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Articles Published in: October 2012

October 19, 2012

FHA Loan Income Requirements: Myths and Reality

By Joe Wallace

Income is a topic that comes up in frequently asked question about FHA loans. Some potential borrowers are misinformed about the nature of FHA mortgages; they think the program is only for the financially disadvantaged. Can a borrower earn too much to qualify for an FHA home loan? Is there a “ceiling” for the amount of income you can earn and still apply for an FHA guaranteed home loan? No. According to the FHA and HUD, “FHA’s mortgage programs do not typically have maximum income limits for qualifying, although you must have sufficient income to qualify for the mortgage payment and other debts.” That’s not to say that there are NO income limits associated with FHA loans; “Income limits may be present when qualifying for down payment assistance or other | more...

 

October 18, 2012

Rules For Credit Reports Associated With FHA Loan Applications

By Joe Wallace

Some FHA loan applicants may consider the credit check something of a mystery. Borrowers should know and understand how the FHA loan application process works–including the credit check–as it can help better prepare the borrower for the preparation needed to get an FHA loan approved. What does the lender need–and get–from the credit check process? Many lenders rely on something known in the industry as the “three repository merged credit report” or TRMCR to gather the borrower’s credit information. According to FHA loan rules, this report must contain information on all credit inquiries made within the last 90 days, any credit and legal data “not considered obsolete under the Fair Credit Reporting Act (FCRA)” which may include the last seven years worth of information about bankruptcy, court judgments, lawsuits, tax | more...

 

October 17, 2012

FHA Warns About Home Equity Mortgage Loan Scams

By Joe Wallace

The FHA official site includes a page about reverse mortgages and Home Equity Conversion Mortgages. On that page, you’ll find a warning from the FHA and HUD about scam artists who take advantage of some loan applicants who don’t know enough about the FHA’s free information on HECM loans and reverse mortgage loans. “Reverse mortgages are becoming popular in America” the FHA site says, “Reverse mortgages are a special type of home loan that lets a homeowner convert the equity in his/her home into cash. They can give older Americans greater financial security to supplement social security, meet unexpected medical expenses, make home improvements, and more. If you are interested in a reverse mortgage, beware of scam artists that charge thousands of dollars for information that is free from HUD!” | more...

 

October 16, 2012

Exceptions to the FHA Mortgage Insurance Payment Eligibility Date Rule: A Reader Question

By Joe Wallace

On March 6, 2012, the FHA and HUD issued Mortgagee Letter 2012-4, which included the following description of a decrease to the annual Mortgage Insurance Premium for “certain Streamline Refinance transactions”: “For all SF Forward Streamline Refinance transactions that are refinancing FHA loans endorsed on or before May 31, 2009, the Annual MIP will be 55 bps, regardless of the base loan amount. The endorsement date is on the Case Query screen in FHA Connection. This change is effective for case numbers assigned on or after June 11, 2012.” Additionally, the same document describes further changes to the up front mortgage insurance payments for these same loans: “For all SF Forward Streamline Refinance transactions that are refinancing existing FHA loans that were endorsed on or before May 31, 2009, the | more...

 

October 15, 2012

FHA Streamline Refinance Loans: A Reader Question

By Joe Wallace

A reader asks, “I am curious about how to get a lower interest rate on my currently FHA backed SFR home loan. I have a 30-year fixed 5% interest rate and am trying to lower my monthly payments with the current low interest rates

 

October 12, 2012

Can I Use A Power of Attorney To Apply For An FHA Home Loan?

By Joe Wallace

A not-so-commonly asked question, but a very important one about FHA loan rules, involves the use of a power of attorney to apply for or commit to an FHA mortgage loan. FHA loan rules state, “All borrowers applying for the mortgage and assuming responsibility for the debt must sign Fannie Mae Form 1003, Uniform Residential Loan Application (URLA), and all addenda.” “Either the initial loan application or the final, if one is used, must contain the signatures of all borrowers. The initial loan application may not be executed by power of attorney except for military personnel and incapacitated borrowers…” What does this mean? In short, there are only two types of FHA borrowers permitted to have a loan executed on their behalf by a power of attorney; the FHA official | more...

 

October 11, 2012

FHA Loan Reader Question: Title I Loans For Remodeling/Rehab

By Joe Wallace

A reader asks, “I am interested in borrowing a small amt. of money for remodeling my home. Is there any way I can qualify for an FHA loan for this purpose? I have never had bankruptcy, never missed a payment, never defaulted on any loan…” Something called a Title I Home Improvement loans are described on HUD.gov as a way to do just what this reader question describes. According to the official site on the page titled “About Title I Home Improvement Loans” you’ll find the following description: “HUD insures private lenders against loss on property improvement loans they make. The applicant must have a good credit history and the ability to repay the loan in regular monthly payments. Both large and small improvements can be financed. Search HUD’s list | more...

 

October 10, 2012

FHA Loan Reader Questions: FHA Loans for Manufactured Homes and Land

By Joe Wallace

A reader asks, “Since FHA loan program includes Manufactured homes what about if you want to have your own land to put the house on. Will the loan cover the home and land?” Here’s a partial answer from the FHA official site: “HUD’s FHA program insures two types of mortgages. Title II insures mortgages on qualifying manufactured homes sold with land and meeting other requirements. FHA’s Title I program can provide information to consumers interested in obtaining HUD-insured loans. You may also want to contact lending institutions in your area (or the area where you want to purchase your home) for additional financing options.” The FHA Title II program mentioned above includes a requirement that the mortgage is intended for “both the manufactured unit and its site”. FHA Title II | more...

 

October 9, 2012

FHA Loans and Credit Score Requirements

By Joe Wallace

Recently we posted a reader question about FICO scores and FHA loan approval. The reader wanted to know why a credit score range between 540 and 618 didn’t qualify for an FHA mortgage. The reader question included the following: “My scores are 618 – 595 – 540…why couldn’t I qualify for this loan?” There are two factors at work when viewing FICO scores. The lender is required to observe FHA loan minimums–which this reader was technically able to meet. But the lender is also required to observe the FICO minimums established by the financial institution. If the FICO score doesn’t meet the bank’s minimum, it’s not eligible for FHA loan approval. How does the lender interpret the three credit scores to determine eligibility if a borrower is right on the | more...