Articles Tagged With: HUD 4155.1

May 14, 2014

FHA Loans and Powers Of Attorney: An Important Rule To Remember

If you are considering the use of a Power of Attorney in conjunction with an FHA mortgage loan, there’s a very important rule you should know. Using a Power of Attorney isn’t common for many borrowers, but for those who do need it, understanding the rules and responsibilities of this procedure can make the entire process go more smoothly. FHA loan rules state clearly, “The initial mortgage loan application may not be executed by using a power of attorney, except in circumstances as indicated in the table below. Note: Either the initial application or the final, if one is used, must contain the signatures of all borrowers.” The table referenced in that quote from HUD 4155.1 includes circumstances for military members. “A power of attorney may be used for military | more...

March 19, 2014

FHA Loans and Borrower Credit

By Joe Wallace

Some borrowers get nervous when applying for an FHA mortgage loan because of the credit check. There can be many reasons for this–some come to the house buying process with some history of credit problems, others may have disputes with creditors or other problems. Having credit issues in the past is not necessarily a barrier to an FHA loan in the present. But there are FHA guidelines for the lender you should be aware of that can help you better prepare for an FHA loan. The rules for FHA home loans found in HUD 4155.1 include instructions to the lender for analyzing borrower credit. Chapter Four of HUD 4155.1 has a section titled, “Past Credit Performance” and includes the following: “Past credit performance is the most useful guide to • | more...

March 18, 2014

FHA Loan Rules: Condominiums

By Joe Wallace

FHA loan rules permit single-family mortgages on suburban homes, mixed-use properties that meet FHA loan requirements, townhomes and condominiums. For a condo to qualify for an FHA mortgage, it must be on or be added to a list of FHA approved condo projects. But some borrowers aren’t sure what constitutes a condominium–what do FHA loan rules recognize as a condo unit as opposed to other types of property? As stated above, FHA requires condo units to be approved. The rulebooks states, “FHA must approve condominium projects before a mortgage on an individual condominium unit can be insured.” The rules for FHA loans on what constitutes a condo are found in HUD 4155.1, Chapter Four Section B under the heading “Requirements For Condominium Eligibility”. Those rules begin by stating: “A condominium | more...

January 3, 2014

FHA Loan Answers: What Are “Compensating Factors”?

By Joe Wallace

When a borrower applies for an FHA home loan, he or she may not fit the “ideal applicant” standard in terms of credit history, credit rating, loan repayment patterns, employment, etc. Sometimes the lender feels that an applicant may be a good credit risk in spite of these things, but needs something to justify approving the loan. Compensating factors can help the lender to do that. The FHA loan rules found in HUD 4155.1 defines “compensating factors” as things which are used, “to justify approval of mortgage loans with ratios that exceed benchmark guidelines must be recorded on the Underwriter Comments section of Form HUD-92900-LT, FHA Loan Underwriting and Transmittal Summary. Any compensating factor used to justify mortgage approval must also be supported by documentation.” What can these compensating factors | more...

December 3, 2013

FHA Loan Downpayment and Rent Credit: A Reader Question

By Joe Wallace

A reader asks, “If leasing a property that you intend to purchase can part of each month’s rent go towards the full downpayment amount?” The short answer to this question is, “It depends”. Much depends on whether or not such rent credit meets FHA loan requirements. The FHA loan rulebook, HUD 4155.1, states that rent credit could be considered a legitimate source of down payment funds, but only if certain standards are met. This information is found in HUD 4155.1, Chapter Five Section B, which says, “The cumulative amount of rental payments that exceed the appraiser’s estimate of fair market rent may be considered accumulation of the borrower’s cash investment.” FHA instructions to the lender in these cases include the following: “The endorsement package must include the • rent with | more...

December 6, 2012

What You Need To Know About FHA Loan Occupancy Requirements

By Joe Wallace

When a borrower applies for a single-family home loan to be guaranteed by the FHA, there are some occupancy rules which must be followed. According to the FHA official site, single-family home loans are for occupants, not investors. Consider the rules as stated in HUD 4155.1 Chapter 4, which include a requirement that at least one borrower obligated on the mortgage loan use the property as his or her “principal residence”. What does that mean? According to Chapter 4, “A principal residence is a property that will be occupied by the borrower for the majority of the calendar year.” The rulebook also says, “At least one borrower must occupy the property and sign the security instrument and the mortgage note in order for the property to be considered owner-occupied.” But | more...