March 31, 2014
Recently, the FHA updated its electronic signature policy to accept “e-signatures” on a wider range of documents related to FHA home loans. According to the official site at www.FHA.gov, “FHA will accept electronic signatures on the following ‘Authorized Documents’ (see below), provided they are not otherwise prohibited by law, and comply with the standards set forth in Mortgagee Letter 2014-03 and with the Electronic Signatures in Global and National Commerce (ESIGN) Act.” The mortgagee letter issued at the end of January 2014 stated that FHA recognizes electronic signatures within certain limits as defined by the ESIGN act. “The ESIGN Act defines electronic signatures as
March 28, 2014
One of the most common questions we get about FHA home loans involves the borrower’s basic eligibility for the FHA loan program based on receiving government assistance or other types of government payments including:
March 28, 2014
We’ve been discussing topics this week related to FHA loan rules for income and employment. The participating FHA lender is responsible for verifying an FHA loan applicant’s employment and income to make sure it is stable and reliable. Not all forms of income can be used on the FHA loan application. Sporadic income from sales of goods online, for example, may not qualify, and certain types of commissions may not qualify depending on their frequency. GI Bill housing stipends cannot be used because they are not “likely to continue” past a certain number of months. Then there is the common question about child support and/or alimony payments. Can this form of income, if declared on the FHA loan application, be used to qualify for the mortgage? Chapter Four of HUD | more...
March 27, 2014
FHA home loan rules include a requirement that the lender verify employment and sources of income. The reasons for this verification include making sure the job and wages are stable and likely to continue to help the borrower pay the monthly mortgage bills. But what are the rules for borrowers who are self employed or who work at a family business? The rules that cover these requirements are found in HUD 4155.1 Chapter Four, Section D. Under the heading, “General Information on Self Employed Borrowers and Income Analysis” we find the following instructions to the lender: “Income from self employment is considered stable and effective, if the borrower has been self employed for two or more years.” However, the FHA loan rules do make a distinction between someone who owns | more...
March 26, 2014
For an FHA home loan, the participating FHA lender is required to verify the borrower’s employment and income. Only verifiable income can be used to calculate the borrower’s debt-to-income ratio and there are instructions for the lender on how to determine if certain types of income can be used and under what circumstances. Commission income is a very good example. Not all commission income may be eligible to be used for the debt to income ratio. How does the lender determiner what’s permissible and what’s not? There are instructions to the lender in HUD 4155.1, Chapter Four, Section D under the heading, “Salary, Wage, And Other Forms Of Income”. It begins by saying: “Commission income must be averaged over the previous two years. To qualify with commission income, the borrower | more...
March 25, 2014
A reader asks, “What is the income limit for a loan? My daughter and friend wants to buy a home with a few acres. She started a new job in Nov of 2013. He has a good income and working on his credit rating. They do not have enough for a large down payment.” FHA loans do not feature a minimum or maximum income limit. Instead, the lender must get employment and income information from the borrower(s) and determine the applicant’s debt-to-income ratio. A borrower with too much debt and not enough income will not qualify for the FHA loan. The borrower who has little debt but not enough income to qualify for the loan based on how much debt to income that would apply with the mortgage figured in | more...
March 24, 2014
FHA loan rules include a requirement that the lender verify sources of income and employment. Some types of income may or may not be permitted on the FHA loan application, and FHA loan rules printed in HUD 4155.1 explain what’s permitted or not allowed. One area some borrowers may be concerned with in this area is part time income. Does the FHA allow a lender to verify and count as income the earnings from a part-time job? The rules for this are found in Chapter Four Section D of HUD 4155.1 under the heading “Salary, Wage, And Other Forms Of Income”. It says in part: “Part-time and seasonal income can be used to qualify the borrower if the lender documents that the borrower has worked the part-time job uninterrupted for | more...
March 21, 2014
A reader asks, “Will FHA allow a house with no heat to use (the FHA Energy Efficient Mortgage) energy package? The EEM program states “improve”; what if it is a question of not having heat at all. Does this program still apply?” There are several different standards that might affect such a transaction. The reader wants to know whether a home without a heating system might be eligible for an FHA mortgage using an Energy Efficient Mortgage that could, if the question is interpreted correctly, add a heating system. What do FHA loan rules say about this? For starters, “
March 21, 2014
FHA loans have flexible standards when it comes to the kinds of credit history a borrower brings to the loan application process. By that we mean that applicants who have non-traditional or even insufficient credit history may be able to get a loan approved depending on circumstances. Borrowers with non-traditional credit or insufficient credit history may be asked to provide additional documentation and paperwork as part of this process. You could be required to furnish tax documents, utility bills, and/or any other recurring payment that could help establish credit history. FHA loan rules in HUD 4155.1 explain the rules, instructing the lender: “When evaluating a borrower with non-traditional credit history, a satisfactory credit history, at least 12 months in duration, must include no history of delinquency on rental housing payments | more...
March 20, 2014
One of the most commonly asked questions we get in our comments section has to do with whether a borrower can apply for a new FHA loan following a short sale. The loan rules for post-short sale transactions are found in HUD 4155.1, Chapter Four, Section C under the heading, “Short Sales”. It starts off by stating that while it IS possible to get a new FHA loan following a short sale under the right conditions,