Articles Tagged With: FHA Requirements

May 10, 2011

How Does Chapter 7 Bankruptcy Affect My FHA Loan Application?

A common question for some FHA loan applicants has to do with previous bankruptcy filings and how having a bankruptcy on a credit record can affect a new application for an FHA home loan. There are two types of bankruptcy-Chapter 7 is a liquidation type bankruptcy, Chapter 13 is a reorganization process where outstanding debts are paid off over a period of up to five years. Chapter 7, where the borrower’s assets are liquidated in order to help pay off the debts owed, does not automatically mean an FHA loan applicant will be denied a mortgage loan. According to the FHA official site, “A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA mortgage if at least two years have elapsed since the date of the | more...

May 9, 2011

Can I Get an FHA Home Loan for a Second Home?

By Joe Wallace

In other blog posts we’ve written about the rules for FHA home loans, which include requirements that the property be used as a primary residence. That means an FHA borrower cannot take out a mortgage to purchase a summer home or vacation property–the rules forbid FHA loans for such “recreational use” purchases. Those rules aside, there are some instances where and FHA borrower could qualify to purchase a second home if certain conditions are met. The FHA describes such homes as “secondary residences”, stating “A secondary residence is a property the borrower occupies in addition to his or her principal residence.” These home loans are approved only when the FHA has evidence that “an undue hardship exists, meaning that affordable rental housing that meets the needs of the family is | more...

May 6, 2011

Refinancing to an FHA Mortgage From a Conventional Loan for Underwater Borrowers

By Joe Wallace

In a troubled housing market, many borrowers discover the property they’ve invested in has lost value, and the borrower may owe more on the home than they can reasonably expect to sell the property for. What does a borrower do in a situation where a potential loss on the home could occur through no fault of their own? For a limited time the FHA offers help to those in “negative equity positions” with an FHA refinancing loan option that moves the borrower from a conventional mortgage to an FHA-insured loan. The program was created specifically for homeowners with conventional loans owing more than the current value of the property. These “underwater” borrowers must meet specific FHA requirements, and lender participation in the program is voluntary, but qualified underwater home owners | more...

May 4, 2011

FHA Cash-Out Refinancing Facts (Part Two)

By Joe Wallace

In our previous blog post, we discussed the rules for FHA cash-out refinancing loans. The FHA allows cash-out refinancing for qualified borrowers. Those qualifications include a requirement for the existing mortgage to be current. FHA

May 4, 2011

FHA Cash Out Refinancing Facts

By Joe Wallace

House hunters who purchase a home with an FHA mortgage loan may eventually decide to refinance the home to get a better interest rate, lower payments or to take advantage of the equity built up in the home. Many borrowers are curious about FHA cash-out refinancing options–does the FHA allow a cash-out refinancing option? The answer is yes, but there are some conditions that apply. There are requirements on cash-out refinancing that may not apply to other types of refinancing loans. For example, a cash-out refinancing loan will be denied to borrowers who are delinquent on the mortgage or who have a record of delinquency within the last 12 months. Borrowers with less than six months of payment history on the current mortgage will be turned down for cash-out refinancing, | more...

May 3, 2011

FHA Loans, Appraisals and Refinancing

By Joe Wallace

FHA loan applicants who find a suitable home and want to buy it must wait out the required FHA appraisal process before a loan can be approved. The FHA appraiser’s job is to make sure the home meets minimum property requirements and to assign the fair market value. The fair market value establishes a baseline for the FHA loan amount and is a very important part of the process. That appraisal has an expiration date. According to FHA rules, ” Effective for all case numbers assigned on or after January 1, 2010 the validity period for all appraisals on existing, proposed, and under construction properties, including HUD REO appraisals that have an effective date of on or after April 1, 2010, will be 120 days.” That doesn’t give the borrower | more...

May 2, 2011

FHA Loans: The Non-Purchasing Spouse

By Joe Wallace

First-time home buyers looking into an FHA mortgage soon learn about a variety of requirements. Some are the rules set by a particular lender, others are dictated by the Department of Housing and Urban Development, while others are established by state laws that govern retail banking procedures. Of these guidelines, often the state laws vary the most from place to place. One example of this is the

April 28, 2011

FHA HECM Loans and Required Counseling Facts

By Joe Wallace

The FHA Reverse Mortgage program, also known as a Home Equity Conversion Mortgage, is a type of loan product available to borrowers age 62 and older and with sufficient equity built up in the property. The reverse mortgage program offered by the FHA has terms that include no monthly payments. The HECM is paid off when the owner dies or sells the property. The borrower gets the proceeds from the HECM loan dispensed according to the loan agreement, which can include a line of credit, installment payments or a combination of the two. Because of the unique nature of an FHA HECM loan compared to other mortgage loans, the FHA requires the applicant to get loan counseling before the loan may be approved. The FHA wants borrowers to be fully | more...

April 28, 2011

FHA LOANS: HECM Loan Terms and Conditions

By Joe Wallace

The FHA Home Equity Conversion Mortgage or HECM loan, also known as a reverse mortgage, has terms and conditions that must be clearly understood in order to get the most out of the loan. HECM loans have strict rules that must be followed in order to avoid violating the terms and conditions, which is why the FHA requires HECM loan borrowers to get counseling on reverse mortgages before they can be approved for an FHA HECM loan. The reason understanding these terms and conditions are so important has much to do with the nature of the loan itself–no payments are due from the borrower at any time unless he or she dies or sells the home. But if the borrower violates the terms of the loan, the lender is able | more...

April 26, 2011

FHA Home Loan Interest Rates

By Joe Wallace

One of the most common misconceptions of the modern FHA loan program is that FHA or HUD is responsible for setting interest rates on the home loans insured by an FHA loan. It’s easy to understand why some might think that is true; the FHA does place limits on certain fees, how closing costs and down payments are paid and by whom. Why wouldn’t the FHA also regulate the interest rates of an FHA-insured mortgage? The FHA does regulate (but does not set) interest rates in some cases. Any FHA-insured adjustable rate mortgage, for example, has built-in limits on when the rates can be adjusted, and how often. There are even caps on how many percentage points may be changed over the lifetime of the variable rate loan. But what | more...