Articles Published in: March 2013

March 19, 2013

FHA Loan Answers: What Does Your Lender See On Your Credit Report?

When you apply for an FHA guaranteed home loan, you’re required to list a variety of items on your application form including credit data. Your recent debts and other recurring financial obligations are required because the lender must determine your debt-to-income ratio. Some borrowers wonder if leaving items off the application means the lender won’t know about them. But it’s very important to know what the FHA requires and what the lender is responsible for checking when it comes to credit. Do you know what goes into your credit report and what the lender has access to when he or she is processing your application data? Many people don’t. Here’s what the FHA loan rulebook, HUD 4155.1 has to say about credit reporting data and what the lender is required | more...

March 18, 2013

FHA Loan Reader Questions: Upcoming PMI Changes

By Joe Wallace

A reader asks, “My expected closing date is March 31, 2013. I see that there will be some new guidelines regarding PMI effective this year. Would I be required to pay private mortgage insurance until I have 20% equity and have paid PMI for five years or would I be required to pay PMI for the life of the loan?” The FHA has issued guidance about its coming changes to the PMI structure and payments. This information is found in FHA Mortgagee Letter 2031-04. It says in part: “FHA will increase its annual mortgage insurance premium (MIP) for most new mortgages by 10 basis points or by 0.10 percent. FHA will increase premiums on jumbo mortgages ($625,500 or larger) by 5 basis points or 0.05 percent, to the maximum authorized | more...

March 12, 2013

FHA Loan Seller Concessions: Have They Changed?

By Joe Wallace

In 2010, the FHA announced it was considering a new rule to cap seller concessions or contributions at a lower rate–reducing those concessions from 6% to 3%. That rule was not implemented, but in 2012 the seller concession cap was revisited once more. According to an FHA mortgagee letter found on the FHA/HUD official site, “In a separate Federal Register notice to be published soon, the FHA will propose to reduce the maximum allowable seller concession from its current level to one more in line with industry norms. The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. The revised proposal reflects public comments received on an earlier proposal published in a Federal Register notice on July, 15, 2010. The revised proposal calls for a | more...

March 12, 2013

FHA Loan Answers: Credit Evaluations

By Joe Wallace

A reader asks, “If my husband has a judgement against him from an old credit card debt, can we put the house in my name and use my credit only and still get approved? Or will they check him at some point anyway and reject me because of his judgement?” The answer to this reader question can be complicated. A married FHA loan applicant who is not affected by community property laws in his or her state may be able apply for an FHA loan without the participation or financial obligation of the spouse. As long as state laws don’t state otherwise, a married FHA loan applicant should be able to apply for an FHA guaranteed mortgage without obligating anyone else on the loan. In cases where more than one | more...

March 11, 2013

FHA Loan Reader Questions: Closing The Deal

By Joe Wallace

A reader asks, “My mom applied for a FHA loan, went through the loan application and was approved. She signed with a builder and they built the house on her property. Two days before closing, the mortgage lending company informs her that she cannot close on her finished house, due to her not having a credit score when they re-ran her credit file.” “When she was approved she had a credit score. What can be done, her house is built on her property and yet to move in, meanwhile the builder has chose another lending company, and she to repeat whole process over, can the first lending company do this?” There’s no way to judge what has happened in a situation like this–there isn’t enough information AND there may be | more...

March 8, 2013

FHA Loan Answers About Down Payments

By Joe Wallace

We get reader questions about FHA loan down payments–many people aren’t sure how much they need to pay up front and how much is required by the FHA loan program. Some borrowers mistakenly assume there’s a “no money down” option for first-time FHA loan applicants, and others assume there is a set dollar amount which must be paid regardless of the transaction. What’s the reality? FHA home loans do not feature a no-money-down option. FHA loan rules state that the minimum required down payment is as follows: “For purchase transactions, the maximum LTV is 96.5% percent (the reciprocal of the 3.5% required investment).” The acronym “LTV” stands for loan-to-value and is, in simple terms, the amount of the loan after the down payment has been made. An LTV of 96.5% | more...

March 8, 2013

FHA Loan Answers: Using A Power of Attorney on FHA Mortgages

By Joe Wallace

Some borrowers are confused or have conflicting information about the ability to use a power of attorney on someone else’s behalf to initiate or continue the FHA mortgage loan application process. What are the FHA loan rules for this procedure? The FHA loan rulebook, HUD 4155.1, Chapter One, states the following: “The initial mortgage loan application may not be executed by using a power of attorney”. That would SEEM to be the FHA’s last word on the matter, but there are exceptions to this rule, which is where some of the confusion may occur. Please note that the rule states the INITIAL application may not be executed via power or attorney but does not necessarily prohibit one from being continued in such a manner. FHA loans do permit military members | more...

March 7, 2013

An FHA Loan Reader Question: FHA Bad Credit Loans

By Joe Wallace

A reader asks, “To whom it may concern; I am planning on buying a house within next 6 months and my credit is not good, rather I shall say that it is delinquent. I would like to know what are my options in buying a house for lets say $350,000. like how much down would I need, I do not have any co signer. Thank you.” There are several myths about FHA home loans that borrowers should be aware of. One myth is that FHA guaranteed mortgages are only for first-time home buyers, which is definitely not true. Another myth–one that is hinted at by the reader question here–is that the FHA loan program includes a “bad credit” mortgage loan option. What is the reality? Let’s examine the FHA loan | more...

March 6, 2013

FHA HECM Deadline Approaching

By Joe Wallace

Earlier this year, the FHA and HUD issued new guidelines regarding the FHA Home Equity Conversion Mortgage Loan program also known as HECM. Important changes are coming to this home loan program which is designed for those age 62 or older. According to FHA Mortgagee Letter 2013-01, the changes are effective for all HECM fixed-rate case numbers assigned on or after April 1, 2013. What are these changes and why are they occurring? According to the mortgagee letter, “To help sustain the HECM program as a viable financial resource for aging homeowners and to strengthen the Mutual Mortgage Insurance Fund, the HECM Saver will be the only initial MIP option available to mortgagors who seek the predictability of a fixed interest rate mortgage and lower upfront closing costs”. This means | more...

March 5, 2013

FHA Loans and Refinance Loans: Interest Rates and Fees

By Joe Wallace

What do you, the borrower, need to know about FHA loan fees for new purchase mortgage loans and home loan refinances? It’s a big issue, but there are some basics to understand as you’re planning your next move in the search for a new home or a refinance loan rate. First, the FHA does not set interest rates on refinance loans or mortgage loans. It does require them to be appropriate, reasonable and customary for the market, but the job of negotiating interest rates is one the borrower and lender work on together. The FHA loan rulebook says as much in Chapter One of HUD 4155.1: “Under all currently active FHA single family mortgage insurance programs, the borrower and the lender negotiate the interest rate and any discount points.” Another | more...