Articles Tagged With: Mortgage Underwriting

March 28, 2013

FHA Streamline Refinance Loans: Rules You Should Know

FHA streamline refinance loans allow a borrower who has an existing FHA mortgage to refinance with no FHA-required credit check or FHA-required appraisal. FHA streamline loans work on the concept that the borrower has already qualified for the original FHA loan, so that qualifying data is used to get the home owner into the streamline refinance loan. These loans have certain rules that apply which don’t necessarily apply to other types of refinancing. For example, the purpose of the loan can come under scrutiny–the borrower must, in most cases, get a reduced mortgage payment or interest rate as a result of the new loan. Additionally, FHA loan rules state: “A transaction for the purpose of reducing the mortgage term must be underwritten and closed as a rate and term | more...

March 27, 2013

FHA Loan Answers: How Long Is An FHA Mortgage?

By Joe Wallace

A common question in any home loan situation is, “How long is my mortgage?” This depends greatly on the type of loan you apply for, the term you agree upon, and how much you pay each month over the lifetime of the loan. In general, FHA mortgages are either 15-year or 30-year loans. The maximum amount of time you can be legally obligated to the original new purchase FHA home loan is 30 years. According to the FHA official site, “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.” Some types of refinancing (certain FHA Streamline Refinances | more...

March 26, 2013

FHA Loan Questions: Down Payments On Homes Sold Between Family Members

By Joe Wallace

Sometimes an FHA loan transaction involves the sale of a home between family members. In such cases there are FHA loan rules that may apply depending on the circumstances. A reader asks, “If I buy a house from a relative is it true that I have to have 15% down payment for FHA loan?” A quick read of HUD 4155.1 Chapter 2 Section B reveals some special rules that apply in circumstances like these. This situation is known as an “identity of interest” transaction. The FHA defines “identity of interest” as, “a sale between parties with family or business relationships”. What do FHA loan rules say about such sales? “The maximum loan-to-value (LTV) factor for identity-of-interest transactions on principal residences is restricted to 85%.” That means that yes, the borrower | more...

March 26, 2013

FHA Loan Reader Questions: Loan Applications

By Joe Wallace

A reader asks, “Are all FHA loans , down payments, and everything regarding my future home have to be dealt with an authorized lender or can I deal with FHA directly? If this is the case, where do I have to send all paperwork?” The answer to this question is fairly simple–all FHA loans and FHA refinance loans are handled via a participating lender. Borrowers must apply via the lender, who processes the paperwork and submits it to the FHA where appropriate. The FHA single-family mortgage loan program does not feature a “direct application” process where the borrower submits loan paperwork to the FHA. This is part of a common misconception about the FHA loan program. The FHA does not lend money directly to borrowers, set or maintain interest rates, | more...

March 25, 2013

FHA Loan Reader Questions: 401Ks in the Debt To Income Ratio?

By Joe Wallace

A reader asks, “My sister in law borrows some fund from her 401(k) to refinance her home. She certainly has to back the fund back to her 401(k). The lender says this monthly payment shall be counted when computing her Debt to Income Ratio. According to the FHA, the following list of financial obligations should not be used to calculate the debt to income ratio: Other retirement contributions, such as 401(k) accounts (including repayment of debt secured by these funds). I notice that this blog was written in year 2011. Do these rules still apply at present or have there been any changes so far? It’s true that the FHA has guidelines about how to view a 401K when it comes to calculating the debt-to-income ratio. According to HUD 4155.1: | more...

March 22, 2013

Your FHA Loan Down Payment

By Joe Wallace

One of the most commonly asked questions about FHA loans is “How much will my down payment be?” The answer to that question depends on how much your home loan is and whether you’re paying the minimum 3.5% down payment or a larger amount. Regardless of how much you pay, the FHA has rules about HOW the downpayment is made. Did you know there are “acceptable sources” for down payment funds as well as “unacceptable sources”? For example, a borrower is free to use money saved in a checking, savings, or investment account. But the borrower cannot use cash advance loans or payday loans to make the down payment. In fact, any “non-collateralized” loan is not an acceptable source of down payment funds. The FHA rules in these circumstances extends | more...

March 21, 2013

FHA Loan Answers: Child Support and Debt-To-Income Ratios

By Joe Wallace

A reader asks, “What about Child Support? My mortgage broker said that if it doesn’t come up on credit report it will not count as a deduction. However it does reflect on my paycheck every 2 weeks. My question is this considered a voluntary deduction at that point or was I misinformed?” FHA loan rules require a borrower’s debt-to-income ratio to be within certain limits in order to qualify for an FHA home loan, and while it’s true that FHA rules do take compensating factors into account, the amount the borrower is obligated to pay every month before the mortgage amount is important. What do the rules say about debt such as child support, alimony, etc.? The FHA official site says, “Most recurring obligations, including child support and alimony are | more...

March 20, 2013

FHA Loan Answers: Rules For Occupancy

By Joe Wallace

We answer a lot of reader questions about FHA loans. One of them most common involves the FHA occupancy regulations for single family loans. Readers want to know if they can rent out a house purchased with an FHA loan under the single-family mortgage program. Is this possible? Are FHA single-family mortgages available for vacation homes or other limited-occupancy residences? A look at the FHA loan rulebook clears up these questions quickly According to HUD 4155.1, Chapter Four Section B, we learn the following under the section titled Eligibility Requirements For Principal Residences: “This topic contains information on eligibility requirements for principal residences, including • a definition of principal residence • the FHA requirement for establishing owner occupancy • FHA-insured Mortgages on principal residences and investment properties, and • exceptions | more...

March 19, 2013

FHA Loan Answers: What Does Your Lender See On Your Credit Report?

By Joe Wallace

When you apply for an FHA guaranteed home loan, you’re required to list a variety of items on your application form including credit data. Your recent debts and other recurring financial obligations are required because the lender must determine your debt-to-income ratio. Some borrowers wonder if leaving items off the application means the lender won’t know about them. But it’s very important to know what the FHA requires and what the lender is responsible for checking when it comes to credit. Do you know what goes into your credit report and what the lender has access to when he or she is processing your application data? Many people don’t. Here’s what the FHA loan rulebook, HUD 4155.1 has to say about credit reporting data and what the lender is required | more...

March 18, 2013

FHA Loan Reader Questions: Upcoming PMI Changes

By Joe Wallace

A reader asks, “My expected closing date is March 31, 2013. I see that there will be some new guidelines regarding PMI effective this year. Would I be required to pay private mortgage insurance until I have 20% equity and have paid PMI for five years or would I be required to pay PMI for the life of the loan?” The FHA has issued guidance about its coming changes to the PMI structure and payments. This information is found in FHA Mortgagee Letter 2031-04. It says in part: “FHA will increase its annual mortgage insurance premium (MIP) for most new mortgages by 10 basis points or by 0.10 percent. FHA will increase premiums on jumbo mortgages ($625,500 or larger) by 5 basis points or 0.05 percent, to the maximum authorized | more...