Articles Published in: 2013

November 25, 2013

Are Tax Documents Required For An FHA Loan Application? A Reader Question

A reader asks, “Does FHA use your tax returns in determining your eligibility for qualifying for a loan?” There are many reasons why a participating FHA lender may request your income tax returns as part of the FHA loan application process. FHA loan rules in HUD 4155.1 start, “All borrowers, including United States (U.S.) citizens, must have a valid Social Security Number (SSN) and must provide evidence of that SSN to the lender.” The rules say the lender is responsible for documenting and validating the Social Security Number for each applicant and may do so through a variety of means including income tax paperwork. Specifically, HUD 4155.1 Chapter One Section B states, “The lender is responsible for documenting an SSN for each borrower, coborrower, or cosigner on the mortgage | more...

November 22, 2013

FHA Refinancing Loans With an Appraisal

By Joe Wallace

Borrowers interested in a non-streamline, credit-qualifying FHA refinance loan that features no cash back to the borrower will be interested in knowing some of the basics of this option including the maximum mortgage loan possible and details of the Up Front Mortgage Insurance Premium requirements. The rules that govern these types of refinancing loans are found in HUD 4155.1 in Chapter Three. Borrowers should note that there is no fixed single dollar amount limit for an FHA loan–your loan amount is determined by the fair market value of the home (which is determined by an appraisal) and your loan amount can be affected by the FHA loan guaranty limits in your county, plus any approved add-ons to the mortgage. When it comes to percentages, however, there are specific numbers. According | more...

November 21, 2013

Basic Information on FHA Refinance Loans

By Joe Wallace

When it’s time to refinance a home loan with an FHA loan, borrowers may wonder whether their situation qualifies for an FHA refinance, whether that’s a Streamline Refinance or a Cash-Out refinance loan. Obviously an homeowner with an existing FHA mortgage wouldn’t have a problem getting a streamline refinance loan, but what about those who have conventional or even VA loans? What do FHA loan rules say it takes to qualify for an FHA refinance? FHA loan rules on this subject are found in HUD 4155.1 Chapter Three Section A, under the heading, “General Information on Refinance Transactions”. It says in part: “A refinance transaction is used to pay off an existing real estate debt with the proceeds of a new mortgage for borrower(s) with legal title, and on the | more...

November 21, 2013

FHA Loans and “Non-Occupying Borrowers”

By Joe Wallace

We’ve gotten a variety of questions lately about the FHA loan rules for occupancy related to buying a single-family home. FHA loan rules state that a borrower must occupy the home purchased with a single-family FHA mortgage as his/her personal residence. But what about when two or more people are obligated on the FHA home loan? Are both required to meet this occupancy rule? FHA loan rules in HUD 4155.1 state that at least one person obligated on the FHA loan must live in the home as the primary residence. In cases where not all the borrowers will do so, the loan is classified differently and there are different rules that may affect the mortgage. According to HUD 4155.1, Chapter 2 Section B, “A non-occupying borrower transaction involves two or | more...

November 20, 2013

FHA Loan Occupancy Requirements: A Reader Question

By Joe Wallace

A reader asks, “My mother works in Florida and wants to finance a home in Kentucky. Can she get a FHA loan? I’ll be the co-owner of the home, but not the co-borrower on the loan. I’ll be at he home all the time.” FHA loan rules for single family home loans require the borrower to certify that he or she will purchase the home for “personal occupancy”. The borrower is required to certify in writing that he or she will occupy the home within a specific amount of time after the loan closes. These rules are found in HUD 4155.1, Chapter Four Section B. It states, “At least one borrower must occupy the property and sign the security instrument and the mortgage note in order for the property to | more...

November 19, 2013

Credit Qualifying Information For FHA Loans: What Your Lender Needs

By Joe Wallace

It’s good to understand the process of FHA loan approval. Knowing what your lender is looking for on your credit application is an important part of being ready for an FHA mortgage application. When you fill out your credit forms, what does your lender do with all that data? When it comes to your credit information, the lender doesn’t just rely on what’s provided on your paperwork; FHA loan rules listed in HUD 4155.1 say the lender must request a credit report that consists of information from the three major credit reporting agencies in something called a Three Repository Merged Credit Report or TMCR. That data must include: –all inquiries made within the last 90 days –all credit and legal information not considered obsolete under the Fair Credit Reporting Act (FCRA), | more...

November 17, 2013

FHA Single-Family Loan Rules For More Than One Loan

By Joe Wallace

FHA loan rules for single-family homes are designed to prevent investors from using these loans to buy more investment properties. An FHA borrower applying for a single-family home loan under the FHA program is required to use that home as the principle residence, and cannot buy, then turn around and vacate the property in order to rent it out. According to FHA loan rules found in HUD 4155.1, “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. FHA will not insure a mortgage if it is determined that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties, even if the property to be insured will | more...

November 15, 2013

FHA Loans and Residency Status

By Joe Wallace

One not-so-common, but very important question for some potential FHA borrowers revolves around citizenship status. Does a borrower have to be a citizen of the United States in order to apply for an FHA home loan? Let’s examine what the FHA loan rules published in HUD 4155.1 Chapter Four Section A say about this question. According to Chapter Four, “U.S. citizenship is not required for mortgage eligibility. The lender must determine the residency status of the borrower, based on information provided on the loan application, and other applicable documentation. “ That is good news for people in a variety of circumstances including legal resident aliens, those who are taking citizenship tests or who are in the process of relocating to this country under certain conditions. Chapter Four adds, “FHA insures | more...

November 14, 2013

Looking For An FHA Loan In Another Part Of The Country? A New HUD Tool Could Help

By Joe Wallace

Not everyone looking for a home with an FHA loan has the luxury of being able to drive through a lot of neighborhoods to look at all the “for sale” signs. Some are forced to look for a new home out of necessity–a job relocates to a new city, a new promotion requires a change of address, sometimes even natural disasters can urge a house hunter to look elsewhere. A lot of people feel at a disadvantage when it comes to looking for homes in a city other than their own, which is why the Department of Housing and Urban Development has created a new tool to help FHA loan applicants and anyone else looking for a home loan. According to a recent FHA/HUD press release, U.S. Housing and Urban | more...

November 13, 2013

FHA Loans and Bankruptcy Requirements: A Reader Question

By Joe Wallace

A reader asks, “My bankruptcy was discharged December 7 2011. Prior to filing I had very good credit, but was forced to retire because of cutbacks. I currently have a Fannie Mae insured mortgage through a local bank and want to go to a small house and sell my current one. Since filing discharge my wife and I have a good credit record. When I called the bank they now tell me FHA requirement is 3 years. Previously I was told 2 years. Who is right and what can I send the bank to show them the answer.” FHA standards say different things depending on the type of bankruptcy and the circumstances surrounding it, but in any case borrowers should know that lender requirements may exceed the FHA minimums–the bank | more...