Articles Tagged With: Mortgage Underwriting

October 22, 2013

FHA Loans After Bankruptcy: A Reader Question

A reader asks, “What is the length of time after filing bankruptcy that you have to wait to qualify for a FHA loan…during that waiting process, what are some of the things that I should be doing to make the approval process easier and making my credit better?” FHA loan rules and lender standards are both considerations in situations like these, as is the specific circumstances of the individual’s bankruptcy and other credit issues. Borrowers should know that FHA minimums are just that–minimums. Lenders can and often do require higher standards. That’s why it’s important to consider shopping around for a lender who may be more willing to work with you–one lender may not be able to help, while another can, depending on your situation. For the record, FHA loan | more...

October 17, 2013

Government Shutdown Ends, FHA Loans Continue

By Joe Wallace

The government shutdown is over, following votes in the House and the Senate on Wednesday and a signature by the President immediately following. But one thing overlooked by some during the shutdown crisis–FHA home loans did continue as normal during the crisis, even if some borrowers who needed IRS confirmation of certain tax documentation did experience some inconvenience while that issue was being sorted out. The IRS was a casualty of the shutdown, with only a small percentage of its work force available for duty under the partial shutdown. In other sectors, government buildings sometimes closed to the public but kept operating for behind-the-scenes work. But overall, FHA loans kept moving forward during the entire length of the shutdown. The reason we write about that here is because while the | more...

October 16, 2013

FHA Loan Rules For Non-Purchasing Spouses

By Joe Wallace

One common FHA loan question has to do with the status of a non-purchasing spouse. Can a married borrower apply for an FHA loan with a non-purchasing spouse? In such cases would the income or credit history of the non-purchasing spouse be considered as part of the loan application? The answer depends greatly on the state laws where you live, or the state laws in the area where the home is to be purchased. According to the FHA loan rules found in HUD 41551., Chapter Four: “If required by state law in order to perfect a valid and enforceable first lien, a non-purchasing spouse may be required to sign either the security instrument or documentation indicating that he/she is relinquishing all rights to the property. When the security instrument is | more...

October 15, 2013

FHA Loan Answers: No Cash Out Refinancing With Appraisals

By Joe Wallace

FHA refinancing loan options include the ability to apply for a no cash-out refinancing loan with an appraisal required. For these loans, the FHA loan rules as described in Chapter Three, Section B of HUD 4155.1, addresses a variety of issues including subordinate liens, refinancing to buy out an ex-spouse’s interest in the property, etc. One issue specifically mentioned in these rules is how the lender must handle a no cash out refinancing loan for homes that have been owned for less than one year before the FHA refinancing loan application. Are FHA refinance loans possible in this case? According to Chapter Three: “If the property was acquired less than one year before the loan application, and is not already FHA-insured, the original sales price of the property must be | more...

October 8, 2013

Minimum Down Payments for FHA Loans: A Reader Question

By Joe Wallace

A reader asks, “Chapter 7 bankruptcy discharged in Oct 2010. Credit score now around 670. The hardest thing I am finding is the ability to save for a down payment. What would be a minimum down payment that I would be required to have before I could get an FHA loan? Thanks.” Unlike VA mortgage loans, FHA home loans feature a minimum down payment, also known as a minimum cash investment. The down payment must not only be a certain percentage of the loan amount, but it is also required to come from approved sources that can be verified. Borrowers cannot, for example, take out a cash advance on a credit card or any other form of unsecured loan for the down payment. FHA loan rules describe the minimum down | more...

September 26, 2013

FHA Loan Rules on Special Forbearance

By Joe Wallace

The FHA recently updated its rules associated with foreclosure avoidance and loss mitigation on FHA mortgages; borrowers who get into financial difficulty and may have trouble paying their FHA insured home loans should contact their loan officer immediately to discuss options for avoiding foreclosure. The newly updated FHA loan rules in this area include something known as Special Forbearance. Special Forbearance is described by the FHA as, “a written agreement between a mortgagee and mortgagor to reduce and/or suspend mortgage payments.” According to the most recent guidance from the FHA, “A Special Forbearance is available only to mortgagors who are unemployed. Special Forbearance agreements must provide for a minimum of 12 months for re-employment and require subsequent evaluation for a more permanent Loss Mitigation option to cure the default.” This | more...

September 25, 2013

FHA Loan Modification Rule Changes

By Joe Wallace

Borrowers who get into financial difficulty and have trouble making payments on their FHA home loans have some options with the FHA that can help the borrower avoid foreclosure. The FHA has updated its rules to home loan modifications and other foreclosure avoidance procedures–those updates are found in FHA Mortgagee Letter 13-32. We recently discussed some of the initial changes, which the FHA has given lenders until December 2013 to make. That recent update includes some instructions to the lender regarding loan forbearance. “Before a mortgagee considers a delinquent mortgagor for one of FHA’s Loss Mitigation Home Retention Options, the mortgagee must first evaluate the mortgagor for both Informal and Formal Forbearance Plans…Informal and Formal Forbearance Plans are the only options available for delinquent mortgagors without verifiable losses of income | more...

September 19, 2013

FHA Home Loan Debt To Income Ratio Rules: A Reader Question

By Joe Wallace

A reader asks, “I have significant student loans, but my parents make all payments on the loans because they had promised to provide my education as a gift (this was a commitment they made before I made the decision to pursue my education).” “They have made timely payments for three years, and they intend to continue to make payments until the loans are paid off. Can they guarantee future payments so that I can remove the loans from my debt-to-income ratio?” There are two basic factors at work when the lender is reviewing a borrower’s debt-to-income ratio. One is the borrower’s current debt load compared to the amount of income coming in. The other is how the new FHA loan payment would affect that debt load. Since the debts in | more...

September 18, 2013

FHA and HUD Announce Assistance for Colorado Storm Victims

By Joe Wallace

The FHA and HUD have issued a press release announcing help for victims of recent storms and flooding in Colorado. According to HUDNo.13-142, foreclosure relief, FHA home loans for disaster victims, and other forms of assistance are now available to those in Adams, Boulder, Larimer and Weld Counties. The press release says, “U.S. Housing and Urban Development Secretary Shaun Donovan today announced HUD will speed federal disaster assistance to the State of Colorado and provide support to homeowners and low-income renters forced from their homes due to severe storms, flooding, landslides and mudslides.” This type of assistance generally comes after the affected area has been declared a disaster zone by the president. “Families who may have been forced from their homes need to know that help is available to begin | more...

September 17, 2013

FHA Reverse Mortgage (HECM) Guidelines: Credit Issues

By Joe Wallace

Recently the FHA issued new rules and instructions to the lender that affect how FHA Reverse Mortgages or Home Equity Conversion Mortgages are processed. According to FHA Mortgagee Letter 2013-28, effective for all HECM case numbers assigned on or after January 13, 2014, the lender, “must perform a financial assessment of all prospective mortgagors on all HECM transaction types, i.e., traditional, refinance, and purchase.” What does that mean for the HECM loan applicant? For starters, when you apply for an FHA reverse mortgage or HECM, the lender is charged with doing the following things with your application data according to Mortgagee Letter 2013-28: performing the credit history analysis. performing the cash flow/residual income analysis; documenting and verifying credit, income, assets and property charges evaluating extenuating circumstances | more...