Articles Published in: May 2011

May 20, 2011

FHA Loans and Non-Taxabl?e Income

FHA applicants come from a wide range of backgrounds, and no two house hunters have exactly the same circumstances. Some borrowers bring a large down payment to the transaction, while others may need down payment assistance (as permitted by FHA guidelines) and help finding just the right type of FHA mortgage. When it comes to verifiable income, it’s the same–borrowers come to the FHA loan application process with a diverse range of income sources. A common question about FHA loans and effective income sources has to do with the nature of that income. Can a potential FHA borrower list money from public assistance, foster care, disability payments or other types of non-taxable income? Will an FHA-approved lender be able to use this income in calculating the borrower’s debt-to-income ratio? As | more...

May 19, 2011

FHA Loans: What is a Mortgage Credit Analysis?

By Joe Wallace

When a borrower applies for an FHA home loan, they must fill out a loan application that includes details about past and current employment, debts and lines of credit, plus submit to a credit check. All of this is part of what the FHA calls a Mortgage Credit Analysis. According to the FHA, the purpose of this analysis includes giving an FHA approved lender the ability to determine the applicant’s credit “performance”, their ability to repay an FHA mortgage if the loan is approved, and to check the record to see if the borrower has “sufficient funds to close” if the loan goes through. This credit analysis has specific rules and regulations to make sure it is fair, secure, and not subject to fraud or the accusation of fraud. That | more...

May 18, 2011

FHA Loans: When the Appraiser Recommends Repairs/Corrections

By Joe Wallace

A frequently asked question about the FHA appraisal process is, “What are my options for satisfying repair requirements on the appraisal?” According to FHA guidelines, any repairs required on the FHA appraisal report must be “satisfied” before the loan is submitted. There are four ways to satisfy the repair requirement–showing documentation to attest that the requirements have been met once the actual work has been done, including a Compliance Inspection Report, a Fannie Mae Appraisal Update (or a Completion Report), a Mortgagee Certification, or funds placed in escrow for the purpose of satisfying the repairs at a later date. Each one of these has its own requirements and situational application. For example, a Compliance Inspection Report must, according to the FHA official site, be “prepared by an appraiser or inspector” | more...

May 18, 2011

Basic Facts About Qualifying for FHA Loans

By Joe Wallace

First-time home buyers looking to a home to purchase with an FHA guaranteed loan have many questions about the program and how it works. One of the first questions is, “Am I eligible for an FHA home loan?” One reason for this question is because FHA loans are sometimes misunderstood, especially when it comes to income requirements. Contrary to what some mistakenly believe, there are no income maximums for FHA loans. Some programs associated with down payment assistance or secondary financing may impose income ranges, but for a basic FHA home loan application, you cannot make “too much money” to qualify. The FHA does require borrowers have enough income to qualify for mortgage payments, and income is carefully scrutinized along with a borrower’s amount of existing debt. A borrower who | more...

May 17, 2011

FHA Loans and Citizenship Status

By Joe Wallace

FHA loans are designed to help people achieve the American dream of home ownership in an affordable way. But does that help with part of the American dream extend to those who aren’t citizens of the United States? According to the FHA official site, “Citizenship of the United States is not required for eligibility. When a mortgage loan applicant indicates on the loan application that he or she holds something other than U.S. citizenship, the lender must determine residency status from the documentation provided by the borrower.” FHA rules allow lawful resident aliens to apply for FHA home loans. There are two types–permanent, and non-permanent resident aliens. Regardless of which status an applicant falls in, the FHA does have procedures to document and verify status so the loan application may | more...

May 16, 2011

FHA Loans: Non-Occupying Co-borrower Requirements

By Joe Wallace

In our last blog post we discussed the FHA loan rules for parents and children who want to apply for an FHA loan together. A parent who acts as a non-occupying co-borrower on an FHA loan for a condominium for a child in college, for example, would be eligible for 100% of the maximum FHA loan amount. Compare that to non-occupying co-borrowers who are not related; such loans are limited to 75% of the loan-to-value ratio. The family status of a borrower and non-occupying co-borrower is an added benefit in such cases. But the FHA has additional rules for non-occupying co-borrowers. For example, all co-borrowers are required to sign the FHA loan regardless of occupancy status. On the surface, that rule wouldn’t seem terribly important, especially in a situation where | more...

May 16, 2011

FHA Loans: Can a Parent and Child Apply for an FHA Mortgage Together?

By Joe Wallace

There are many situations where a parent and child may wish to apply for an FHA insured home loan together. One of those is where a parent co-borrows on an FHA loan for the child in college, purchasing what some in the real estate industry call a “kiddie condo”. In such cases, the parent co-borrows on the loan but does not occupy the property. In most cases an FHA loan with a non-occupying co-borrower would be limited to 75% of the loan-to-value ratio, rather than the maximum loan amount. But FHA rules say when it comes to family members, the rules are different. A parent and child can take out an FHA home loan and get the maximum amount of FHA financing available (as long as the borrowers otherwise qualify). | more...

May 13, 2011

FHA Loans For Manufactured Homes: Which Manufactured Homes Are Eligible?

By Joe Wallace

The rules for FHA insured loans have long included manufactured homes; the FHA recognizes that not all borrowers need or want a tradition suburban home, condo, or multi-family unit. Manufactured homes have their own unique requirements in order to be approved for FHA mortgages, and in order to be eligible for FHA financing, the home must meet these requirements to the letter unless otherwise specified in FHA loan requirements. For starters, a manufactured home is not eligible for an FHA insured loan unless it has at least 400 square feet of floor space. It must be built upon and remain on a permanent chassis and foundation. That foundation must be considered permanent and meet FHA specifications. The home must be classified as real estate, which goes back to the permanent | more...

May 12, 2011

FHA Rules on Non-Occupying Co-Borrowers

By Joe Wallace

In our last blog post we discussed FHA options that apply to military members who might explore FHA insured loan options when a VA loan isn’t available. Military families often face unique circumstances which affect the ability to meet some obligations as an FHA home loan applicant. For example, a military member could be sent to a war zone for an extended period of time–which could lead to worries about fulfilling FHA occupancy requirements. Such situations are usually covered under FHA rules and don’t necessarily mean problems with an FHA mortgage. FHA rules also address circumstances a borrower might find themselves in when applying for an FHA insured loan with a non-occupying co-borrower. Did you know FHA requirements state that all non-occupying co-borrowers and/or co-signers must have a principal residence | more...

May 12, 2011

FHA Loans For Military Veterans

By Joe Wallace

The Department of Veterans Affairs offers VA home loans to qualified service members as part of their VA benefits package. Why would a veteran want to explore options for an FHA home loan? It’s a very good question, and depending on the status of a military veteran, he or she may find an FHA mortgage to be a good alternative when the full benefits of a VA loan are unavailable. VA loan applicants must first apply for eligibility through the VA–the VA loan benefit is not automatic. In some cases the borrower may not have served long enough to qualify for benefits. This is true in the case of Guard and Reserve members who haven’t served for six years (unless “otherwise eligible” according to the VA). That’s just one example, | more...