Articles Tagged With: FHA Requirements

June 10, 2014

FHA Refinance Loan Rules For Payments Before and After The New Loan

FHA refinance loan advice includes a variety of recommendations about creditworthiness. For example, you should make sure you have 12 months of on-time payments on your credit record before you apply for a refinance loan, especially when applying for cash-out refinancing loans. But what about the timeliness of your original mortgage payments? Borrowers who have made all their payments on time and are about to refinance may wonder if, because of the timing of an FHA refinance transaction, two payments might be required in a single month. Can’t the borrower skip the final payment on the old mortgage before the new one kicks in? The rules for refinance loans found in HUD 4155.1 Chapter Three instruct the lender to make sure the borrower is current and paid up all the | more...

May 7, 2014

FHA Loan Documentation Standards: What’s Required, What’s Not Permitted

By Joe Wallace

In order to get the FHA loan application approval process moving, the lender may need authorization from the borrower to check credit reports, individual creditors, employers, even current or former landlords. In order to do this, your loan officer may need you to sign paperwork showing the financial institution has the authorization needed to request personal data. There are strict rules that govern this process. They are found in HUD 4155.1 Chapter One, Section B, which starts off by stating: “The lender may ask the borrower to sign a general authorization form that gives the lender blanket authority to verify information needed to process the mortgage loan application, such as • past and present employment records • bank accounts, and • stock holdings. If using a blanket authorization form, the | more...

April 24, 2014

FHA Loan Rules: Seller Paid Closing Costs

By Joe Wallace

The FHA loan rulebook, HUD 4155.1, has rules about how much a seller or other third party can contribute to the closing costs of a borrower purchasing a property using an FHA mortgage. According to the rules, it is possible for a seller to contribute toward closing costs, but there are limits. “The seller and/or third party may contribute up to six percent of the lesser of the property’s sales price or the appraised value toward the buyer’s closing costs, prepaid expenses, discount points and other financing concessions.” Six percent of the sales price or appraised value (whichever amount is lower) also includes the following: 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 | more...

April 11, 2014

FHA Loan Occupancy Rules

By Joe Wallace

In our last blog post, we answered a reader question about what might happen if the FHA loan applicant didn’t comply with FHA occupancy requirements spelled out for all new purchase single-family FHA home loans. But what ARE those occupancy requirements? What should a borrower know about the FHA home loan requirements for occupancy before committing to the FHA mortgage? The rules for occupancy when it comes to single-family FHA loans can be found in HUD 4155.1, Chapter Four under the heading, “Eligibility Requirements For Principal Residences”. Those requirements include the following definition of a principal residence: “A principal residence is a property that will be occupied by the borrower for the majority of the calendar year.” Why is this definition so important? Because of the very next section in | more...

April 4, 2014

FHA Loan Reader Questions: FHA Mortgage Loan Interest Rates

By Joe Wallace

A reader asks, “Is there a current guideline for the expected interest rate under the short refi for a home 450k to 500k. My note holder indicated approx 5% interest, 6.5 APR which seems a little high given the current rates for Jumbos.” “Also, for those interested should note my Tax Rep indicated the “forgiven debt” is no longer tax exempt (meaning the next year they amount forgiven would be taxed at you income+forgiven debt level). Have you heard if the Fed is talking about re-instating? This could be a substantial one time out of pocket tax owed the next year.” The first part of this reader question would seem to imply to some that the FHA might regulate or set interest rates. But that’s a misconception almost as common | more...

April 2, 2014

FHA Loan Reader Questions: “Low Income” Loans For Modular Housing/Mobile Homes

By Joe Wallace

A reader asks, “I am on disability and receive a fixed income of 788.00 monthly. I would love to be able to get a loan for a mobile or modular home. Can I be qualified for a low-income loan?” Single-family FHA loans don’t have income requirements in terms of minimum or maximum incomes per se. It’s a common misconception that you must earn a minimum amount of money or NOT earn too much money to qualify for an FHA mortgage. But if there are no minimums and no maximums, how do participating FHA lenders determine who qualifies for an FHA single-family home loan? The borrower’s income and monthly obligations are analyzed to see if the borrower can afford the loan. If a borrower’s debt-to-income ratio is within the right tolerances | more...

March 20, 2014

Am I Eligible For A New FHA Loan After A Short Sale?

By Joe Wallace

One of the most commonly asked questions we get in our comments section has to do with whether a borrower can apply for a new FHA loan following a short sale. The loan rules for post-short sale transactions are found in HUD 4155.1, Chapter Four, Section C under the heading, “Short Sales”. It starts off by stating that while it IS possible to get a new FHA loan following a short sale under the right conditions, “A borrower is not eligible for a new FHA-insured mortgage if he/she pursued a short sale agreement on his/her principal residence simply to • take advantage of declining market conditions, and • purchase a similar or superior property within a reasonable commuting distance at a reduced price as compared to current market value.” The rules mention | more...

March 5, 2014

FHA Loan Reader Questions: Can I Get Cash Back On My FHA Home Loan?

By Joe Wallace

A reader asks, “When you getting a FHA loan can you have some money in the bank for the hard days to come in case something happens in the future unexpectedly?” It seems as though the reader is asking if the borrower can apply for an FHA home loan in excess of the amount required for purchase and put that money in the bank for later use. FHA loan rules are clear for new purchase home loans–there is no cash back to the borrower permitted. FHA home loans for new purchases require a minimum cash investment of 3.5%, so the down payment issue would further complicate the issue if a “no cash out” policy weren’t in place. Borrowers are not only required to make a down payment for FHA home | more...

February 18, 2014

FHA Loan Reader Questions: Credit History Issues

By Joe Wallace

A reader asks, “I meet the income and credit score qualifications for an FHA loan, however I have two collection accounts on my credit report. These accounts were paid in full eight months ago. In addition, I had two credit card accounts 30 days late approximately a year ago. These were remedied within a reasonable time, yet they show on my credit report. I would like to add that these delinquent payments were due to a medical illness that left me disabled.” “I recently applied with a lender for an FHA loan and was told that I did not qualify because of my payment history. I read that, ‘a collection is minor in nature and usually does not need to be paid-off as a condition for loan approval’. If these | more...

February 17, 2014

After The Application: FHA Loan Procedures

By Joe Wallace

When you fill out and submit an FHA loan application, there are a number of steps the lender will take to process your application. Borrowers want to know how long the application review process takes and the answer can vary depending on the lender’s workload, the amount of information that needs to be verified and reviewed, etc. Some borrowers hope for an answer on their FHA loan application in a matter of days, but this isn’t possible–it takes weeks, not days, to verify all the information on your application. One reason for this is the rules the lender is required to observe when verifying employment and credit details. Did you know the lender cannot accept credit reports and similar documents from third parties? FHA loan rules say the lender must | more...