Monthly Archives: December 2014
For those looking to buy a home with a “new purchase” FHA single-family home loan, it’s a good idea to get familiar with FHA loan guaranty limits for your area. This information is found on the FHA/HUD official site at http://portal.hud.gov/hudportal/documents/huddoc?id=14-25ml.pdf.
That link is a downloadable .PDF titled “Federal Housing Administration’s (FHA) Maximum Loan Limits Effective for Case Numbers Assigned on or after January 1, 2015 through December 31, 2015”.
For borrowers interested in FHA refinance loans, you can learn about your cash-out or streamline refinance loan options at the FHA/HUD official site, which features pages for both streamline and cash out loans.
For FHA Streamline Refinancing: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/buying/streamli
FHA rules for maximum loan amounts on Cash-Out/No Cash Out refinance loans: http://portal.hud.gov/hudportal/documents/huddoc?id=4155-1_3_secB.pdf
Those interested in FHA Home Equity Conversion Mortgages (HECM) should know that the FHA HECM program has changed a great deal in 2014. Learn about the current state of the FHA HECM program and how it works:
There is much more to learn about FHA single-family loans in general. If you need more information, check out the FHA Single Family page:
Got questions about FHA home loans or refinance loans? Ask us in the comments section. All comments are held for moderation.
The FHA and HUD have updated policies related to the sales of foreclosed homes for “all defaulted FHA insured mortgages” with sales scheduled on or after 1 February 2015. According to Mortgagee Letter 2014-24, Increasing Use of FHA’s Claims Without Conveyance of Title (CWCOT) Procedures, the following guidelines will apply to those home sold after the date mentioned above:
“Unless otherwise required by statute or jurisdiction, mortgagees are to use the Commissioner’s Adjusted Fair Market Value (CAFMV) for all foreclosure sales and Post-Foreclosure Sales Efforts associated with defaulted FHA insured mortgages when all of the following criteria are met:
A.The FHA mortgage insurance is still active for the FHA Case Number;
B. The FHA-insured loan is not subject to indemnification. (Note: Items A and B may be verified by checking Neighborhood Watch);
C. The mortgagee has worked with the mortgagor to exhaust all applicable home retention loss mitigation options and has determined that the mortgagor’s case does not meet the criteria for a Pre-Foreclosure Sale (PFS) or a Deed-in-Lieu (DIL). (Mortgagees may not proceed with any foreclosure sale until this condition has been met);
D.The property has no surchargeable damage (i.e. damage caused by fire, flood, earthquake, tornado, hurricane, boiler explosion, or mortgagee neglect);
E. If the mortgagee were to file a “conveyance” claim, the mortgagee’s projected ‘conveyance’ claim amount would be equal to or greater than the CAFMV.”
These are not the only changes–other alterations include new or amended requirements for appraisals:
“Unless otherwise directed by HUD, mortgagees must first obtain, and review for accuracy, an ‘as-is’ FHA appraisal, which includes both an interior and exterior evaluation of the property. If the property is occupied and an interior appraisal cannot be obtained, an “exterior-only” appraisal may be used.”
“The appraisal must be valid on the date of the foreclosure sale. Appraisals are valid for 120 days. If delays such as bankruptcy, court delays or delays outside of the mortgagee’s control occur, the lender is granted an additional 30 day extension on the appraisal expiration date.”
For more information on these rule changes, contact the FHA directly at their toll-free number: 1-800 CALL FHA.
Do you have questions about FHA home loans? Ask us in the comments section. All comments are held for moderation.
A reader asks, “ I bought a home back in 97 I was in the military at the time and in 1999 it went for a short sale and unfortunately they charged my entitlement to my certificate of eligibility $36,000 I got screwed they said they were saving me from foreclosure but in reality I sold the house for more then what I bought it for but now they say I owe that money to get my COE reinstated.”
“So that’s why I am now considering using a FHA home loan. My question to you is would I be eligible for the 3.5% down payment with a credit score of 650 and a discharge BK over 2 years its actually 2 1/2 years.”
The FICO score portion of this question is simple–FHA standards say that a borrower with a 650 FICO score is technically eligible for maximum financing on an FHA loan. This assumes the borrower is otherwise qualified. The bankruptcy issue complicates things and depending on lender standards, the borrower may or may not need a larger down payment–much depends on the circumstances of the bankruptcy and how the borrower has re-established credit in its wake.
The debt owed to the government is another issue entirely. The reader may find that this debt needs to be addressed before an FHA loan can move forward. This may involve a payment plan or other resolution of the debt to the satisfaction of the government. The debt may not have to be completely paid in full for the loan to move forward, but again, much depends on the circumstances and how the situation is handled.
