Monthly Archives: December 2011
When a borrower applies for an FHA insured home loan, part of the qualifying process includes having all sources of income reviewed and verified. Some income can’t be used for purposes of qualifying for an FHA mortgage–usually anything which is not steady, reliable, and likely to continue can’t be claimed.
By the same standards, some types of income are not required to be listed, but if they are not listed and verified that source of income can’t be considered for the purposes of qualifying for the FHA mortgage.
Alimony, child support, and maintenance income falls into this category. If a borrower chooses not to list that type of income, it’s his or her choice–but the income must be listed and verified in order to be used to qualify for the FHA guaranteed mortgage.
Alimony, child support, and maintenance income is not automatically considered verifiable. These payments are considered “effective income” when, according to the FHA official site:
The FHA has extended a waiver to its anti-flipping rules into 2012. Under normal circumstances FHA rules forbid taking out an FHA mortgage for the purpose of “flipping”,which is the practice of buying a home, renovating it, and returning it to the market as soon as possible.
A press release from the Department of Housing and Urban Development, HUDNo 11-292, states the waiver will be extended through 2o12 as part of an effort to stabilize home values and improve the housing market.
Acting Federal Housing Administration Commissioner Carol J. Galante was quoted in the release, saying
If you’re planning on applying for an FHA home loan or refinancing an existing FHA mortgage in the new year, it might be a good idea to consider the option of an FHA Energy Efficient Mortgage or EEM.
The FHA Energy Efficient Mortgage program is designed to let a qualified borrower “to finance 100% of the expense of a cost effective
Some potential FHA loan applicants wonder if they are eligible to apply for an FHA insured mortgage loan.
Some borrowers wonder if they are eligible because they are naturalized citizens or have applied for citizenship. Others aren’t sure they will qualify because of a lack of credit history or other issues.
Fortunately, the FHA loan rules for eligibility are clearly spelled out in a document called HUD 4155.1. This document contains a variety of rules and instructions for participating FHA lenders. For example, HUD 4155.1 tells lenders not to deny an FHA loan application simply because the borrower has a limited or non-traditional credit history.
It also clearly states who is basically eligible to apply for an FHA mortgage. HUD 4155.1 states, that the FHA insures mortgages made to those “with valid Social Security numbers (SSN)” but also insures loans for state and local governments and “approved nonprofit organizations”.
When it comes to having a valid Social Security Number, the FHA provides an exception to this rule, stating, “Employees of the World Bank, foreign embassies, etc., may not be required to have an SSN. Conclusive evidence of this exception must be provided.”
The FHA also states there is no maximum age limit for loan approval, which means as long as a borrower is financially qualified for an FHA insured mortgage, their age is not a factor. The only exception to this is that the borrower must be of the legal minimum age to sign binding contracts in the state where the property to be purchased is located.
The FHA can’t issue a minimum age rule stating a specific age since the legal age of consent varies from state to state. As long as the borrower is legally able or considered competent to sign according to the laws of a particular state, he or she is eligible to apply for an FHA insured mortgage.
The Federal Housing Administration has posted its maximum loan limits for FHA loans as a downloadable PDF. The loan limits are effective between October 1, 2011 to December 31, 2012.
But the official announcement of the 2012 FHA loan limits requires a bit of additional reading for some borrowers who applied or will apply for an FHA loan between certain dates prior to the new year.
According to HUD Mortgagee Letter 2011-39, for forward mortgages (new purchase FHA home loans, for example, as opposed to reverse mortgages or HECM loans) issued between November 18, 2011 through December 31, 2011,
“The Forward loan limits (floor, ceiling and county loan limits) that were in effect from January 1, 2011 through September 30, 2011, as announced in ML 10-40, shall apply for case numbers assigned from November 18, 2011 through December 31, 2011.”
The FHA mortgagee letter also states for all loans between January 1, 2012 through
December 31, 2012, “The FHA Floor and Ceiling loan limits will remain the same as those that were in effect from January 1, 2011 through September 30, 2011,
as announced in ML 10-40. The individual county loan limits contained in Attachments I and II of this Mortgagee Letter will be in effect.”
