Articles Published in: July 2012

July 19, 2012

A Second Chance For Some FHA Borrowers? HUD Accepting Applications to Purchase Troubled Neighborhoods

The FHA and HUD have issued a press release about the Distressed Asset Stabilization Program, which is described as “an expansion of an FHA disposition program that sells pools of defaulted mortgages headed for foreclosure and provides the opportunity for the purchaser and borrower to avoid a costly foreclosure.” HUDNo.12-116 says “Qualified entities interested in purchasing pools of severely distressed loans formerly insured by the Federal Housing Administration (FHA) can now submit applications for the Distressed Asset Stabilization Program“, stating that around 3,500 loans will be sold in four areas among the communities hardest hit by the foreclosure crisis. Those areas are Chicago, Illinois, Newark, New Jersey, Phoneix, Arizona and Tampa, Florida. This stabilization program is part of the Obama Administration’s efforts to stimulate “public/private partnerships to stabilize neighborhoods and | more...

July 18, 2012

FHA Loan Qualifying Factors–The Relationship of the Mortgage Payment to Gross Income

By Joe Wallace

When a borrower applies for an FHA home loan, the lender must analyze the applicant’s debt-to-income ratio in order to approve the loan application. That ratio is basically described in FHA loan rules as the amount of verifiable income versus the amount of debt the borrower has. But that’s not the only factor in the equation when the lender is trying to insure the borrower is a good risk for an FHA mortgage loan. According to the FHA official site, the lender must establish whether the borrower can afford his or her current financial obligations AND the amount of the new obligations under the FHA mortgage. According to Chapter Four of the FHA loan rules (HUD 4155.1), “The relationship of the mortgage payment to income is considered acceptable if the | more...

July 17, 2012

General FHA Refinancing Loan Rules

By Joe Wallace

There are many things borrowers ask when applying for an FHA refinancing loan for the first time. Some borrowers are interested in lowering their monthly payments, others are interested in cash-out refinancing loan options. But there are some basics every borrower should know about FHA refinancing loans, regardless of what kind of refinancing they wind up applying for. For example, FHA loan rules as written in HUD 4155.1 Chapter Three state that a borrower must be current on any loan being financed. “The borrower must be current on the loan being refinanced for the month due prior to the month in which he/she closes the refinancing, and for the month in which he/she closes.” “Example:

July 17, 2012

FHA Loans For Site-Built Homes?

By Joe Wallace

A reader asks, “I have learned a great deal from just this information listed on this website. However one question remains, are FHA loans eligible for site built homes? I see a listing for HUD homes, and refinancing, but are ground up homes eligible for FHA backed loans?” According to FHA loan rules, FHA mortgages are available from participating lenders for “proposed construction, under construction or existing construction less than one year old”. There are established FHA procedures and guidelines for these loans including:

July 16, 2012

FHA Loans and Military Service

By Joe Wallace

A reader asks, “Can you still use the FHA while being stationed overseas and still active duty?” This is a fairly complex issue and the answer is dependent on circumstances. If an active duty military borrower wishes to purchase a home with an FHA mortgage loan while still stationed overseas, there are several questions to be answered, including how the borrower intends to execute the FHA loan application. Eligible borrowers who are able to fill out the application themselves may be able to clear this initial hurdle, but those who rely on a power of attorney should know the FHA rules on loan applications in these situations: In general the FHA rules state, “The initial mortgage loan application may not be executed by using a power of attorney, except in | more...

July 13, 2012

HUD Charges Minnesota Condo Association and Management Company With Fair Housing Act Violations

By Joe Wallace

In spite of federal laws, conventional, VA, and FHA loan applicants sometimes experience discrimination when house hunting. While the most obvious types of discrimination involve bias against race, religion, sexual orientation, or national origin, there’s another type of discrimination that’s just as illegal and unfair–discrimination based on family status. According to a press release issued by the Department of Housing and Urban Development, a Minnesota condominium association and its management company, Gassen Company, Inc., have been charged by HUD with violating the Fair Housing Act, “by discriminating against families with children under the age of 18”. The press release says, “According to HUD

July 12, 2012

FHA Loans: Can My Loan Costs Be Considered Part of the Down Payment?

By Joe Wallace

FHA home loans require a minimum down payment. The amount of an individual borrower’s down payment varies for several reasons. One reason is that the borrower must pay a percentage of the overall loan amount. Rather than requiring X amount of dollars as a standardized down payment, the borrower pays this percentage based on how much financing he or she qualifies for. For “new purchase” FHA home loans, the FHA has set a maximum Loan-To-Value ratio of 96.5%. “Loan-To-Value” simply means the amount of the FHA guaranteed home loan compared to the value of the home. 96.5%, being the maximum FHA loan available for a new purchase, means the FHA requires a 3.5% down payment of the loan amount. From the FHA loan rules found in HUD 4155.1 Chapter Two: | more...

July 11, 2012

FHA Loan Reader Question: Appraisals and “Comparables”

By Joe Wallace

A reader asks, “I am interested in purchasing a log cabin home with 44 acres and I am being told by a lender that FHA requires the comparables must be within a 12 month sale time frame. As you know log cabin homes are not sold that often. Do the comparables have to be within a 12 month time frame like I am being told?” “Comparables” refers to a benchmark FHA appraisers use to help arrive at the fair market value of the appraised property. The appraiser compares the property to be purchased with an FHA home loan to similar homes in the same market to see what current market values might be for those properties. In Issue 30 of the official FHA Appraiser Roster Newsletter, comparables are discussed as | more...

July 10, 2012

FHA Loan Reader Question: Eligibility For Another FHA Mortgage

By Joe Wallace

A reader asks, “If my brother and I purchased a home with FHA loan, can I still qualify for a FHA loan if I purchase a home on my own. What would the down payment be?” FHA loan down payment rules state the borrower must put down a minimum of 3.5%. On the other part of this reader question, there’s additional information needed. Is the reader a primary borrower? A non-occupying co-borrower? FHA loan rules vary depending on a variety of factors. For example, a non-occupying co-borrower might be technically eligible to apply for another FHA home loan, but FHA occupancy requirements for single-family purchases wouldn’t permit the primary borrower to do the same. Why? FHA home loans require the borrower to certify he or she will occupy the home | more...

July 10, 2012

FHA Announces Disaster Assistance For Minnesota Storm Victims

By Joe Wallace

The FHA and HUD have announced disaster relief for victims of severe storms and flooding in parts of Minnesota. According to an FHA press release dated July 9, 2012, “Last week, President Obama issued a disaster declaration for Aitkin, Carlton, Cook, Crow Wing, Dakota, Goodhue, Kandiyohi, Lake, Meeker, Pine, Rice, Saint Louis, and Sibley Counties. The declaration also includes Fond du Lac, Grand Portage and Mille Lacs Indian Reservations. The President