The best advice in this situation is for the borrower to contact the VA directly to resolve the debt issue mentioned in the question–doing this BEFORE applying for the FHA loan is the best course of action.
Do you have questions about FHA home loans? Ask us in the comments section. All questions and comments are held for moderation and may not appear until they have been reviewed.
A reader asks, “I am owner/occupant of a 4 unit residential apartment Bldg which I built 37 years ago. it was successful until wacancies took over after the crash, I have funded the payments with my cash flow but it is now getting lower and lower and need my 6% reduced to the 3% rates with help i a small principal reduction.”
This falls far outside the FHA single-family home loan program. The reader doesn’t indicate in the question whether the original loan was an FHA-guaranteed mortgage or not, but in any case, a borrower who seeks a principal reduction needs to work with the lender to see if this is possible.
A refinance loan option may be possible depending on the circumstances and the lender, but again, this is a question for the loan officer.
Borrowers who have single-family FHA home loans who need principal reductions should also address this question to the loan officer, but there may be other alternatives such as the government-backed Home Affordable Modification Program established by HUD and the U.S. Treasury back in 2009.
That program recently got some modifications of its own to further assist borrowers who need it. An announcement made earlier in 2014 states that borrowers who successfully complete six years of the program may be eligible for a principal reduction as outlined in the press release HUDNo.14-150.
That release states:
“…all homeowners in HAMP will now be eligible to earn $5,000 in the sixth year of their modification, which will reduce their outstanding principal balance by as much as $10,000. Homeowners will also be offered an opportunity to re-amortize the reduced mortgage balance, which will have the effect of lowering their monthly payment. As of today, approximately one million homeowners with HAMP modifications are eligible to earn the increased HAMP incentive.”
Talk to your loan officer about HAMP and how the program may be able to help you. Or you can contact the FHA directly by calling 1-800 CALL FHA.
Do you have questions about FHA home loans? Ask us in the comments section. All comments are held for moderation and review.
From all of us here, have a safe and happy holiday! We pause from our usual posts about FHA loans, answering reader questions, and FHA news to celebrate the season. Our regularly scheduled posts will return on Friday. Thanks for reading and we hope your holiday time is filled with joy.
–The Staff at FHANewsBlog.com
The answer to this question may depend greatly on the lender, the circumstances, and whether the borrower has compensating factors that might offset a lower FICO score. FHA loan rules spell out minimum credit scores and the lender will also have minimum credit score requirements which must be met.
The FHA loan rulebook, HUD 4155.1 in Chapter Four has rules which spell out some standards for credit for all applicants, co-borrowers, etc. Chapter Four says in part:
“If a credit score is available, it must be used to determine the decision credit score for the application and for eligibility for FHA-insured mortgage financing. A “decision credit score” is determined for each applicant according to the following rule: when three scores are available (one from each repository), the median (middle) value is used; when only two are available, the lesser of the two is chosen; when only one is available that score is used.”
Furthermore, FHA loan rules say:
“When determining the creditworthiness of borrowers, coborrowers, or cosigners, the underwriter considers their
• liabilities, and
• credit histories.”
So depending on these factors the lender may or may not be willing to work with a borrower and a co-borrower. Credit scores are important but they are only one part of the picture–the borrower’s payment history and other factors also play an important part in loan approval or denial.
Do you have questions about FHA home loans or refinance loans? Ask us in the comments section. All comments are held for moderation and approval.
The FHA and HUD have announced the loan guaranty limits for 2015. FHA Mortgagee Letter 2014-25, which announces 2015 limits and policy for single-family “forward loans” for new purchases, FHA Streamline loans, and Home Equity Conversion Mortgages (HECMs).
According to the mortgagee letter, “The minimum FHA national loan limit ‘floor’ is at 65 percent of the national conforming loan limit (which is $417,000 for a one unit property for the period January 1, 2015 through December 31, 2015). The floor applies to those areas where 115 percent of the median home price is less than 65 percent of the national conforming loan limit.”
The FHA defines a high-cost area where the typical FHA loan guaranty rate may be different as follows: “Any area where the loan limit exceeds the floor is a high cost area. The maximum FHA national loan limit ‘ceiling’ is at 150 percent of the national conforming loan limit. In areas where 115 percent of the median home price (of the highest cost county) exceeds 150 percent of the conforming loan limit, the FHA loan limits remain at 150 percent of the conforming loan limit.”
The FHA loan rules for HECMS is also addressed. For the whole of 2015, unless otherwise changed by law, “the maximum claim amount for FHA-insured HECMs will remain $625,500 (150 percent of Federal Home Loan Mortgage Corporation’s (Freddie Mac) national conforming limit of $417,000). This maximum claim amount of $625,500 is also applicable to Freddie Mac’s special exception areas – Alaska, Hawaii, Guam and the Virgin Islands.”
