Articles Tagged With: Mortgage Underwriting

July 10, 2013

FHA Loan Answers: Can I Add Appraiser-Required Repairs/Improvements Into My FHA Loan?

When you want to purchase a home with an FHA mortgage, one of the most important steps after choosing the property is the appraisal. An appraisal is required in order to establish the fair market value of the home and to make sure the home lives up to FHA minimum property standards. Appraisals may result in some required improvements, corrections or alterations to the home in order to bring it up to minimum standards. In such cases, the appraiser may make FHA loan approval conditional upon the completion of these changes and require a compliance inspection to make sure the fixes or alterations now bring the home up to standard. In such cases, is the borrower permitted to include the cost of this work in the sales price of the | more...

July 9, 2013

FHA Cash-Out Refinancing Loan Amounts

By Joe Wallace

When borrowers choose the refinance a home loan using an FHA cash-out refinancing loan, many come to the application process not sure how much they can apply to borrow. For FHA cash-out refinance loans, there are specific rules found in HUD 4155.1 that govern the amount of the loan. There’s no single, set dollar amount limit placed on cash-out refinancing. Instead, the FHA/HUD provide a set of guidelines that determine the maximum loan-to-value percentage based on how long the borrower has owned the home and lived there as the principal residence, and how much the home has been valued at based on a new FHA appraisal. HUD 4155.1 Chapter Three Section B states, “If the property has been owned by the borrower as his/her principal residence for 12 months or | more...

June 27, 2013

FHA Loan Reader Questions: FICO Score Minimum Requirements

By Joe Wallace

A reader asks, “Hello, my husband score is 623 and my score is 738, is there a FHA loan out there that would allow us to get a loan? I have read that some companies have stated that both parties must have at least a 650 or above.” Credit score questions are some of the most frequently asked when it comes to a new purchase FHA home loan. While it’s true that the FHA does have a set of minimum FICO scores listed (see below) there is one very important thing ALL borrowers should know about the FHA loan rules for minimum credit scores–they are the FHA’s minimums ONLY. A lender is free to require higher credit scores as long as such higher standards are consistently applied and in accordance | more...

June 21, 2013

FHA Loan Rules: Maximum Loan Amounts and Down Payments

By Joe Wallace

FHA loan rules include guidance for lenders and borrowers about maximum loan amounts and down payment requirements. There’s a myth about today’s FHA home loans that some still repeat–variations on the idea that there may be no down payment required for first-time home buyers. What’s the reality? FHA loans do require a down payment. It’s much lower than the required down payment for many conventional loans, which is why some might believe that the FHA down payment requirement is reduced or eliminated for first-time borrowers. The minimum down payment amount for an FHA new purchase loan is 3.5%. No closing costs can be used to meet this requirement–the down payment is a separate amount from what are called “non-recurring” costs, prepaid expenses, discount points, etc. The down payment amount is | more...

June 19, 2013

FHA Loan Rules for Non-Purchasing Spouses

By Joe Wallace

One of the most commonly asked questions about FHA home loans is whether or not a spouse is required to sign, co-sign, or otherwise be committed to an FHA home loan. Can one spouse by a home with an FHA insured mortgage without participation of the other? That depends greatly on state law. FHA loan rules cannot and do not override state laws, but there are clauses found in the FHA loan rules written in HUD 4155.1 that address this issue. These items are found in Chapter Four, Section A under a section titled Non-Purchasing Spouses. It says in part; “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 | more...

June 18, 2013

FHA Loan Approval or Rejection: The Rules

By Joe Wallace

FHA loan rules cover a lot of ground, including specific procedures that are supposed to happen when an FHA single-family mortgage loan is approved or denied. Did you know the FHA loan rules, listed in HUD 4155.1, give instructions on how approvals and rejections are handled? Those rules are found in Chapter One, Section A of HUD 4155.1. When an FHA loan application is approved, the rules instruct the lender: “When a borrower is approved, the Direct Endorsement (DE) underwriter • records the results of the credit analysis on the HUD-92900-LT, FHA Loan Underwriting and Transmittal Summary • enters any modification of the mortgage amount or approval conditions under “Underwriter Comments” on the form, and • approves the borrower and authorizes closing, if the case is a DE case.” The | more...

June 17, 2013

FHA Loan Occupancy Rules

By Joe Wallace

We answer many reader questions about FHA loans, FHA loan rules, and what it takes to qualify for an FHA insured mortgage. Did you know there is an occupancy requirement for all new purchase single family FHA mortgage loans? FHA loans for single-family purchases do have an occupancy requirement, which does not permit the borrower to buy the home then turn around and rent out the property to someone else. According to the FHA loan rules found in HUD 4155.1, the home MUST be used as the principal residence or primary address. “A principal residence is a property that will be occupied by the borrower for the majority of the calendar year. At least one borrower must occupy the property and sign the security instrument and the mortgage note in | more...

June 14, 2013

HUD Updates Good Neighbor Next Door Policy

By Joe Wallace

The Department of Housing and Urban Development has updated its policy on the Good Neighbor Next Door program, which offers homes at a major discount to qualifying borrowers. According to HUD, the program “offers HUD owned single family (one-unit) homes to eligible participants at a 50% discount” to “law enforcement officers, teachers and firefighters/emergency medical technicians and who meet all other requirements of the program”. The HUD Good Neighbor Next Door program is available to those who want to purchase using an FHA insured mortgage. Recently the FHA and HUD have issued guidance about the Good Neighbor Next Door Program, which includes clarification on the mortgage insurance premium for the loan. According to FHA Mortgagee Letter 2013-20, “The purpose of this Mortgagee Letter is to: Clarify that the mortgage insurance | more...

June 13, 2013

FHA Loan Rules on Verifiable Income: Commissions

By Joe Wallace

FHA loans require the lender to verify the applicant’s employment, credit history, and income. When it comes to income verification, the FHA requires the lender only to use “verifiable income” when calculating a borrower’s creditworthiness. When an FHA loan applicant has ordinary hourly or salary income, it’s simple to establish what verifiable income might be using pay stubs, income tax reports, and other documentation. But what about when a mortgage loan applicant has a job that pays a commission instead of a salary? FHA loan rules have provisions for commission-based income, as described in HUD 4155.1 Chapter Four. There, you’ll find the following: “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 | more...

June 7, 2013

FHA Loan Questions: Applying for an FHA Loan With No Credit Card History

By Joe Wallace

A reader asks, “I have a credit score of 662, but I have no outstanding credit. I do not have any credit cards open, nor a car loan (loan was open in 2003)I have 0 installment loans, 0 credit cards, 0 retail cards. How can I get approved for a home loan? I have had credit in the past, but closed my accounts when I moved out of the country in 2001 and never got any credit cards again.” FHA loan rules address this in HUD 4155.1 Chapter Four, Section C. That section says in part, “Past credit performance is the most useful guide to • determining a borrower’s attitude toward credit obligations, and • predicting a borrower’s future actions. Borrowers who have made payments on previous and current obligations | more...