Articles Tagged With: Mortgage Insurance

January 31, 2014

FHA Loan Occupancy Rules: A Reader Question

A reader asks, “With a FHA Arm 5/1 or Section 251 loan, how long do I have to live in the house before I can sell it?” This may seem like a tricky question. FHA loan rules for single family home loans found in HUD 4155.1 do list occupancy requirements. According to Chapter Four: “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. FHA security instruments require a borrower to establish bona fide occupancy in a home as the borrower’s principal residence within 60 days of signing the security instrument, with continued occupancy for at least one year.” But that rule says nothing about the borrower’s ability to sell the property. Borrowers are | more...

October 29, 2013

FHA Loans and Trust Income

By Joe Wallace

FHA home loan applications require the borrower to list income and job details so that the lender can accurately determine a borrower’s debt-to-income ratio. For this purpose, FHA loan rules say that only income that is likely to continue can be used–the borrower’s wages, tips, bonuses and other earnings may be counted if they meet FHA criteria for “stable and reliable” and “likely to continue”. One source of income for some borrowers involves a trust fund–can trust income be used as verifiable income for an FHA mortgage loan? The answer is yes, but only if the trust income meets FHA loan minimum standards as described in HUD 4155.1, which includes the following guidance to lenders when reviewing trust fund income listed on a borrower’s application, found in a section called | more...

September 24, 2013

FHA Updates Foreclosure Prevention Program

By Joe Wallace

On Friday September 20, 2013, the FHA issued a Mortgagee Letter that updates its Loss Mitigation program options. The new Mortgagee letter, ML 2013-32, overrides a previous mortgagee letter issued in 2012. The changes are designed to, “help reduce the number of full claims against FHA’s Mutual Mortgage Insurance Fund by assisting a greater number of distressed mortgagors in retaining their homes; thus, Mortgagee Letter 2012-22 will remain effect until servicers are able to fully implement this Mortgagee Letter.” The Loss Mitigation Program was established by the FHA in 1996, “to ensure that distressed FHA mortgagors were afforded opportunities to retain their homes and to assist in minimizing losses to FHA’s Mutual Mortgage Insurance Fund”. The most recent changes include a variety of program modifications. Keep in mind that the | more...

July 31, 2013

FHA Loan Answers: Alimony and Child Support as Verifiable Income

By Joe Wallace

FHA loan rules say that a borrower’s income must be verified in order for it to count when the lender makes debt-to-income ratio calculations necessary for approving (or denying) the mortgage loan. Verifiable income is defined basically as earnings that are stable, reliable, and likely to continue. A borrower’s full or even part-time employment would count in most cases. But the money a borrower makes, for example, by selling items on eBay, would likely not pass the “stable” or “likely to continue” requirements. When it comes to non-job “income” such as child support or alimony payments, FHA loan rules make provisions that allow this income to be counted under the right conditions. A borrower does not have to declare child support income under the Fair Housing Act, but it is | more...

July 15, 2013

FHA Loan Reader Questions: Mortgage Insurance and Down Payments

By Joe Wallace

A reader asks, “If a buyer is making a 25% down payment on a home purchase, is the mortgage insurance premium mandatory? This down payment is for a home sale that is appraised for the sale price or higher.” FHA loan rules for mortgage insurance premiums changed in early 2013. There were several changes, but one of them was to eliminate the exemption for mortgage insurance for those making a large down payment. According to the FHA/HUD official site, FHA mortgagee letter 2013-04 “rescinds the automatic cancellation of the annual MIP collection” announced in previous mortgagee letters (ML) and also “rescinds ML 2011-35, under which mortgages with terms of 15 years or less and LTVs of less than or equal to 78 percent at time of origination were exempt from | more...

July 11, 2013

FHA Streamline Refinance Loans With Appraisals

By Joe Wallace

FHA refinancing loans include something known as a Streamline Refinance option; the FHA Streamline Refinance allows a borrower with an existing FHA mortgage to apply for refinancing to lower mortgage rates or monthly payments. No cash back is permitted and no FHA-required credit qualifying is needed. Additionally, FHA Streamline loans have no FHA-required appraisal. But what about situations where there IS an appraisal with an FHA Streamline Refinance? FHA loan rules for no-appraisal streamline loans describe the maximum loan amount as follows: “The maximum insurable mortgage for streamline refinances without an appraisal cannot exceed the outstanding principal balance • minus the applicable refund of the UFMIP, • plus the new UFMIP that will be charged on the refinance. Note: The outstanding principal balance may include interest charged by the servicing | more...

May 23, 2013

FHA Announces Assistance For Homeowners in Oklahoma

By Joe Wallace

The FHA and HUD have announced disaster relief for victims of the recent tornado in Oklahoma. According to HUDNo.13-078, “HUD will speed federal disaster assistance to the State of Oklahoma in addition to resources being provided by Federal Emergency Management Agency (FEMA) and other federal partners. HUD will provide support to homeowners and low-income renters forced from their homes due to tornadoes and severe storms.” U.S. Housing and Urban Development Secretary Shaun Donovan has also reiterated current Federal Housing Administration policy, “that mortgage lenders should release insurance payments to homeowners rather than applying these funds toward outstanding mortgage debt” according to the press release. On Tuesday May 21, 2013, the President made a federal disaster declaration for Oklahoma counties including Cleveland, Lincoln, McClain, Oklahoma and Pottawatomi. A federal declaration allows | more...

April 30, 2013

FHA Loan Answers: How Long Is An FHA Loan?

By Joe Wallace

One common FHA loan question is fairly simple and straightforward; how long can an FHA loan be? In general, FHA loans are available for 15 or 30 year terms. FHA loan rules as spelled out in HUD 4155.1 state that there is a maximum loan term–one that depends on the type of transaction and other factors. “The maximum mortgage term may not exceed 30 years from the date that amortization begins. In the case of adjustable rate mortgages (ARMs), the term must be for 30 years. FHA does not require that loan terms be in five year multiples.” FHA loan rules add, “Some programs require a shorter term, including certain streamline refinances made without appraisals.” For FHA Streamline Refinances made without an appraisal, FHA loan rules state, “The streamline refinance | more...

April 24, 2013

FHA Loan Reader Questions: Commission Income

By Joe Wallace

A reader asks, “How would you calculate a borrower who started a new job in May 2011, made a base salary with incentive? In 2012 went from incentive to commission + base & will continue for 2013 w/a verification stating commission likely will continue. Please advise.” While many FHA loan applicants work in “traditional” vocations with weekly, bi-weekly, or monthly paychecks, others are self employed, work on commission, etc. FHA loan rules anticipate these types of employment situations and have rules based on them. FHA loan rules address commission income in HUD 4155.1 Chapter Four Section D, which states, “Commission income must be averaged over the previous two years. To qualify with commission income, the borrower must provide –copies of signed tax returns for the last two years, and –the | more...

February 21, 2013

FHA Refinance Loan Questions: Credit Requirements

By Joe Wallace

A reader asks, “My divorce was final last March. My ex got the house. He’s suppose to be getting it refinanced but has been turned down twice for the Streamline. What are we missing? It was “transferred” to him through divorce, he has all documents showing he’s made the payments since we bought the house 5 years ago to present. And what’s the “non-credit” qualifying requirement? From what I’ve read, he should be good to go with that but the lenders, or lack thereof, keep turning him down due to debt/income ratio.” Reader questions like these are common; unfortunately there are too many variables that could affect a refinance loan application to answer this reader’s query specifically. What variables could be at work in situations like these? Any number of | more...