Articles Tagged With: FHA

October 19, 2017

How Does FHA Deal With A Borrower’s Financial Hardship? Part Two

How does FHA deal with a borrower’s financial hardship? That is a question we began addressing in a previous blog post, starting with an examination of the FHA attitude toward things like public assistance income, credit counseling programs, etc. In general, FHA loan rules do not allow borrowers to have public assistance income held against them as a liability, and participating in a credit counseling program is not grounds for denying an FHA mortgage loan. All income, including public assistance, must meet FHA loan standards for dependability and the likelihood of that income continuing. But just because the income is from public assistance, Social Security, etc. does not mean that income is not a valid means of financially qualifying for an FHA mortgage. Borrowers With Temporary Reductions of Income One | more...

October 18, 2017

How Does FHA Deal With A Borrower’s Financial Hardship?

By Bruce Reichstein

How does FHA deal with a borrower’s financial hardship? That is an important question, and the answers may surprise some who expect the same types of financial qualifications from FHA mortgages as from conventional loans. What is the reality? Basic FHA Loan Financial Requirements FHA loan FICO score minimums are 580 and higher for maximum financing and the lowest down payment. Lenders may have higher requirements, but the FHA minimum FICO score allows those who wouldn’t be considered for a conventional mortgage. Debt-to-income ratio requirements for FHA mortgage loans (which may vary depending on FICO scores) will vary some among lenders, too but you’ll find that your total payments must not (generally speaking) exceed 43% of your monthly income. How Does FHA Deal With Financial Hardship? Depending on the nature | more...

Time Is Running Out On Exterior-Only FHA Appraisals

October 17, 2017

What Is An FHA Rate And Term Refinance?

By Joe Wallace

What is an FHA rate and term refinance? This refinance loan is different than FHA cash-out refinancing or reverse mortgages. The rules that cover FHA rate and term refinancing are found in the FHA loan handbook, HUD 4000.1, and explains how this type of mortgage differs from the rest. What Are FHA Rate And Term Refinance Loans? HUD 4000.1 defines an FHA rate and term refinance loan as follows: “Rate and Term refers to a no cash-out refinance of any Mortgage in which all proceeds are used to pay existing mortgage liens on the subject Property and costs associated with the transaction.” Who Is Eligible To Apply For An FHA Rate And Term Refinance Loan? HUD 4000.1 explains that “at least one Borrower” named on the original home loan as | more...

October 12, 2017

Can I Get An FHA Mortgage After A Short Sale?

By Joe Wallace

Can I get an FHA loan after a short sale? Many have asked this question, unsure of the FHA loan rules for transactions in the wake of a negative credit event such as a foreclosure, bankruptcy, or short sale. To begin, we should address the basic definition of a short sale and what that means for a potential FHA borrower. What Is A Short Sale? A short sale involves a transaction where a property is sold to avoid foreclosure, often at a loss. It is referred to professionally as a “pre-foreclosure sale”. FHA loan rules in HUD 4000.1 specifically define the short sale transaction as follows: “Pre-Foreclosure Sales, also known as Short Sales, refer to the sales of real estate that generate proceeds that are less than the amount owed | more...

October 11, 2017

Is There An FHA Loan For Homes On Tribal Land?

By Bruce Reichstein

Is there an FHA loan for homes on tribal land? According to the FHA loan handbook, HUD 4000.1, a type of loan known as a “Section 248 Mortgage” is available specifically for home purchases of this type. HUD 4000.1 defines the Section 248 mortgage as “a purchase or refinance Mortgage covering one- to four-family dwellings on Indian Lands.” Since definitions are extremely important for many aspects of the FHA loan program, this section of the FHA loan rules also defines what the FHA considers to be “Indian land” and the communities that live there: “Indian Land refers to those lands that are held by or for the benefit of Indian Tribes under some restriction or with some attribute peculiar to the legal status of its owners. Indian Tribe refers to | more...

October 10, 2017

What Are The FHA Loan Rules For Maximum Loan Amounts?

