Monthly Archives: February 2012
FHA loan applicants should know their rights under the Fair Housing Act, which forbids discrimination in the terms and conditions of a loan to an individual based on disability.
That includes setting a different standard or requiring different application processes for disabled FHA and conventional loan applicants. Under federal law, it is also illegal for a lender to ask about the nature or severity of a disability except in limited circumstances explained in the Fair Housing Act.
The U.S. Department of Housing and Urban Development recently announced it is charging Bank of America with discriminating against homebuyers with disabilities.
The Department of Housing and Urban Development and the FHA have announced a plan to increase FHA Mortgage Insurance Premiums.
In a press release, HUD No. 12-037, it was announced, “As part of ongoing efforts to encourage the return of private capital in the residential mortgage market and strengthen the Federal Housing Administration
We always encourage people to ask us questions about the FHA home loan process in our comments section, and one thing that definitely helps us to answer them properly is to provide as much specific detail about your question as possible.
One reader asks, “Applying for an FHA Loan and was told that the assistance with closing costs on my loan floats. One day it could be 5.0% or 4.0%. Is that true?”
It’s tough to know what the specific question is in this case, but most likely the reader is asking about seller concessions. These concessions are permitted by FHA loan rules, which state;
“The seller and/or third party may contribute up to six percent of the lesser of the property
We get many questions about FHA home loans from our readers. Some of those questions concern short sales for FHA home loans, and FHA loan assumption.
An FHA loan short sale is a transaction where the home owner, who coordinates with the lender, agrees to sell the home for less than the amount currently owed on the home. An FHA loan assumption is where a home owner agrees to transfer the property to a buyer under the terms of the original loan.
According to FHA.gov, “All FHA-insured mortgages are assumable.
A recent reader question included a mention of the Hope For Homeowners program, also known as H4H. The reader was specifically asking whether it is possible to rent a property that qualifies under H4H. But what exactly is Hope For Homeowners?
In 2008 the subprime mortgage crisis created a major problem for homeowners–and not just those risking loan default and foreclosure. Property values were falling and many who purchased their homes found themselves owing more money than their property was worth.
In an attempt to stabilize the market, Emergency Economic Stabilization Act of 2008 was signed into law on October 3, 2008. Part of that new law included Hope For Homeowners, which was created to prevent qualified home owners from defaulting on their loans, and avert foreclosure. H4H allowed qualified borrowers to refinance into affordable, fixed-rate mortgages using an equity sharing program with the U.S. government.
Hope For Homeowners was phased out after September 30, 2011. Details of the phase-out can be found in HUD Mortgagee Letter 11-20, which gave lenders instructions as to how to process cases during the final days of Hope For Home Owners.
That means no new cases are now being processed. The reader question is basically moot for anyone looking to submit a new application for the H4H program–it is now closed. For those with home loans that were modified under H4H in the past, program rules and regulation information can be obtained by calling 888-995-HOPE (4673), which is the hotline for the Making Home Affordable program.
Do you have a question about FHA home loans? Ask us in our comments section. Due to the volume of questions we receive, we can only reply in the comment area–personal replies or phone calls are not possible.
At the time of this writing, it’s more difficult to find an FHA home loan for a manufactured home than in years past.
Even so, some borrowers may find lenders willing to consider an FHA loan application for a mobile home or manufactured housing. One reader wrote in recently to ask, “Are the requirements of the Permanent Foundations Guide for Manufactured Housing applicable to both FHA Title 1 and Title 11 loans?”
To answer this question we need to reference the Foundation Compliance section of a document known as the HUD FHA HOC Reference Guide Manufactured Homes. Under Foundation Compliance, FHA and HUD requirements are clearly spelled out.
“All foundation systems, new and existing, must meet the FHA
A reader asked us recently whether there were any minimum income requirements for FHA condo loans. While the FHA does not place a dollar amount or set a minimum income, it does have standards for verifiable income which must be met in order to qualify for the FHA mortgage loan.
