Articles Published in: January 2013

January 31, 2013

FHA Loan Rules For Income: Interest, Trusts, and Dividend Payments

Part of the FHA loan approval process involves the lender verifying an applicants income. FHA rules state that for purposes of calculating a borrower’s debt-to-income ratio, only verifiable income can be counted in that ratio. Do FHA rules allow a borrower’s interest or dividend payments from investments to be counted as verifiable income? For some borrowers this can be an important question. According to HUD 4155.1 Chapter Four, “Interest and dividend income may be used for qualifying as long as tax returns or account statements support a two-year receipt history. This income must be averaged over two years.” Additional instructions to the lender for this issue include the requirement that when making the calculation, “The underwriter should subtract any funds derived from these sources that are required for the cash | more...

January 31, 2013

A Reader Question on FHA Minimum Property Requirements

By Joe Wallace

A reader asks, “Would a home that is missing just the cabinet doors in the kitchen qualify for FHA? It has the everything else, its just the doors that are missing.” From time to time we get questions like these that reference specific conditions in a home. Will X make my home ineligible for an FHA mortgage? Does Y disqualify the property? In answering these questions there are two important aspects to consider. One is whether or not a specific condition is described in FHA minimum property standards. Some are, but many more are not. For example, a home located in certain flood zones may not qualify for an FHA mortgage. A home with standing puddles of water in the basement or a leaky roof may require corrections or repairs | more...

January 30, 2013

New Hampshire Real Estate Agency Settles Housing Discrimination Case

By Joe Wallace

Those viewing FHA.gov will find a recent press release by HUD announcing a settlement in a New Hampshire housing discrimination case that many families looking for homes should definitely read. According to the press release HUDNo.13-009, Scott Walker and his company Premiere Real Estate, LLC, in Concord, New Hampshire, have agreed to pay $9,000, “to settle allegations that they refused to rent to families with children in violation of the Fair Housing Act.” The press release adds, “The days of ‘no children allowed’ are long over,” according to John Trasviña, HUD Assistant Secretary for Fair Housing and Equal Opportunity. “For 25 years, the federal Fair Housing Act has guaranteed families with children the same rights to housing as those without children, and HUD will continue to take swift enforcement action | more...

January 29, 2013

FHA Refinancing Loans: No Cash Out With An Appraisal

By Joe Wallace

The FHA refinance loan options you have to choose from can include cash-out and no cash out refinance. The FHA has different rules for these types of refinancing; what are the basics of the FHA No Cash Out With Appraisal refinance loans? Maximum Mortgage Loan Amount The maximum you can borrower on a no cash out refinance loan with an appraisal is either: 97.75% Loan-To-Value (LTV) factor applied to the appraised value of the property, or the amount of the existing debt. Whichever amount is lowest between these two will be used to calculate the FHA refinance loan amount. Loan Amounts and UFMIP FHA loan rules state, “The total FHA first mortgage is limited to 100% of the appraised value, including any financed upfront mortgage insurance premium (UFMIP)…Generally, the maximum | more...

January 28, 2013

FHA Loan Reader Questions: First Time Home Buyers and Down Payments

By Joe Wallace

A reader asks, “Is it true the first time buyer with an FHA Loan can purchase the home with no money down?” The FHA loan program is similar in some ways to another government-backed loan program–VA loans. VA guaranteed loans are for eligible veterans and feature a no-down payment option unique to that program. FHA home loans, which are also government guaranteed mortgage loans issued by a private lender, do not feature a no downpayment option. According to FHA home loan rules as described in Chapter Two of HUD 4155.1, says the following about down payments on FHA loans in a section titled Maximum Mortgage Amount For A Purchase: “The maximum mortgage amount that FHA will insure on a purchase is calculated by multiplying the appropriate loan-to-value (LTV) factor by | more...

January 25, 2013

FHA Loan Reader Questions: Multiple FHA Loans

By Joe Wallace

A reader asks, “I was told that I could apply for a second FHA loan if my family outgrew the first house. We have a 980 sqft home–2 bedroom 1 bath that was purchased when my wife and I had only one child. Now we are 4 and need a bigger home. I applied for the second FHA loan and was told last minute that I needed to sell the first home, or lower the balance down to 70% of balance. I hear different things from different banks and want to see if FHA can help me out on this.” According to the FHA, “To prevent circumvention of the restrictions on making FHA-insured mortgages to investors, FHA generally will not insure more than one principal residence mortgage for any borrower. | more...

January 25, 2013

FHA Loan Reader Questions: How Do FHA Loans Differ From Credit Union Mortgages?

By Joe Wallace

A reader asks, “What is the difference between an FHA loan and a loan from a credit union?” FHA loans differ from other types of loans for many reasons. Conventional mortgages, for example, often require much higher down payments and credit score requirements for conventional lenders. When it comes to credit unions, there may be many differences or similarities depending on which lender you’ve compared the FHA terms and conditions with. It’s not possible to say across the board how FHA loans may vary–credit unions are all different–but a quick look at some terms and conditions of individual credit unions can be revealing. For example, some credit unions we looked at offered qualified first time home buyers conventional loans with low down payments but did not offer at or near | more...

January 24, 2013

FHA Single-Family Home Loans: For Personal Use Only

By Joe Wallace

One topic we’ve covered recently in blog posts and in our answers to reader questions concerns the permitted uses for single-family FHA home loans. Read what the FHA official site says about FHA policy (in general) on multiple FHA home loans for a single borrower: “To prevent circumvention of the restrictions on FHA-insured mortgages to investors, FHA generally will not insure more than one mortgage for any borrower (transactions in which an existing FHA mortgage is paid off and another FHA mortgage is acquired are acceptable).” FHA home loans for single-family properties also have a rule stating the borrower must occupy the property as the primary residence once the sale is complete. That is another rule designed to reinforce the “no investors” policy on these types of loans. Some borrowers | more...

January 23, 2013

FHA Loan Credit Requirements: A Reader Question

By Joe Wallace

A reader asks, “My wife’s uncle just passed away not to long ago and I want to keep his property in the family. I make very good money,but i only have a 590 credit score.How can I go about buying his property and keeping everything the way it always has been?” Without addressing the credit score issue, in general one good way to go about buying a home with an FHA home loan is to get pre-approved for a loan amount–fill out the online application at FHALoan.com (a private company, not a government agency) and work with the loan officer to get the property appraised. This process–pre-approval, appraisal, and etc.–is fairly typical for many borrowers. Credit scores are a separate issue. The FHA Loan program has minimum credit score requirements | more...

January 22, 2013

U.S. Bank Settles Discrimination Claim

By Joe Wallace

A press release on the FHA/HUD official site announces a settlement in a disability discrimination claim brought by HUD against U.S. Bank. According to HUDNo.13-008, “Minnesota-based U.S. Bank National Association will pay $12,000 to a loan applicant with disabilities under a Conciliation Agreement settling allegations that the bank required him to provide unnecessary documentation to establish he would continue receiving disability income for three years before they would approve his mortgage loan.” As the press release states, the Fair Housing Act makes it an offense to discriminate “in the terms and conditions of a loan based on a person’s disability, including by imposing different loan application or qualification criteria.” According to the press release, a complaint was filed with HUD after U.S. Bank required a borrower to show proof that | more...