Articles Tagged With: FICO Score

April 9, 2015

FHA Loan Interest Rates

Many potential FHA borrowers want to know more about the ins and outs of mortgage loan interest rates. When it comes to FHA mortgages, it’s easy to misunderstand the relationship between a participating FHA lender and the FHA itself. For example, some assume that the FHA sets and/or regulates mortgage loan rates (it does not). So if the FHA does not set or regulate the interest rates on an FHA mortgage or refinance loan, who does? The short answer is that the lender sets the rates. The FHA loan rule book only requires that lenders set rates that are “reasonable and customary” based on similar loans. But market forces that affect other types of mortgage interest rates also affect FHA rates. The borrower and lender negotiate the FHA loan rate | more...

March 27, 2015

FHA Loan Reader Questions: FICO Scores and Down Payment

By Joe Wallace

A reader sent us a question via our comments section recently, asking: “I HAVE A CREDIT SCORE OF 591, I HAVE WORKED FOR MY JOB FOR 18 YEAR. I WOULD LIKE TO PURCHASE A HOME AND AM WORKING ON MY CREDIT WITH MY CREDIT UNION. WHAT MORTGAGE COMPANY WOULD WORK WITH ME TO GET A HOME? I DON’T HAVE MONEY FOR A DOWN PAYMENT”. Unfortunately, FHA home loans do not offer a zero downpayment option. FHA loan rules found in HUD 4155.1 states clearly that a “minimum borrower cash investment” or downpayment is required. The minimum down payment on any new purchase FHA home loan is 3.5% of the sale price or appraised value of the home (whichever is lower). That information is found in HUD 4155.1 Chapter Five Section | more...

March 24, 2015

Basic FHA Loan Eligibility Requirements

By Joe Wallace

We get many questions about FHA loans–questions about FICO score requirements, questions about credit and income, residency, etc. The FHA official site (www.fha.gov) has many answers to these questions–but what ARE the basic requirements for an FHA mortgage? FHA loan rules specify a minimum FICO score needed to qualify for maximum financing, and a minimum FICO score for basic eligibility with a larger down payment in cases where the applicant’s FICO score is close to the margins of acceptability. “FHA insures mortgages” the official site says, “made by approved lenders to individuals and nonprofit and government agencies that are approved to participate in HUD’s programs; HUD does not loan money to homebuyers.” The FICO score requirements mentioned previously (580 for maximum financing, and FICO scores above 500 for program eligibility | more...

March 24, 2015

FHA/HUD Announce Trial Payment Plan Details

By Joe Wallace

The FHA and HUD have announced details about a trial payment plan for qualified borrowers who are in trouble on FHA home loans. The FHA mortgagee letter 2015-07, “Trial Payment Plans Associated with HUD’s Loss Mitigation Loan Modification Options for Forward Mortgages” informs lenders of certain details of the program and the conditions where the FHA views a trial payment plan (TPP) as a failure. According to the mortgagee letter, “The Trial Payment Plan Agreement is a written agreement to be executed by all parties on the original note, all parties on the FHA-insured mortgage, and all parties that will be subject to the modified mortgage and/or partial claim, except where: –a borrower or co-borrower is deceased; –a borrower and a co-borrower are divorced or legally separated; or –a borrower | more...

March 20, 2015

FHA Loan Questions: Tax Records

By Joe Wallace

A reader asks, “Is an fha requirement for a home buyer to have two years of taxes?” This is a difficult question to answer in general except to say that borrowers should be prepared to include tax information as part of an FHA loan application. The actual requirement can vary depending on lender standards, state law, and whether the borrower is self employed or not. Consider what FHA loan rules found in HUD 4155.1 Chapter Four Section D have to say about self-employed FHA loan applicants, or those who own a family business: “Self employed borrowers must provide –signed, dated individual tax returns, with all applicable tax schedules for the most recent two years –for a corporation, “S” corporation, or partnership, signed copies of Federal business income tax returns for | more...

March 13, 2015

FHA Loan Reader Questions: Seasoning Period Following Bankruptcy

By Joe Wallace

A reader asks, “On 3/11/15 I was told by a potential lender that consumers who have claimed bankruptcy must wait 4 years to potentially qualify for ANY loan… conventional or FHA. My bankruptcy was discharged in August 2013 and I have been rebuilding my credit ever since…. with the hopes that I could start looking at buying a home at the near 2 year mark, post discharge. Can someone please clarify this for me? And give the source of the data that is accurate? The lender just blew me off…” This reader’s question asks if what a lender told her about waiting four years after bankruptcy may be true if those are that particular lender’s standards. Those standards may vary from bank to bank, lender to lender. But if the | more...

March 5, 2015

FHA Loan Reader Questions: Chapter 13

By Joe Wallace

A reader asks, “I am a bit confused. My Chapter 13 was discharged in February 2014. Since then I have re-established my credit and my score is at 660 and no late payments. What is the sooner I will be able to pre-qualify for a loan and/or close on a FHA.” Chapter 13 bankruptcy is addressed specifically in FHA loan rules. FHA loans are still possible for qualifying borrowers, but the following rules apply. “A Chapter 13 bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage, provided that the lender documents that • one year of the pay-out period under the bankruptcy has elapsed • the borrower’s payment performance has been satisfactory and all required payments have been made on time, and • the borrower has received written | more...

March 2, 2015

FHA Loan Credit Issues

By Joe Wallace

A reader asks, “My partner had a 642 and i have a 517. I have messed up in the past with my credit,but i am now paying off what i have on my credit report. Would we be able to get a home loan with these scores?” That would depend on the standards of the individual lender. FHA loan rules state that borrowers below a certain FICO score are not eligible for maximum FHA loan financing (which requires the borrower to put down a minimum cash investment of 3.5%). Here’s what the FHA official site says about circumstances like the one in the reader question: “When a credit score is available, it must be used to determine eligibility for FHA insured financing. The score that is used to determine eligibility | more...

February 18, 2015

FHA Mortgage Rate Trends: Worse, Then Better

By Joe Wallace

In 2015, saying that mortgage rate performance is “bad” is a bit like saying a slice of cake is mostly delicious–that is to say that in spite of upward pressure on mortgage loan rates, we’re still looking at best execution rates below four percent, and overall that’s a very good thing. 30-year fixed rate conventional loans edged all the way down to a best execution potential of 3.5% for some of the most qualified borrowers, and FHA mortgage loan rates have up until only very recently persisted in a best execution comfort zone of3.25%. Last week, going into a three-day holiday weekend we saw mortgage rates (best execution) struggling. Blame Friday the 13th, blame Greece and the EU situation, or simply refuse to look for a specific reason and concentrate | more...

February 18, 2015

FHA Loans and Other Major Credit Applications: A Reader Question

By Joe Wallace

A reader asks, “I was hoping to get an FHA loan but I was wondering if my father could cosign? I was also wondering if it would be feasible of me to get a new car. (My current vehicle is giving me serious problems)” FHA loans do permit non-occupying co-borrowers and co-signers. Talk to your loan officer about lender standards in this area, but in general when a family member co-signs or co-borrows there are procedures and considerations. FHA loan rules say that in cases where the LTV exceeds 75%, a loan with a non-occupying co-borrower is limited to a single unit property. The other part of the reader question isn’t quite clear–is the reader asking if the FHA loan can include the purchase of a vehicle? The answer is | more...