Articles Tagged With: FHA

May 17, 2017

FHA Appraisal Questions: Defective Conditions

A reader asks a question about FHA appraisal issues: “Bought a house that was supposedly totally renovated about a 1.5 months ago. Finding out about major issues and violations in the house. There were a lot of concealed things hidden…found they had unlicensed contractors.” “Didn’t have the money to do a regular home inspection. People were saying FHA does their own home inspection to make sure house is safe…problems with windows plumbing illegal hookup with water main electrical box etc. Have to make a payment to mortgage plus fighting with seller to get licensed contractors…please tell me why didn’t FHA see these issues.” FHA appraisals must never be confused with a home inspection. The FHA and HUD warn borrowers of this in a document found on the FHA/HUD official site | more...

May 16, 2017

FHA Loan Application Data: What You Should Know

By Joe Wallace

The FHA single family loan program rule book, HUD 4000.1, has a variety of rules and instructions to the lender on how FHA loan application information is to be handled and processed. You might not think those rules affect you as an applicant, but some of the rules do pertain to how the lender must collect the borrower’s information and the approved sources of that information. Your credit scores and other data must be given to the lender from approved sources. Did you know that HUD 4000.1 does not permit the borrower to handle or transmit certain kinds of information to the lender? Your loan officer is responsible for making sure she gets the information from the proper sourcing. According to HUD 4000.1: “Mortgagees must not accept or use documents | more...

May 16, 2017

FHA Appraisal Questions: Peeling Paint, Electrical Outlets

By Joe Wallace

We frequently get FHA appraisal questions in our comments sections. Here’s one of the latest: “Im trying to purchase a home and I have an FHA loan. The only thing Im concerned about is the peeling paint outside and that some of the outlets arent grounded. How would this affect my FHA loan approval?” FHA appraisal rules are found in HUD 4000.1. The instructions to the FHA appraiser don’t cover all possible contingencies for defective conditions, required corrections, etc. but do have something to say about peeling paint. The age of the paint may determine the extent of the corrections/repairs in this area. According to HUD 4000.1, for homes or improvements on or before 1978: “The Appraiser must note the condition and location of all defective paint and require repair | more...

May 15, 2017

FHA Home Loans, Deed-In-Lieu, Foreclosure: A Reader Question

By Joe Wallace

How do actions like deed-in-lieu of foreclosure or actual foreclosure affect borrowers and their chances at getting new FHA home loans? A reader asks: “I have a bankruptcy filed and discharged in 2012. My 1st and Heloc were not reaffirmed. I will be moving out of California and to Arkansas but want to know how FHA would look at the wait for purchasing if I: Surrender property in deed in lieu, or Allow the home to be foreclosed upon. Also would it make a difference if I applied before foreclosure is final since it is not reporting on my credit report (I would not be making payments if this is the scenario and staying with family)?” It is hard to answer questions like this without addressing certain implications or ambiguities. | more...

May 12, 2017

Mortgage Rate Trends: Pushing Higher

By Joe Wallace

Since our last report, we’ve watched an upward mortgage rate trend pushing interest rates slowly higher. Some of this is contrary to bond market activity on Thursday that would otherwise typically “help” rates. So at the moment it seems that in the very short term we’re seeing mortgage rates behave in ways they don’t normally. Why? Some market watchers point to the timing of that bond market activity-there was what industry professionals describe as “weakness” on Wednesday that caused rates to adjust higher, but the following day improvements occurred. But not all lenders modify their mortgage loan rates at the same time, so for those where rates pushed higher on Thursday, it’s possible that the timing of their adjustments is at least partly to blame. That doesn’t likely interest house | more...

Can I get an FHA home loan if I owe back taxes?

May 11, 2017

FHA Loans And Income Verification Requirements

By Joe Wallace

FHA loan income verification requirements include submitting tax data as part of the application process. Your lender may require tax returns and other paperwork; depending on the transaction these requirements may include additional forms of documentation. A reader got in touch recently in our comments section to ask about these income verification issues. “Our lender is asking for two years of tax returns. We have not filed for 2016 yet. We apply for and get an extension every year and have until October since we are freelancers…Can we just submit 2014 & 2015 for now to apply for the loan? We have pay stubs for 2016 as proof for income and it is greater than what we have made the priors years. Although, it seems to be a problem that | more...

May 11, 2017

FHA Loan Appraisal Questions: Dug Wells

By Joe Wallace

Are properties with dug wells a problem when it comes to FHA loan approval? That’s what one reader asked us this week in the comments section: “Would like to know if a dug well is OK for an FHA loan.” Short, simple, and to the point. The answer is, unfortunately, not so straightforward. The reader was asking a question in response to a blog post we made back in 2010 which referenced then-applicable FHA loan rules for wells-including dug wells. However, the references in that old blog post have since been replaced with updated guidance and instructions to the FHA appraiser. HUD 4000.1 (the FHA loan rule book) is the most current reference, and contains this section that references dug wells: “The Appraiser must report when water to a Property | more...

May 4, 2017

Part Time Income: FHA Loan Rules

By Joe Wallace

What are the rules for using part time income to qualify for FHA loans? A reader asked us a question on that topic in our comments section this week: “I have a client that worked full time for a company for eight years. In the last eight months he went to half time. Why cant we use this income since hes been at the same employer for more than 2 years?” Instructions to the lender on this issue are found in HUD 4000.1. There, we learn that for all income sources, the lender is required to do some calculations. “For employees who are paid hourly, and whose hours do not vary, the Mortgagee must consider the Borrowers current hourly rate to calculate Effective Income. For employees who are paid hourly | more...

May 2, 2017

Cash To Close And Earnest Money: FHA Loan Rules

By Joe Wallace

All home loans have requirements for cash to close the deal, earnest money, and down payments. The FHA loan rules for these are found in HUD 4000.1, which has instructions to the lender on how to verify and process these payments. For example, on page 296 of HUD 4000.1, we learn the following: “The Mortgagee may only consider assets derived from acceptable sources in accordance with the requirements outlined below. Closing costs, prepaid items and other fees may not be applied towards the Borrowers Minimum Required Investment” also known as the down payment. Sources of cash to close and earnest money must be properly documented by the lender. FHA loan rules do not permit non-collateralized loans such as credit card cash advances or payday loans to be used for the | more...

April 19, 2017

Multiple FHA Loans? The Rules

By Joe Wallace

Based on some of our reader questions lately, there seems to be some confusion over the rules for FHA loans where the borrower is interested in applying for an additional FHA mortgage. What are the rules in HUD 4000.1 on this issue? There are two general areas of confusion related to those rules. Some borrowers have purchased a primary residence with non FHA loans and want to know if the FHA loan rules governing additional mortgages apply to them. According to a literal interpretation of the requirements in HUD 4000.1, borrowers who have a non-FHA mortgage are free to apply for an FHA mortgage without worrying about being in violation of the rules. FHA loans have rules for additional mortgages apply which specifically to those who already have an existing | more...