You can read about those limits by viewing FHA Mortgagee Letter 2011-39 at the FHA official site.
A recent press release from the Department of Housing and Urban Development could help some FHA loan applicants who need help with understanding their borrower’s rights.
According to HUDNo. 11-29, released on FHA.gov December 22, 2011, “The U.S. Department of Housing and Urban Development (HUD) today announced that it has launched the HUD Language Line, a telephone language service pilot that will offer live, one-on-one interpretation services in more than 175 languages.”
“Accessible throughout the nation, the language line will help HUD staff to better communicate with Limited English Proficient (LEP) individuals and families about HUD housing programs, services, and activities.”
The pilot program, which runs through September 2012, is funded under the Consolidated Appropriations Act of 2010, “to help ensure that individuals have access to information in languages other than English regarding HUD programs, services and activities.” It’s another step in an ongoing campaign to address equal access issues for FHA/HUD services for those who need help in languages other than English.
A recent reader left a message in our comments section asking, “If u live in Minnesota what the requirements for down payments on FHA loan?”
Some FHA loan applicants may have the mistaken impression that FHA rules for down payments vary from state to state, so we thought it important to dispel that notion once and for all. FHA loan rules state there is a minimum down payment of 3.5%.
According to the FHA official site (on the Let FHA Loans Help You page), “Your down payment can be as low as 3.5% of the purchase price, and most of your closing costs and fees can be included in the loan. Available on 1-4 unit properties.”
However, FHA loan applicants should know there may be additional factors that affect the amount of the down payment. A borrower may not qualify for the lowest required down payment if there are credit issues or other factors that affect credit worthiness. A participating FHA lender may also have a higher down payment requirement based on other issues.
So while the FHA rules don’t change state by state, the amount of your down payment could vary depending on individual circumstances. Borrowers should not expect to be given the same terms or conditions on an FHA loan as a friend or fellow borrower, and the lender’s requirements could vary from loan to loan for a variety of reasons.
But borrowers should expect to be given equal consideration based solely on qualifying criteria such as credit history, ability to repay and other factors. Discriminatory or predatory lending is not permitted under FHA loan rules–borrowers can’t be given higher down payment requirements based on non-qualifying data such as race, country of origin, family status, or any other criteria forbidden under Fair Housing Act regulations.
To learn more about Fair Housing rules, review http://portal.hud.gov/hudportal/HUD?src=/program_offices/fair_housing_equal_opp/FHLaws
When first-time FHA borrowers submit their loan applications to the lender, it’s natural they might feel nervous about the outcome of the lender’s review of the application data.
Will the borrower’s occasional credit missteps or isolated credit problems negatively affect the ability to get FHA loan approval?
FHA rules for lenders include a long list of requirements for the credit check, which includes the following:
“Past credit performance is the most useful guide to
One of the frequently asked questions at FHA.gov involves FHA loan refunds for mortgage insurance premiums. This continues to be an issue for the FHA, and according to FHA.gov the agency has increased its efforts to find home owners who are due refunds.
The FHA has hired a third party agency called Immediate System Resources to assist in the search for those who are due an FHA mortgage insurance premium refund. According to the FHA, “This will save people the ‘finders fees’ normally collected by third party tracers. If someone from Immediate System Resources, Inc. contacts you, they are officially affiliated with HUD and will help you and won’t charge you to get your refund.”
The “tracer companies” mentioned in the quote above contact home owners with offers to help locate the mortgage insurance premium refund–for a fee. But no fees are needed as the FHA offers borrowers a cost-free way to find out if they are owned money. The tracer companies are not operating illegally, but their fees are unnecessary.
Borrowers are encouraged to check the FHA list to see if their name appears. Simply go to the FHA official site page titled “Does HUD Owe You A Refund” at http://www.hud.gov/offices/
At the time of this writing, the FHA advises, “Due to increased public interest, the Mortgage Insurance Premium Refund Support Service Center is experiencing a high volume of calls. Please be aware that the 1-800-697-6967
Borrowers who want to apply for refinancing on an FHA insured mortgage have several choices. One of those is the cash-out refinancing