By Bruce Reichstein

What are the FHA loan rules for maximum loan amounts? It’s an important question many borrowers need to know when looking for homes; knowing how much you can borrow is an important factor in budgeting and planning for your FHA loan. FHA Loan Maximum Mortgage Amounts Defined HUD 4000.1, the FHA loan handbook, describes FHA loan maximum mortgage amounts as follows: “A Mortgage that is to be insured by FHA cannot exceed the Nationwide Mortgage Limits, the nationwide area mortgage limit, or the maximum Loan-to-Value (LTV) ratio. The maximum LTV ratios vary depending upon the type of Borrower, type of transaction (purchase or refinance), program type, and stage of construction.” For most FHA loans, the maximum mortgage an applicant is eligible for involves “the lesser of the Nationwide Mortgage Limit | more...

Conventional Loan Interest Rates Make History, FHA Loan Rates Still Incredibly Low

October 2, 2017

Credit Score Issues and FHA Loans

By Bruce Reichstein

Do you know how credit score issues affect your FHA home loan application? For most borrowers, there’s no such thing as a new purchase loan with no credit check; The FHA loan handbook (HUD 4000.1) instructs the lender that credit score checks for FHA mortgage loan applications are mandatory except in certain instances such as for FHA Streamline Refinance loans, and other transactions as described on page 158: “The Mortgagee must review the credit report to determine the Borrower’s Minimum Decision Credit Score (MDCS), except for Mortgages to be insured under Section 247, Section 248, Streamline Refinances, and Assumptions. The MDCS will be used to determine the maximum insured financing available to a Borrower with traditional credit.” HUD 4000.1 adds that FHA loan applicants who have non-traditional or insufficient credit | more...

September 28, 2017

FHA Loans, Income Verification, And Rental Income From Other Properties (Part One)

By Bruce Reichstein

In a previous blog post, we discussed the issue of a borrower using projected rental income from the property to be purchased with an FHA mortgage. Some borrowers are interested in purchasing property that they intend to live in as their primary residence, while planning on renting out unused living units in a multi-unit property. It is reasonable to expect that such a borrower would want to know if she could use projected rental income from that arrangement as “verifiable income” for the purposes of loan approval. Can the borrower reasonably expect a lender to approve of income from this rental situation when calculating the borrower’s debt-to-income ratio? This is possible in situations that meet FHA loan approval; some scrutiny will be given to a borrower’s rental income history or | more...

September 26, 2017

Can I Finance My FHA Loan Up Front Mortgage Insurance Premium?

By Bruce Reichstein

Can I finance my FHA loan Up Front Mortgage Insurance Premium (UFMIP)? And how does it affect my mortgage loan? These are questions many ask, unsure of whether FHA mortgage loan limits include the UFMIP and how they are allowed to pay. FHA Up Front Mortgage Insurance Premiums May Be Financed FHA loan rules in HUD 4000.1, the FHA loan handbook, state clearly that FHA UFMIP may be financed. It will be included in the final loan amount at closing time. UFMIP Must Be Financed Or Paid In Cash HUD 4000.1 instructs the lender to either collect the Up Front Mortgage Insurance Premium in cash at closing time, or have it included into the loan amount. However, the borrower must pay 100% either way-you cannot finance half the amount and | more...

September 26, 2017

How Does My Credit Score Affect My FHA Mortgage Loan?

By Joe Wallace

How does my credit score affect my FHA mortgage loan? There are several areas where FICO scores may affect how much a borrower pays including interest rates, down payment issues, and more. FHA Loan Credit Score Rules: Two Standards There are two basic sets of rules and requirements governing borrower credit scores. One set of rules is found in HUD 4000.1, and gives the FHA Single Family Home Loan program minimum requirements for credit scores and how they affect a borrower’s down payment requirements. The other set of rules and regulations are those of the individual participating lender. Your chosen lender may have higher standards than FHA minimums, and this is permitted by law as long as those higher standards conform to Fair Housing Act policies and other federal regulations. | more...