Articles Published in: 2011

December 7, 2011

What is an FHA 203(n) Mortgage Loan?

As we’ve written in other blog posts, the most well-known FHA home loan is called the FHA 203(b). This is the mortgage loan product most FHA borrowers who are first time house hunters will apply for to purchase a home. But there are many other types of FHA home loans, including something known as the FHA 203(n). This is also known as a Single Family Cooperative Mortgage and according to the FHA, is designed to insure loans “for persons buying a unit in a cooperative housing project. The loan is made by a lending institution, such as a mortgage company, bank, or savings and loan association, and is insured by HUD’s Federal Housing Administration (FHA).” As with other FHA loans, the purpose of the FHA 203(n) Single Family Cooperative Mortgage | more...

December 7, 2011

Can an Energy Efficient Mortgage Loan Be Used With an FHA 203(k) Loan?

By Joe Wallace

The most common FHA insured home loan is called the FHA 203(b). This is the loan most people considering a first time home purchase will apply for when they look into the FHA loan program. Another type of FHA loan is the 203(k), which according to the FHA official site, “enables homebuyers and homeowners to finance both the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage

December 6, 2011

FHA Loan Debt To Income Ratio Rules

By Joe Wallace

In recent blog posts we’ve been examining the FHA loan debt-to-income ratio rules. The FHA requires borrowers to have a combined monthly debt load and projected FHA home loan obligation that does not exceed 41% of the borrower’s income. As stated in previous blog posts, FHA guidelines require the lender to examine the borrower’s monthly debts and compare to his or her monthly income. The total amount of debt including credit card payments, auto loan payments, student loans, and other payments, is added together, then combined with the total amount due each month for the FHA home loan. That figure does not just include the mortgage payment itself–it also includes any home owner association dues, amounts which must be deposited in escrow for property taxes and insurance, etc. When the | more...

December 6, 2011

FHA Loans and the Debt To Income Ratio: Projected Debt

By Joe Wallace

In a previous blog post, we mentioned the importance of the debt to income ratio as part of the FHA loan application process. Calculating the debt to income ratio for the purpose of underwriting an FHA mortgage loan includes adding up the entire monthly mortgage obligation (principal and interest, escrow for taxes, hazard insurance, mortgage insurance premium, and any homeowners’ association dues) and reviewing all revolving and installment debt due per month. These can include personal and automobile loans, student loans, credit card debt and more. These amounts are combined and divided by the borrower’s verified gross monthly income. FHA rules say the maximum ratio to qualify is 41%. But when calculating that debt to income percentage, the FHA requires lenders to examine not only current financial obligations but also | more...

December 5, 2011

FHA Loans and the Debt To Income Ratio

By Joe Wallace

The debt to income calculation is a very important part of a borrower’s FHA loan application review. The lender must analyze the amount of verified income and compare it to the amount of debt the borrower has to see whether the borrower can afford his or her current monthly obligations and the projected monthly FHA mortgage loan payment. To do this, the lender takes income (only income which can be verified as stable and reliable) and compares it to all current debt and calculates what percentage the debt takes of the verified income. How is this done? The lender adds up the total mortgage payment, which includes principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners’ dues, and any other payments that are considered part of | more...

December 2, 2011

HUD Offers Millions of Dollars in Housing Counseling Grants

By Joe Wallace

There are two times when potential or current FHA borrowers should seriously consider FHA-approved housing counseling help. First-time house hunters examining their FHA loan options should explore FHA/HUD approved counseling, as should anyone worried about going into default or foreclosure on an FHA loan, conventional mortgage or VA insured loan. FHA and HUD referred or approved counseling is often free depending on the type of counseling, All HUD-approved or referred foreclosure avoidance counseling is free, but other services such as required sessions for FHA HECM or Reverse Mortgages come with a fee. But FHA rules require approved agencies to offer free HECM and related counseling to borrowers who demonstrate financial hardship or need. In HUD press release 11-280, the agency announces more than $40 million in grant money to FHA/HUD | more...

December 1, 2011

FHA Loans: How Lenders Evaluate Non-Traditional Credit

By Joe Wallace

In a recent blog post we answered a reader question about FHA home loans and non-traditional credit. Can an FHA loan applicant qualify for an FHA home loan even if they have limited credit history or a history of non-traditional credit? The short answer is yes–after all, not all FHA borrowers choose to apply for credit cards, some buy their vehicles in cash, and don’t have many of the credit needs that others do. The reader asked, “would the FHA look at our utility bill payment history instead of credit history?

December 1, 2011

Reader Questions: FHA Loans and Non-Traditional Credit

By Joe Wallace

A reader recently wrote, asking a very good question about how FHA loan rules address loan applicants with non-traditional credit histories. “My husband and I had not considered an FHA loan, but now I’m wondering if we would qualify. We don’t use credit cards and we paid cash for our current home…I have a credit score of 740 or 750, but I am not the “breadwinner,” so I don’t think my credit will even count. What are the chances we would qualify for an FHA loan…(and) would the FHA look at our utility bill payment history instead of credit history?” FHA rules state that non-traditional credit histories should be handled carefully by the lender, but non-traditional credit or a lack of credit history is not enough to disqualify a borrower | more...

November 30, 2011

FHA Loan Loan Limits and Non-Occupying Co-Borrowers

By Joe Wallace

If you’re buying a single-family home with an FHA insured mortgage, FHA loan rules require you to certify the property will be your primary residence. But FHA loans do permit a loan with co-borrowers who do not plan to occupy the property. Chapter Three of FHA Handbook 4155.1 states, “A non-occupying borrower transaction involves two or more borrowers where one or more of the borrower(s) will not occupy the property as his/her primary residence.” This in mind, borrowers should know that there is a different FHA maximum mortgage permitted for a non-occupying borrower transaction in many circumstances. “When there are two or more borrowers, but one or more will not occupy the property as his/her principal residence, the maximum mortgage is limited to 75% loan-to-value (LTV).” However, the rules do | more...

November 29, 2011

FHA Help Available For Those At Risk of Foreclosure

By Joe Wallace

The FHA encourages borrowers worried about going into default or foreclosure on their FHA mortgages to seek help as soon as possible. The earlier a borrower acts, the better chance he or she has of saving the home and preventing damage to credit and other issues. One of the most important thing a borrower can do is to get Foreclosure Avoidance Counseling as early as possible The FHA and the Department of Housing and Urban Development offer help in this area; the FHA official site says, “HUD-approved housing counseling agencies are available to provide you with the information and assistance you need to avoid foreclosure. As part of President Obama’s comprehensive Homeowner Affordability and Stability Plan (HASP), you may be eligible for a special Making Home Affordable loan modification or | more...