October 17, 2017

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Articles Published in: July 2013

FHA Loan Answers: Alimony and Child Support as Verifiable Income

FHA loan rules say that a borrower’s income must be verified in order for it to count when the lender makes debt-to-income ratio calculations necessary for approving (or denying) the mortgage loan. Verifiable income is defined basically as earnings that are stable, reliable, and likely to continue. A borrower’s full or even part-time employment would count in most cases. But the money a borrower makes, for example, by selling items on eBay, would likely not pass the “stable” or “likely to continue”  requirements. When it comes to non-job “income” such as child support or alimony payments, FHA loan rules make provisions that allow this income to be counted under the right conditions. A borrower does not have to declare child support income under the Fair Housing Act, but it it | more...

 

FHA Loan Answers: Buying Homes From Family Members With An FHA Mortgage

Here’s a question about FHA loans that isn’t as common as some, but still comes up often enough to discuss here: can a family member purchase a residence from another family member using an FHA mortgage? FHA home loans have rules designed to protect the integrity of the loan process–FHA loan rules in HUD 4155.1 say that some FHA loan transactions may have different or lower loan amounts depending on the circumstances of those loans. “Certain types of loan transactions affect the amount of financing available to a borrower and how the maximum mortgage amount is calculated. These transactions include identity-of-interest properties with non-occupying coborrowers three- and four-unit properties properties where a house will be constructed by a borrower on his/her land, and/or as a licensed general contractor payoffs of | more...

 

FHA Loan Reader Questions: Bankruptcy and FHA Loans

A reader asks, “I filled for a Chapter 13 bankruptcy in March 2009, then converted it to a Chapter 7 which was discharged in March 2012. I would like to buy a house, but was told I had to wait 2 years from the March 2012 date by a mortgage broker I called. I have worked to repair my credit since then and have incurred no more dept other than a small credit limit credit card that I was using to build new, good credit.” “I have a good job with good pay in education, with solid 2 years of increased income and have signed a contract for another year. What process should I take to try and qualify for an FHA loan under the 2 year wait period after | more...

 

FHA Loan Downpayment Sources: A Reader Question

A reader asks, “Can I use money from a residential loan or my thrift savings towards a FHA downpayment and closing costs?” The rules that cover down payment funds for FHA insured mortgages are found in HUD 4155.1, Chapter Five. That chapter begins by stating, “Under most FHA programs, the borrower is required to make a minimum downpayment into the transaction of at least 3.5% of the lesser of the appraised value of the property or the sales price. Additionally, the borrower must have sufficient funds to cover borrower-paid closing costs and fees at the time of settlement. Funds used to cover the required minimum downpayment, as well as closing costs and fees, must come from acceptable sources and must be verified and properly documented.” Specifically, the reader wants to | more...

 

FHA Loans and Your Credit

For some borrowers, the credit approval process is a mystery, especially when it comes to FHA home loans. Do you understand what the lender needs in order to approve a home loan application? Borrowers should understand that FHA loan approval is based on several factors including FICO scores, debt to income ratio, but also the repayment history shown on your credit report. FHA rules and instructions to the lender on this area are found in HUD 4155.1 Chapter Four. In Section C, we get some insight into this process and how the lender is supposed to evaluate your repayment history as found in a credit report: “Evaluating credit involves reviewing payment histories in the following order: • first: previous housing expenses, including utilities, • second: installment debts, • third: revolving | more...

 

FHA Loans After Chapter 7 Bankruptcy: A Reader Question

A reader asks, “I filed chapter 7 in March 2010 and discharged in June 2010. I had a home included in the bankruptcy but after the two year waiting period the lender told me I had to wait an additional three years from the time of the final sale of the property which was not until March 2013. So are they correct in stating that it is a five year waiting period before I can qualify for an FHA loan?” FHA loan rules for FHA mortgages applied for in the wake of a Chapter 7 Bankruptcy are found in HUD 4155.1 Chapter Four, Section C, which states the following: “A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have | more...

 

“No Credit Check” FHA Loans: A Reader Question

A reader asks, “In regards to not all FHA streamline loans require a new credit check. What is the criteria required for FHA loans that do not require a credit check and/or appraisal?” FHA new purchase home loans do require a credit check and an appraisal, as do all FHA cash-out refinance and Home Equity Conversion Mortgages or HECM loans. There is no such thing as a no-credit check FHA loan for a new purchase transaction or for any transaction that includes cash back to the borrower that is not in the form of a bona fide refund. Certain exceptions may be possible for FHA energy efficient add-ons for a Streamline Refinance loan, depending on the circumstances. The FHA Interest Rate Reduction Refinance Loan or Streamline Refinancing loan is the | more...

 

FHA Loan Minimum Property Requirements: Where Are They Found?

A reader asks, “We are looking into an FHA loan but our I know our house is not totally in code with the FHA/HUD guidelines. Such as railings needed if steps are 2 feet or higher. Is there somewhere that I can find these guidelines so that we can start?” FHA minimum property requirements are found in HUD 4910.01, Minimum Standards For Housing. But there is a very important factor to be considered–FHA loan rules are not the only standards a home must live up to. Anyone who wants to spend time and money fixing up a home to make sure it is in compliance with FHA loan minimum standards must also make sure the home is within state, local or otherwise applicable building codes. FHA appraisals on homes that | more...

 

FHA Loan Reader Questions: A Few Basics:

A reader asks, “Why is there no website that shows you what income qualification rules might apply for an FHA loan ? Is there a maximum income allowed for a first-time, unmarried, home buyer?” There’s a simple reason where there is no website that details income qualification rules for FHA home loans when it comes to maximum loan amounts, first-time home buyer preferences and whether marital status itself affects an FHA home loan application: these are generally not factors. That’s NOT to say that your marital status or income might not affect your FHA loan. Far from it. Married borrowers applying for a loan together may have a better chance based on income factors and other aspects than a single borrower. (Two applicants applying together may also have its share | more...

 

FHA Loan Reader Questions: Social Security Income

A reader asks, “My husband and I have never owned a home. He is a Veteran. He is receiving Social Security. I will also be receiving Social Security. Would we be able to receive a FHA Loan?” FHA loan rules do address Social Security income as a potential source of verifiable income that can be used to qualify for an FHA mortgage loan. For example, in HUD 4155.1 in a section titled “Income Analysis: Individual Tax Returns (IRS Form 1040)” we find the following in the section for IRA Distributions, Pensions, Annuities, and Social Security Benefits: “The non-taxable portion of these items may be added back to the adjusted gross income, if the income is expected to continue for the first three years of the mortgage.” Also, in a section | more...