Articles Tagged With: HUD 4155.1

August 24, 2015

FHA Loans And Non-Purchasing Spouses

There are a lot of questions asked about FHA loans and how spouses can buy together. Can the FICO scores of one spouse make up for the lower scores of the other borrower? Can one spouse’s income offset the lower income of the other? How does state law factor into FHA loan applications when spouses apply? All valid questions. But what about circumstances where one spouse is not borrowing? Does an FHA loan require action on the part of a non-borrowing spouse? The answer can be influenced by state law, lender standards, and FHA loan regulations. At the time of this writing, FHA loan rules that govern non-purchasing spouses can be found in HUD 4155.1 Chapter Four, Section A. There we learn the following: “If required by state law in | more...

What happens to my FHA loan in a natural disaster?

August 14, 2015

FHA Loan Income Rules: Does Alimony/Child Support Count As Income?

By Joe Wallace

For any applicant trying to get an FHA loan to purchase a home, the debt-to-income ratio is very important. How much money you have coming in versus how much you have going out for monthly bills and other financial obligations is a very big part of the lender’s calculations to see whether a borrower can afford the new loan. One area that concerns some is whether alimony/child support is able to be used as part of the borrower’s potential income for those calculations. FHA loan rules currently available in HUD 4155.1 have plenty to say on how and why such income might be used. This type of income can indeed by used, as long as it meets FHA minimum requirements for “effective income” or “verifiable income”: “Alimony, child support, or | more...

August 12, 2015

FHA Refinance Loan Maximum Mortgage Calculation

By Joe Wallace

In recent posts we have discussed the maximum mortgage amount for FHA home loans. The borrower is required to make a minimum down payment on all new purchase FHA mortgage loans (3.5%) so that the maximum financing allowed would be 96.5%. Some borrowers may have to make larger down payments depending on credit scores and credit history. The FHA’s loan-to-value maximums can also be different depending on the type of transaction. With those ideas in mind, what are the FHA loan rules for refinance loans? For non-streamline, appraisal-required FHA refinance loans that feature no cash back to the borrower, FHA loan rules say the following: The maximum mortgage for a no cash out refinance with an appraisal (credit qualifying) is the lesser of the –97.75% Loan-To-Value (LTV) factor applied to | more...

What you should know about FHA 203(h) Loans For Disaster Victims

August 10, 2015

FHA Loan Maximum LTV Amounts

By Bruce Reichstein

In our last blog post we discussed some of the basics about FHA loans, loan-to-value limits, and how certain circumstances might affect the maximum LTV on an FHA mortgage. Normally FHA single-family home loans for new purchases have a maximum LTV of 96.5%, requiring the borrower to make a 3.5% down payment. But FHA loans can have different LTV percentages if certain conditions apply. Homes that are purchased with non-occupying co-borrowers, for example, may require a higher down payment. According to HUD 4155.1 Chapter Two Section B, “A non-occupying borrower transaction involves two or more borrowers where one or more of the borrower(s) will not occupy the property as his/her primary residence. When there are two or more borrowers, but one or more will not occupy the property as his/her | more...

June 24, 2015

FHA Single Family Home Loans: Owner-Occupiers Only

By Joe Wallace

Recently we answered a reader question in the comments section about the nature of FHA single-family home loans. The reader wanted to know if it was possible to get an FHA home loan on a home to be used as a rental property or as a guest house for visitors, etc. The short answer to this question is no. FHA loans are designed for those who intend to purchase a home and move into it when the loan closes. The borrower is required to occupy the home as his or her personal, primary residence as a condition of loan approval. This would prevent borrowers from purchasing the home to use as a rental property, vacation home or guest house. HUD 4155.1 Chapter Four Section B spells it out in black | more...

May 15, 2015

FHA Loan Rules For Employment: A Reader Question

By Joe Wallace

A reader asks, “if one party has a temp position to perm and there is a letter from temp staff stating that she will be hired full time at the end of the 6 month probation period by the company she is working for can we be eligible for a fha loan or will it get denied?” FHA loan rules for verifying employment and income from that employment are found in HUD 4155.1 Chapter Four, Section D, which states in part: “To be eligible for a mortgage, FHA does not require a minimum length of time that a borrower must have held a position of employment. However, the lender must verify the borrowers employment for the most recent two full years, and the borrower must: –explain any gaps in employment | more...

April 24, 2015

FHA Home Loans and Tax Lien Repayment Plans: A Reader Question

By Joe Wallace

A reader asks, “I have a payment plan on a tax lien from 2009 which I have been paying on time for a few years. Other than that, my credit is perfect. I am wondering if this would be okay for an FHA loan. I have records from IRS showing that this is being paid and can present them as well.” This is an important question. FHA loan rules do not permit borrowers who are delinquent on federal debts to apply for an FHA home loan until that delinquency has been addressed. But what about situations like the reader question, where there is no delinquency, but the federal debt still exists? FHA loan rules that govern the tax lien issue can be found in HUD 4155.1, Chapter Four, Section A. | more...

October 1, 2014

FHA Single-Family Home Loan Occupancy Rules

By Joe Wallace

FHA loan rules for single family home loans include an occupancy requirement. This requirement is designed to encourage single-family borrowers and exclude investors from using single-family FHA mortgage loans to purchase investment property. Why? The intent of the single-family home loan program is to help eligible borrowers get into affordable housing using a low-cost, lower-than-conventional loan interest rate. These rates are not intended to help investors buy property for non-occupying rental or outright sale. What are the FHA loan rules for occupancy? The full explanation of the rules can be found in HUD 4155.1 Chapter Four Section B, which starts off by defining what a “principal residence” is. A home purchased with a VA mortgage is required to be used as the principal residence, so it’s good to know what | more...

September 10, 2014

FHA Loan Reader Questions: Bank Statements

By Joe Wallace

A reader asks, “Is a bank statement, showing the amount needed at closing, required with my application? What is a lender required to ask me for?” In some cases the FHA gives the lender the option of collecting a bank statement, and in others the bank statement is FHA-required. Lender standards may insist on bank statements, so what the FHA allows and what the lender requires may differ; the FHA may not require a bank statement in some cases, but the lender is free to. We can find evidence of this in HUD 4155.1 Chapter Five Section B under the heading, “Cash and Savings/Checking Accounts as Acceptable Sources of Funds” states: The lender must verify and document the deposit amount and source of funds, if the amount of the earnest | more...

August 29, 2014

FHA Maximum Loan Amounts: Some Basics

By Joe Wallace

FHA loan applicants often want to know how much they can borrow with an FHA mortgage. There’s no set answer to that question since the FHA loan amount depends on the appraised value of the home and other factors. Borrowers will need the amount of the sale price of a home before a loan amount can be properly calculated. Some borrowers want to know if they can apply for more than the sale price of the home with the intent of taking the excess funds for other purposes. This is not permitted for FHA home loans, so borrower who ask “how much can I borrow?” with that idea in mind should know it’s not a possibility. But the FHA loan basics for maximum loan amounts are spelled out for the | more...