Articles Published in: May 2017

Can I get an FHA home loan if I owe back taxes?

May 11, 2017

FHA Loans And Income Verification Requirements

FHA loan income verification requirements include submitting tax data as part of the application process. Your lender may require tax returns and other paperwork; depending on the transaction these requirements may include additional forms of documentation. A reader got in touch recently in our comments section to ask about these income verification issues. “Our lender is asking for two years of tax returns. We have not filed for 2016 yet. We apply for and get an extension every year and have until October since we are freelancers…Can we just submit 2014 & 2015 for now to apply for the loan? We have pay stubs for 2016 as proof for income and it is greater than what we have made the priors years. Although, it seems to be a problem that | more...

May 11, 2017

FHA Loan Appraisal Questions: Dug Wells

By Joe Wallace

Are properties with dug wells a problem when it comes to FHA loan approval? That’s what one reader asked us this week in the comments section: “Would like to know if a dug well is OK for an FHA loan.” Short, simple, and to the point. The answer is, unfortunately, not so straightforward. The reader was asking a question in response to a blog post we made back in 2010 which referenced then-applicable FHA loan rules for wells-including dug wells. However, the references in that old blog post have since been replaced with updated guidance and instructions to the FHA appraiser. HUD 4000.1 (the FHA loan rule book) is the most current reference, and contains this section that references dug wells: “The Appraiser must report when water to a Property | more...

May 10, 2017

FHA 203(k) Rehab Loans: Eligible Repairs

By Joe Wallace

In our previous blog post, we discussed the idea that an FHA 203(k) rehab loan could be used to purchase and modify a property to meet FHA requirements for properties to be no more than four units. In HUD 4000.1, under the list of eligible improvements, we learn that “decreasing an existing multi-unit Structure to a one- to four-family Structure” is one of those approved uses of the loan. But what are the other uses? In the original blog post we had a partial list, but there is a complete (at the time of this writing) list of what is considered an eligible use of FHA 203(k) rehab loan funds. The FHA loan rule book states that the improvements on this list is not exhaustive and that what you see | more...

what is mortgage insurance and how does it work?

May 10, 2017

FHA Mortgages For Multi-Unit Properties

By Joe Wallace

A reader asked us a question this week in the comments section about FHA mortgages for properties with multiple units. “I want to buy a 6 residential unit apartment building with a very small store front commercial space on the property (computer repair shop that takes up about 15% of the property space) I plan on living in one of the apartment units. Is there an FHA loan out there for this situation?” FHA mortgages under the single family loan program do allow FHA loans to qualified borrowers for multi-unit properties. The rules for these purchases are found in HUD 4000.1, which states: “FHAs programs differ from one another primarily in terms of what types of Properties and financing are eligible. Except as otherwise stated in this SF Handbook, FHAs | more...

What You Need To Know About Your FHA Home Loan

May 9, 2017

FHA Appraisal Issues: A Reader Question

By Joe Wallace

How do certain factors such as the location of a home affect the FHA appraisal process? Can a home located near certain retail establishments be deemed unsuitable for an FHA mortgage? That’s basically what one reader wants to know this week, asking: “Are there any special requirements regarding adjoining properties for a person to be eligible for FHA loan? Specifically, does FHA prohibit loans for primary residences that are within 300 feet of gas stations or convenience stores?” FHA appraisal rules are found in HUD 4000.1, and that rule book does address this reader question. In general, FHA loan rules say that the proximity to high-traffic areas are to be noted by the FHA appraiser, but there are also appraisal requirements governing the home’s location adjacent to high-pressure gas pipelines, | more...

May 9, 2017

Mortgage Loan Interest Rate Trends: Moving Higher

By Joe Wallace

Since our last report, mortgage loan rates have crept slightly higher and there are indications that we could see conditions favorable for that to continue depending on investor reaction to things like breaking news from other parts of the world, bond market activity, etc. What is bad for the economy is often good for mortgage loan interest rates, and vice versa. Recent developments such as the French election and the release of the most recent U.S employment data have brought good news. Mortgage rates have crept higher within the range we’ve gotten accustomed to seeing, so many affected borrowers may notice the difference in closing costs rather than actual higher rates. 30-year fixed rate conventional mortgages are still operating at a best execution range at or near between 4.0% and | more...

FHA Loans And Natural Disasters: What You Should Know

May 8, 2017

FHA Appraisal Rules: Water Purification Systems

By Joe Wallace

What are the FHA appraisal rules for properties served by water purification systems? A reader asked us a question about that recently: “Im interested in a property that has a UV purification system. Does that qualify under an FHA loan?” A quick look FHA appraisal rules in this area reveals no references that specifically, at the time of this writing, mention UV purification. Instead, they address water purification in general, requiring that any such systems meet basic standards. What are those standards? From HUD 4000.1 we learn that the lender has a responsibility to the borrower in such cases” “If a Property does not have access to a continuous supply of safe and potable water without the use of a water purification system, the Mortgagee must ensure that the Property | more...

May 8, 2017

FHA Loan Fees: A Reader Question

By Joe Wallace

A reader asked us a question in the comments section recently about FHA loan fees. “What is the total that lender can charge on an FHA loan?” Unfortunately there is no single answer to this question. FHA loans, and all mortgage loans, have costs that will vary depending on the lender, the transaction, whether or not sellers agree to pay some of the closing costs or other expenses. etc. Even the FHA loan funding fee, which is a standard part of all this, is based on a percentage of the mortgage amount. That amount naturally varies depending on the transaction. FHA loan rules in HUD 4000.1 instruct the lender: “The Mortgagee or sponsored TPO may charge a reasonable origination fee. The Mortgagee or sponsored TPO may charge and collect from | more...

How much can I borrow with an FHA refinance loan?

May 5, 2017

Old Credit Problems And FHA Loans

By Joe Wallace

Do old credit problems come back to haunt you later when you fill out an home loan application? That’s basically what one reader asked us in the comments section this week: “If (a) charge-off was from a student loan account a decade ago that was delinquent, but paid in full from a tax-return offset six years ago, how is this viewed?” The reader is referencing some information we mention in a previous blog post, FHA Loan Standards: Charge-Offs and Collections, which includes the following information on how FHA loan rules instruct the lender to handle charge-off information found on a borrower’s credit report. The post includes a definition of what the FHA calls a charge-off account. “Charge Off Account refers to a Borrowers loan or debt that has been written | more...

May 4, 2017

Part Time Income: FHA Loan Rules

By Joe Wallace

What are the rules for using part time income to qualify for FHA loans? A reader asked us a question on that topic in our comments section this week: “I have a client that worked full time for a company for eight years. In the last eight months he went to half time. Why cant we use this income since hes been at the same employer for more than 2 years?” Instructions to the lender on this issue are found in HUD 4000.1. There, we learn that for all income sources, the lender is required to do some calculations. “For employees who are paid hourly, and whose hours do not vary, the Mortgagee must consider the Borrowers current hourly rate to calculate Effective Income. For employees who are paid hourly | more...