These standards have more to do with stability of income, and the ratio of monthly financial obligations to that income than the amount itself. The lender is required to determine whether the borrower can realistically afford the FHA monthly mortgage payment when factored in with the rest of the loan applicant’s obligations.
So how does the FHA lender analyze the borrower’s income? FHA rules state clearly, “The lender must analyze the income of each borrower who will be obligated for the mortgage debt to determine whether the borrower
In 2011, one of our blog posts included information about FHA Title I loans for manufactured homes. These home loans can be used several ways, as mentioned in our post from last year;
A reader asks, “Is it possible to get an FHA loan if the ‘gap’ in employment was due to starting your own business? I have 1099?s that show income, as well as pay stubs as a contractor with a contract in place. The company paying me wants to hire me full time as a w-2 employee.”
FHA home loans require the borrower to verify employment, but the lender does not have to deny a loan simply based on alternative, non-traditional, or self-employment. However, the rules for these types of employment are a bit more stringent so that the loan officer may properly verify income.
When you fill out an FHA loan application, you’re required to list your employment prior to the period of self-employment, plus list out specific details of your small business, contract or freelance income. Self-employed FHA loan applicants must show their net income and list all business expenses that might offset that income.
Borrowers who are self employed and want to qualify for an FHA home loan need to keep good records. It’s best to have your taxes professionally prepared as the FHA will require these tax documents as well as your profit/loss record keeping and other vital documents that will provide proof of your legitimate business income and expenses.
Self-employed FHA loan applicants should begin preparing for their new home purchase earlier than people with traditional careers, if only to make sure they have all the right paperwork to present to a potential lender. You should also be prepared to explain any lengthy gaps between contracts, freelance work, or slumps in the business as well as provide explanations as to the nature of your business and why such gaps would not affect your ability to handle monthly FHA mortgage payments.
Do you have a question about FHA home loans? Ask us in our comments section.
A reader recently sent us a lengthy comment as part of a request for assistance on FHA loan topics.
He writes, “I had a foreclosure in a bk chap 7 that was discharged in Nov 2009. This was due to a job lost in 2008 like most of the country. I had to get unemployment for I went over one year looking for another job. I went back to work full time in Dec 2009…”
We won’t reproduce the entire correspondence here, but we thought it important to address the issues mentioned above as there are plenty of other readers who may be facing similar circumstances. Is it possible to get a new FHA home loan with conditions like the ones previously mentioned as part of the borrower’s history?
Let’s examine each part of the quote from our reader’s communication:
“I had a foreclosure in a bk chap 7 that was discharged in Nov 2009.” FHA loan requirements state the borrower must wait a minimum of two years before applying for a new FHA mortgage after Chapter 7 bankruptcy. Similar minimum wait time requirements apply for foreclosure proceedings. This is known as a “seasoning period” in some circles, and many lenders require a three-year wait as opposed to the FHA’s minimum two year requirement.
These longer wait times are not illegal or prohibited by FHA loan rules. In this case, in November of 2012 the reader will have three years since the bankruptcy was discharged and may be eligible to apply for a new FHA home loan with most lenders. The borrower must qualify for the new FHA mortgage loan in the same way he or she would for any other home loan application.
“I had to get unemployment for I went over one year looking for another job. I went back to work full time in Dec 2009…” The borrower has more than two years of employment history at this point, so there should be no worries there in a general sense. An individual borrower needs to show stable employment and income history, but these factors are flexible depending on circumstances.
A lender must verify current income and employment to judge whether current income is stable and likely to continue. Simply having a new job is not enough to disqualify you from an FHA guaranteed loan, but the lender will look for evidence that a new job is “likely to continue”.
These types of situations are handled case-by-case, and borrowers should never assume they aren’t eligible for an FHA loan until they’ve been denied or told they are not eligible by a lender or FHA representative. There may be ways to appeal or provide compensating factors that could make an FHA loan application more favorably considered.