Articles Tagged With: Mortgage Underwriting

February 15, 2012

FHA Loan Questions: Is There Any Way Around My Bankruptcy?

A reader asks, “Bankruptcy filed just 2 years ago, is there a way around that? Have a descent (sic) income, employment and debt to income ratio.” There are two types of bankruptcy borrowers sometimes ask about in these cases. One is Chapter 7, where the borrower has debts discharged. The other is Chapter 13, where borrowers have a restructured payment plan enforced by court order. For Chapter 7, FHA loan rules require a minimum two year waiting period from the discharge of the bankruptcy before a borrower may apply for a new FHA mortgage. There is no workaround for this two-year minimum, even when the borrower has tried to reestablish good credit and employment in the wake of the bankruptcy. However, for those who have filed Chapter 13 bankruptcy, FHA | more...

February 7, 2012

FHA Loan Standards: Exceptions to the Rules?

By Joe Wallace

The FHA has standards for qualifying for an FHA insured mortgage including income, employment, credit score and other factors. In most cases, borrowers who don’t meet the minimum required credit score or debt-to-income rations can’t qualify for an FHA loan. But are there exceptions? For example, could a borrower who has a debt-to-income ratio that’s too high still get an FHA loan approved? And why would the FHA approve a loan when the applicant doesn’t meet FHA loan standards? FHA loans include an option for lenders to review any “compensating factors” the borrower might bring to the bargaining table. For example, one such factor has to do with the borrower’s ability to pay–and a history of being able to pay–even though the debt-to-income ratio might exceed FHA standards. According to | more...

February 7, 2012

Can Repair Costs Be Added to the FHA Loan Amount?

By Joe Wallace

The FHA has strict rules about how a loan may be calculated. There’s the minimum cash investment required of the borrower, there are FHA loan limits, and there are rules covering what kinds of incentives a seller may provide in the form of interest rate buydowns and other financial contributions. Did you know that in some cases, the cost of home repairs on a sale property can be included in the sale price of the home for FHA loan purposes? According to Chapter Two of HUD4155.1, “Repairs and improvements may be added to the sales price before calculating the mortgage amount when…the repairs and improvements are required by the appraiser as essential for property eligibility”. These costs must be paid by the borrower, and

February 1, 2012

FHA Announces New Fair Housing Rules

By Joe Wallace

Nearly 30 percent of same-sex couples were treated differently when trying to buy or rent a home. That figure was published in a 2007 report by Michigan’s Fair Housing Centers. FHA and HUD have announced new regulations designed to end that sort of discrimination and much more. According to HUDNo.12-014, new regulations have been implemented to “ensure that HUD’s core housing programs are open to all eligible persons, regardless of sexual orientation or gender identity” according to the press release.

January 31, 2012

FHA Loans, Effective Income, and Alimony

By Joe Wallace

One important section of the rules for FHA loans states a borrower’s income must be verified by the lender as “effective income”. This means that the income must be stable and likely to continue. Some types of income can’t be counted. A part-time business selling goods on eBay, for example, might not qualify. But what about other types of non-employment income like child support, alimony, or maintenance payments? There are plenty of borrowers who receive or are eligible to start receiving these types of payments. Does the FHA recognize them as effective income? In certain cases, yes. Alimony, maintenance payments as part of a divorce decree, and/or child support can qualify and be counted toward a borrower’s debt-to-income ratio provided the payments meet standards set by they FHA. According to | more...

January 27, 2012

FHA Loan Restrictions on Cash-Out Refinancing

By Joe Wallace

When borrowers want to refinance an FHA mortgage, there are two basic types of refinancing to choose from; FHA cash-out refinancing loans and those with no cash to the borrower. The FHA loan rules for cash-out refinancing are naturally more stringent than those with no money to the borrower–in cash-out transactions the borrower must qualify under FHA requirements and meet certain standards that may not be the same as for non-cash out transactions. What are the restrictions on FHA cash-out refinancing? For starters, according to the FHA official site at FHA.gov, “Cash out refinance transactions are only permitted on owner-occupied principal residences”. The FHA takes the owner/occupant issue quite seriously, going so far as to add an additional rule stating; “Non-occupant co-borrowers may not be added in a cash out | more...

January 20, 2012

FHA Loan Reader Question: Why Was I Denied an FHA Home Loan?

By Joe Wallace

Many readers write in with questions similar to the one we received this week, which includes the following: “I am recently divorced. While married, went through two bankruptcies (both discharged) have/had issues with back taxes (installment plans made and determined to be paid in full by ex per divorce decree). Have moved to another state, working (1.5 years), full time student. Was living with children, have moved into an apartment paying $600.00 per month (comfortably), because I could not get qualified for a loan. Have two major credit cards (visa/master credit cards not debts) established in my name for 1.9 years, never late, never over limit. Credit score is 620. Is there a main reason why, I did not or cannot be approved for a FHA loan?” Before addressing an | more...

January 18, 2012

FHA Loan Assumption: An Alternative to Foreclosure

By Joe Wallace

FHA loan assumption is a process which lets one FHA borrower assume the debt on an existing FHA home loan started by another borrower. FHA.gov states,

December 19, 2011

FHA Refinancing Loan Requirements

By Joe Wallace

One recurring question in the reader comments section as of late involves the rules of cash-out refinancing loans and streamline refinancing loans insured by the FHA. Some borrowers seek loans on property that no longer has a mortgage, and wonder if FHA refinancing loans can help. Borrowers looking at options including FHA cash-out refinancing or streamline refinancing learn there are important differences between the two. FHA streamline loans require the home to have a lien, otherwise there is no loan to refinance. Without an existing mortgage, there’s no possibility an FHA streamline loan can be underwritten for that property. For example, in the HUD.gov frequently asked questions section, under the heading, “Streamline Your FHA Mortgage”, the site states; “FHA has permitted streamline refinances on insured mortgages since the early 1980’s. | more...

December 14, 2011

FHA Energy Efficient Mortgage Loans Part Two

By Joe Wallace

In a recent blog post we discussed the FHA Energy Efficient Mortgage Loan (EEM) and some of the basics of the program. The FHA EEM is for new purchase and refinancing mortgages and lets the borrower finance additional costs of energy-efficient upgrades or improvements to the home. Because the FHA loan program has loan limits and specific rules that govern those limits, it is easy to see how borrowers new to the FHA loan program could be confused by the terms of such a loan. After all, if a borrower can add at least $4,000 (or as much as $8,000 depending on the circumstances) to the FHA loan, how does one roll the costs of the improvements into the mortgage without exceeding the FHA loan limit for that purchase? According | more...