Articles in Category: Debt Ratios

November 30, 2023

Avoiding Foreclosure in 2024

Do you want to buy or build a home with an FHA loan? When planning and saving, consider what happens after closing day once you accept the keys, schedule the movers, and take possession of your new house. What’s the big issue to remember here? Future borrowers in the budgeting and planning stages must choose how much cash to pay at closing time. And so far out from that first mortgage payment it may feel tempting to save a bit on your out-of-pocket expenses and finance certain closing costs like the FHA loan upfront mortgage premium. There is an issue called “cost creep” that some borrowers may experience. Financing one closing cost might not hurt your bottom line too much. And from there some justify adding even more to the | more...

November 21, 2023

Before You Apply For Your Home Loan

By Joe Wallace

First-time homebuyers are often encouraged to start planning and saving for an FHA loan at least 12 months ahead. And it’s good advice. Within those 12 months, you’ll want to concentrate on a few important areas. There are moves to make and moves to avoid in the 12 months before your home loan application. 12 months is just a baseline. Some prefer to take 18 months or longer to prepare for a mortgage application. Take as much time as you need for best results. Don’t Make Big Career Changes Too Close To Application Time For the purposes of this article, pay raises, promotions, or other upwardly mobile moves within the company you currently work for are not the issue. Switching to a freelance career, transitioning from full-time to contract work, or | more...

October 13, 2023

FHA Home Loan Approval And Your Income

By Joe Wallace

Some important financial issues can derail your FHA home loan application. They include missed housing payments, FICO scores that don’t meet lender standards, or a lack of time in the job market. These are all factors that can lead to a “no” from a lender. But there’s a “new” wrinkle. Insufficient income–not a new problem, obviously, as many aspire to buy a home but can’t afford it yet. But it is a trending issue in ways that make some financial pundits sit up and take notice. According to CNBC, insufficient income is a problem is a major reason why some loan applications get rejected in 2023. Rates And Mortgage Payments Higher In 2023 Home loan interest rates were flirting with the 8% range at the time of this writing, and higher rates | more...

July 7, 2023

Signs You Are Not Ready To Apply For A Home Loan

By Joe Wallace

How does a first-time buyer know they are ready to apply for a home loan? There are some instances where a first-time borrower is definitely NOT ready, do you know what they are? You Don’t Know Your FICO Scores If you don’t know what your FICO scores are, you aren’t truly prepared to apply for a home loan. You need to know what the lender will know when she reviews your credit report. If you apply without knowing your scores, you risk wasting time and money. You Haven’t Reviewed Your Credit Report In The Last Months Leading Up To Your Credit Application If you don’t know what your loan officer will see when your credit report is pulled, you aren’t ready to apply for a loan. Evidence of identity theft, | more...

June 22, 2023

FHA Loan Rules For Income: Investments, Trusts, and Promissory Note Payments

By Joe Wallace

Part of the FHA loan approval process involves the lender verifying an applicant’s income. FHA rules state that for purposes of calculating a borrower’s debt-to-income ratio, only verifiable income can be counted in that ratio. Do FHA rules allow a borrower’s interest or dividend payments from investments to be counted as verifiable income? For some borrowers, this can be an important question. According to the FHA Lender’s Handbook, “The Mortgagee must verify and document the Borrower’s Investment Income by obtaining tax returns for the previous two years and the most recent account statement.” Additional instructions to the lender for this issue include the requirement that when making the calculation. “The Mortgagee must subtract any of the assets used for the Borrower’s required funds to close to purchase the subject Property | more...

May 22, 2023

Does Income Affect FHA Loan Approval

By Joe Wallace

The short answer to the question, “Does your income matter” regarding FHA loan approval? Yes, it does. But not the way some borrowers might think. Do you know the issues important to your loan officer when considering an FHA loan application? Income is an essential part of the equation based on the age, dependability, and nature of your earnings. Your income matters if you want to buy or build a home with an FHA mortgage. But there are some misconceptions about home loan approval regarding income. Do you know the difference between the facts and the fiction about home loan income requirements? FHA Home Loans: No Minimum Income FHA loan rules do not specify a minimum earning amount per day, week, month, or year. To be approved for an FHA | more...

October 19, 2022

FHA Home Loan Approval And Debt Ratios

By Joe Wallace

How is FHA home loan approval affected by your debt ratio? Your credit qualifications including FICO scores and credit history are very important factors in home loan approval, but the amount of debt you carry is also a factor. Your participating FHA lender must evaluate your monthly debt versus your monthly income to determine if you can realistically afford the mortgage. How does the lender do this? The rules governing this process are found in the FHA loan handbook, HUD 4000.1. It begins by stating that the lender is required to “determine the Borrower’s monthly liabilities by reviewing all debts listed on the credit report, Uniform Residential Loan Application (URLA), and required documentation”. The lender must review all monthly financial obligations but some things may not necessarily be included in | more...

January 19, 2022

Is A Second FHA Loan Possible?

By Joe Wallace

Is it possible for borrowers to apply for second FHA loans, resulting in paying on two mortgages at once? Here is a variation on a common reader question about this issue: “I relocated to another state over 400 miles away. Will I be able to get an FHA loan even though I still own my first home?” There’s no one single answer to a question like this. Aside from FHA loan rules, a borrower’s credit rating, loan repayment history, and debt-to-income ratio may all play a part in whether a lender is able to approve or deny an FHA loan. In cases like these, one of the most important factors would be (all other considerations aside) focused on the borrower’s debt-to-income ratio. With an existing mortgage payment, will the borrower | more...

September 29, 2021

Do FHA Home Loans Have An Income Cap?

By Joe Wallace

Some borrowers learn that FHA mortgage loans are government-backed and guaranteed by the FHA and HUD, which can lead to certain assumptions about the nature of a government-backed mortgage. One of the misconceptions about FHA home loans is that due to their government association have either an income limit, or are otherwise need-based. Some borrowers might be confusing the government-backed USDA loan program with the FAH loan rules. USDA loans ARE need based. However, FHA loan rules in HUD 4000.1 do not specify a maximum income and do not require a specific financial need to qualify. FHA loans do not have a low-income requirement, a household income cap, or a requirement that you be a first-time buyer. These loans are instead designed for those who want to purchase a home | more...

July 23, 2021

How Early Should You Use A Mortgage Calculator?

By Joe Wallace

The short answer? The moment you think you want to commit to being a home owner, you should consider using an online mortgage calculator. A mortgage calculator can help you plan and save for your mortgage. The use of a mortgage calculator is something most real estate blogs and home loan websites encourage you to use. The most basic, entry-level finance blog advice includes “use a mortgage calculator”. But there are some things to keep in mind about using a mortgage calculator–you want to use one that includes more than just the principal and interest for your loan. If you use one that limits the input to just those two things, you won’t really get an estimate of your monthly mortgage payment. Why? Because you will need to factor in | more...