FHA Streamline loan guaranty amounts are not affected by the information above. The FHA mortgagee letter states, “Mortgages that meet the requirements for streamline refinance transactions without an appraisal are governed only by the maximum mortgage amounts
under Section 223(a)(7) of the National Housing Act and 24 CFR 203.43(c). These transactions are not subject to the limits described in this ML”
You can learn more about FHA loan limits for 2015 by downloading the FHA mortgagee letter PDF from the FHA official site: http://portal.hud.gov/hudportal/documents/huddoc?id=14-25ml.pdf
Do you have questions about FHA home loans? Ask us in the comments section.
In many cases borrowers will typically find that lenders require average credit scores of around 620 or so (or better), but no two lenders operate exactly the same–you may find higher or lower FICO score requirements depending on the lender, the type of home loan, etc.
This reader question seems to imply that the borrower wants to get a loan for a specific amount, but it’s important to understand how FHA loan amounts are determined. The FHA loan amount is set based on the sale price or the property, or the appraised value–whichever is lower. The loan amount can also be affected by adding things to the loan such as an FHA Energy Efficient Mortgage, including permitted fees and expenses into the loan, etc.
So the borrower doesn’t apply for “X” amount of dollars on the loan, rather, the amount is determined by the factors mentioned above. The FHA loan program does not permit borrowers to apply for zero down payment loans–a cash investment by the borrower is required.
Additionally, the FHA does not allow loans for higher amounts than required to complete the transaction with the idea that the borrower can get money back on the deal. FHA loan rules are specifically designed to prevent this from happening.
Do you have questions about FHA loans? Ask us in the comments section. All comments and questions are held for moderation.
A reader asks, “My credit scores a 654 i have a car loan at 22000 where i pay 328 amonth and have a debt collecter who ive already payed but still shows on my credit report. Is there any way I can get a 5000 dollar loan?”
It sounds like this reader is asking whether the FHA loan program permits a borrower to apply for a personal loan guaranteed by the FHA. Or perhaps the reader is asking if it’s possible to apply for an FHA home loan for an amount far smaller than it would take to purchase a home.
In either case, the answer is no. FHA loan rules do not permit the FHA single family home loan program to be used as a personal loan–FHA guaranteed home loans are strictly for the purchase or refinance of a home. FHA loan amounts are determined in part by the sale price or appraised value of the home, and partly by the amount of add-ons or other extras included in the loan amount.
The FHA loan program doesn’t permit the borrower to use an FHA mortgage loan as a personal loan (cash out refinancing is possible, but the same rules apply–the entire amount of the home’s appraised value would be considered when it’s time to determine the loan amount) but that does not mean that a participating FHA lender might not be able to offer a personal loan outside the FHA loan program.
Such personal loans would depend strictly on the lender’s rules and standards, assuming such loans are available from that particular lender. Borrowers who seek personal loans would not be applying for an FHA loan in any way. As mentioned above, cash-out refinancing loans are possible and may even offer the same amount of cash or at least in the ballpark–but the borrower would need to discuss the cash out refinancing loan with the lender to determine what uses the proceeds from that loan (once the original financial obligation has been paid in full) might be approved for.
Do you have questions about FHA home loans? Ask us in the comments section.
A reader asks, “I would like to know how can I get a FHA Loan if my husband and me just make 40.000 a year. I went on bankruptcy in Oct 2011. Right now I have no debts, no car loans. I need an answer as soon as possible, we are living place to place, we paid rent on time,but living with more people is difficult. Also we have $10.000 for a downpayment.”
FHA loan rules have no specific minimum income requirements for loan approval. FICO scores are used to approve the loan, as is your employment history and the likelihood of your current employment to continue.
One of the most important things related to the borrower’s income isn’t the amount of that income, but rather how the income is used. If a borrower has too much debt, it doesn’t matter how much or little the amount of that income is, the lender can’t approve the loan if the debt to income ratio is too high.
Borrowers who have little debt in the situation described above have a better chance at loan approval. The lender must determine if you can afford the loan you’re applying for on top of your existing monthly financial obligations. The borrower’s combined income with another borrower would still need to be examined in light of the debt picture for both parties.
Naturally, the amount of the loan might also be an important factor–if the mortgage payment is too high, the borrower may not be able to afford that loan with the other monthly obligations. But a loan that is the right size may be no problem for the lender to approve, depending on circumstances. Borrowers should discuss their needs with a loan officer to see what might be possible.
Do you have questions about FHA home loans or refinance loans? Ask us in the comments section. All comments are held for review.