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Articles Published in: December 2013

Happy New Year!

We’re taking a short break from our usual discussion of FHA home loans, and fielding reader questions about FHA loans and refinancing loans, to celebrate New Year’s Eve and New Year’s Day. Our regular posting schedule returns on Thursday, January 2, 2014. Thank you for reading in 2013 and we look forward to another year of serving you. Have a safe and wonderful New Year.

 
FHA Loan Credit Score

FHA Extends Deadline For 2014 Loan Limit Appeals

The FHA has announced an extended deadline for appeals to the 2014 FHA loan limits for high cost areas. According to an announcement dated December 20, 2013, the FHA will allow “interested parties” in high-cost areas to submit an appeal until the end of January 2014. “On December 6, 2013, the Federal Housing Administration (FHA) issued Mortgagee Letter 2013-43 which announced FHA’s loan limits for case numbers assigned on or after January 1, 2014 through December 31, 2014. FHA is extending the date for interested parties to request a change to high cost area loan limits announced in ML 2013-43 from January 6, 2014 to January 31, 2014.” However, the appeal process is not open to all high cost areas. According to the FHA/HUD announcement, “Requests for a change to | more...

 

FHA Loan Answers: Debt To Income Ratios

When a borrower applies for an FHA home loan, he or she is asked to list all source of verifiable income. This is used to calculate the debt-to-income ratio, which is a comparison of the borrower’s income against the amount of financial obligations the applicant must pay every month. The ratio is very important in the FHA loan approval process. According to HUD 4155.1, Chapter Four, Section F, this ratio must be calculated in two ways–the borrower’s income is compared to the projected amount of the FHA mortgage payment, and a separate calculation is made for the total amount of monthly debts plus the mortgage payment. Why are these calculations made? Because FHA loan rules don’t allow the mortgage payment itself or the amount of total debt plus the mortgage | more...

 

FHA Loan Answers: New Job Income

Many FHA loan applicants want to know if taking a new job will affect their chances at FHA loan approval. FHA loan rules are designed to help guide loan officers through the qualification process for a variety of scenarios including those where the borrower may have “projected income” that could be factored into the borrower’s debt-to-income ratio. What do FHA loan rules say about projected income? How is it defined? The answers to these questions and more can be found in HUD 4155.1 Chapter Four, Section E. “Projected income is acceptable for qualifying purposes for a borrower scheduled to start a new job within 60 days of loan closing if there is a guaranteed, non-revocable contract for employment.” That is simple enough–FHA loan rules allow for projected income when there | more...

 

Happy Holidays!

We pause from our usual writing and answering reader questions about FHA home loans to enjoy the holiday season. Our regularly scheduled posts return on Thursday December 26. Thank you for reading and may your holiday be a safe and festive one! Season’s greetings from all of us at FHANewsBlog.com!

 

FHA Loan Program FICO Score Minimums: A Reader Question

A reader asks, “I noticed that to be eligible for an FHA loan your score must be at least at a 580. Is this true? I was told this is just something you show here on your site but once you really go through the process its a whole different story. I’m looking to buy my 1st home and I want to be told what’s right as to what’s wrong.” FHA loan FICO score requirements, as listen in HUD 4155.1, are as follows: That is an exact duplicate of the table found in HUD 4155.1. The basic answer to the reader question is that according to FHA loan rules, any borrower with a credit score above 500 is technically eligible for some kind of FHA guaranteed home loan. However, these | more...

 

FHA Loan Rules For Section 8 Income & Government Assistance: Reader Questions

We’ve gotten several questions lately from readers about FHA loans, government assistance and Section 8 income. What does the FHA loan rulebook say about government assistance and Section 8 income used to qualify for an FHA guaranteed home loan? When it comes to government assistance, FHA loan rules found in HUD 4155.1, Chapter Four say, “Income received from government assistance programs is acceptable for qualifying, as long as the paying agency provides documentation indicating that the income is expected to continue for at least three years.” The continuation of the income is key, so borrowers using government assistance income to qualify should be prepared to submit documentation of the income according to the lender’s requirements. Borrowers should know that FHA loan rules also address government assistance that isn’t expected to | more...

 

FHA Loans and Commission Income: A Reader Question

A reader asks, “Is it true that if you work in a job where your pay is based on commission you have to be with your current employer for at least one year to obtain a FHA loan, even if your prior job was in the same line of work and was also a commission paying job?” FHA loan rules require the lender to verify employment and income. Only verifiable income can be used to calculate a borrower’s ability to afford an FHA home loan and there are FHA regulations that determine what constitutes verifiable income. Commission income can be used if it meets certain criteria. The rules governing commission income are found in HUD 4155.1, Chapter Four Section D  under a heading titled, “Salary, Wage, and Other Forms of | more...

 

FHA Loan Closing Costs: A Reader Question

A reader asks, “My husband and I are trying to buy a home. We have the 3-3.5% down required, I have $1500.00 for the realtor earnest money, the appraisal and the inspection. Is that all the money I will need up front. We are asking seller to pay closing. Since we can ask them that 6% goes to pay to closing. SO, if seller pays closing. I have money for the down payment, earnest money, appraisal and inspection- that will be all I need, correct?” It’s difficult to answer a question like this because every loan is unique. Some home loan purchases may require a flood zone determination, there may be certain legal fees if the borrower has paid for certain title services, state laws and tax code may apply, | more...

 

FHA Loan Questions: Credit History–What Counts?

We get a number of reader questions about FHA home loans, and many of those include questions about credit history. Does the presence of a few late payments on a borrower’s credit history jeopardize an FHA loan application? In general, it’s best to come to the FHA loan process with at least 12 months of on-time payments on your record, but we should examine the FHA loan rulebook (HUD 4155.1) to see what instructions are given to participating FHA lenders about credit history. These instructions can be found in Chapter Four, Section C of HUD 4155.1. They include the following, found under the heading “Documenting an Analysis of Delinquent Accounts”: “The lender must document the analysis of delinquent accounts, including whether late payments were based on • a disregard for | more...