Articles Published in: April 2015

April 13, 2015

FHA Streamline Refinance Loan Applications: A Reader Question

A reader asked us a question recently about applying for a refinance loan. “Do I mark “YES” on “Credit qualifying Streamline”?” The term, “credit qualifying streamline” refers in this case to an FHA streamline refinance loan that requires a credit check. HUD 4155.1 states the following about credit qualifying: “The purpose of the mortgage credit analysis is to determine − a borrower’s credit performance − a borrower’s capacity to repay the mortgage, and − whether or not the borrower has sufficient funds to close, and – limit collection actions or foreclosure. ” Furthermore, as part of this process, HUD 4155.1 states: “The lender must • verify the borrower’s identity, and • ask sufficient questions of the borrower to get a complete picture of the − borrower’s financial position − source | more...

April 13, 2015

FHA Loan Refinance Rules: A Reader Question

By Joe Wallace

A reader asks, “Hello.. i have a question. We are first time home buyer through FHA loan. How long we can refinance after our purchase?“ The FHA issued a mortgagee letter back in 2011 updating its policies for minimum wait times or seasoning period for borrowers to refinance after the original purchase. The minimum wait time may vary depending on the lender, the type of refinance loan you want to apply for, and other factors. For example, a borrower applying for FHA Streamline Refinance Loans, according to FHA Mortgagee Letter 2011-11, is subject to the following requirements: – The mortgagor must have made at least six payments on the FHA- insured mortgage that is being refinanced, and – At least six full months must have passed since the first payment | more...

April 11, 2015

FHA Appraisals Versus Home Inspections: Part Two

By Joe Wallace

A reader asks, “My follow up question is that I believed that there would be an FHA inspection done and if serious problems or defects are found then the seller would be required to fix the issues. I realize FHA does not “check” for everything so a home inspection is still in order, but has this rule changed?” This is a follow-up to our answer to this reader’s question in our April 3, 2015 post, “Is A Home Ever ‘FHA Approved'” where we answered the original question as follows: “…there is one serious issue raised here that we MUST address–the prevailing misconception some borrowers have that the FHA or HUD would ever ‘approve’ a home. Some borrowers mistakenly assume that because a home passes the appraisal process that it is free | more...

April 10, 2015

FHA Home Loans and Credit Score Issues: A Reader Question

By Joe Wallace

A reader asks, “I have an average credit score of about 600, the same with my boyfriend. We have a good chunk of money for a down payment but have been turned down by two lenders.” “We make good money also. We don’t currently have revolving credit but have just been approved for secured credit cards. We would like to purchase in the next month or so rather than waiting. Is there anything we can do?” Borrowers in this situation should call the FHA directly at their toll-free hotline: 1-800 CALL FHA. Request a referral to an FHA/HUD approved housing counselor in the local area who can help advise on pre-purchase issues including credit. Pre-purchase counseling can be a big help to house hunters, especially those who are new to | more...

April 10, 2015

FHA Loan Rules: Student Loan Debt And Mortgage Applications

By Joe Wallace

A reader asks, “if I have a student loan with a 0 payment and can not get the payment what % will fha use for the student loan payment?” The answer to this question depends greatly on the status of the student loan. Is the student loan in deferment? And if so, for how long? FHA loan rules in HUD 4155.1 Chapter Four Section C state: “Debt payments such as a student loan or balloon note scheduled to begin or come due within 12 months of the mortgage loan closing must be included by the lender as anticipated monthly obligations during the underwriting analysis.” FHA loan rules in Chapter Four also add, “Debt payments do not have to be classified as projected obligations if the borrower provides written evidence that | more...

April 9, 2015

FHA Mortgage Loan Interest Rate Trends: Mixed

By Joe Wallace

Mortgage loan rates have been up and down since our last report–there has been some volatility that saw rates climbing ahead of last week’s Employment Situation Report, then making strong gains last Friday, which were in turn undone by upward movement the following Monday. 30-year fixed rate conventional mortgage rates have, best execution, climbed to 3.75% as of Wednesday’s reports at market closing time. The release of Fed meeting minutes this week was expected to be a market mover, but rates moved more or less sideways in the wake of the release of that information. FHA mortgage loan rates have found a “comfort zone” in all this, with a range between 3.25% and 3.5% best execution. FHA mortgage loan interest rates tend to vary more among lenders than their 30-year | more...

April 9, 2015

FHA Loan Interest Rates

By Joe Wallace

Many potential FHA borrowers want to know more about the ins and outs of mortgage loan interest rates. When it comes to FHA mortgages, it’s easy to misunderstand the relationship between a participating FHA lender and the FHA itself. For example, some assume that the FHA sets and/or regulates mortgage loan rates (it does not). So if the FHA does not set or regulate the interest rates on an FHA mortgage or refinance loan, who does? The short answer is that the lender sets the rates. The FHA loan rule book only requires that lenders set rates that are “reasonable and customary” based on similar loans. But market forces that affect other types of mortgage interest rates also affect FHA rates. The borrower and lender negotiate the FHA loan rate | more...

April 9, 2015

FHA Cash-Out Refinance Loans: A Reader Question

By Joe Wallace

A reader asks, “Our home is in trust, and my mother-in-law has signed a quit claim deed. My husband was in a hit and run motorcycle accident 3 years ago this coming June. Due to his inability to work for 4 months we struggled with payments and our credit is horrible. We would like to get a loan on our house so we can pay off a home equity loan, and multiple collections.” “Our home is valued at approx. $250,000, and we would like to get a loan for half of that so we can get out of debt and make some improvements to our home. My husband has credit scores of Experian 558, Equifax 517, and Transunion 491. Is it possible to find an FHA lender that would be | more...

Can I buy a manufactured home with an FHA loan?

April 8, 2015

Commission Income and FHA Loans: A Reader Question

By Joe Wallace

A reader asks, “If a job has a base pay plus commission on a set sales route, does that have to viewed as a commissioned/self-employment job requiring Tax returns?” Let’s examine the rules for commission income as printed in HUD 4155.1, Chapter Four Section D. Under the section heading titled, “Salary, Wage, and Other Forms of Income”, we learn the following about commission income: “Commission income must be averaged over the previous two years. To qualify with commission income, the borrower must provide • copies of signed tax returns for the last two years, and • the most recent pay stub.” Furthermore, the FHA loan rules in this section address the nature of commission income–how successful is the FHA loan applicant in this area? That is an important factor as | more...

April 8, 2015

FHA Loan FICO Requirements and Occupancy Rules: A Reader Question

By Joe Wallace

A reader asks, “I saw a home I liked far away in another state. I could very easily afford 20% down and also very easily afford the mortgage payments. My problem is that my FICO is probably too low for a conventional loan. I don’t want to be an investor. I just want to live in the house. I can not move to where the house is for two years and I assume it will be off the market by then.” “If I could get the home today, I would be just fine leaving it empty till I could move to that area. I’m pretty sure I could get an FHA loan except for the owner occupancy rule. I would never break the law, but I wonder if the FHA | more...