loan Reader Question: Irregularities in the FHA Loan Process

By Joe Wallace

The FHA has rules which must be followed in order for participating lenders to legally take part in the FHA loan guaranty program. There are also federal laws which apply to all lenders above and beyond FHA regulations. With this in mind, we reviewed a reader comment/question which came in recently: “A friend of ours just told us she is closing on an FHA loan tomorrow.

January 12, 2012

FHA Loans: Can I Change the Terms of Sale Agreement?

By Joe Wallace

The FHA provides many helpful resources for homebuyers on its official site at FHA.gov. One of those resources is an online version of a HUD/RESPA booklet called “Buying Your Home” which includes a section on settlement costs. One of the first portions of this booklet a prospective FHA mortgage loan applicant will read includes the following: “The real estate broker probably will give you a preprinted form of agreement of sale. You may make changes or additions to the form agreement, but the seller must agree to every change you make. You should also agree with the seller on when you will move in and what appliances and personal property will be sold with the home.” The second sentence contains a revelation for some borrowers–some loan applicants simply assume that | more...