Articles in Category: FHA Requirements

July 25, 2023

Which FHA Loan Is Right For You?

There are some home loan options some won’t consider. A shorter loan term is one. In an era where lower monthly payments seem to be the priority for some borrowers more than saving money over the entire course of the loan, a longer loan term makes sense. But for some, these are essential aspects of the loan to consider. If you can afford to pay more each month on your mortgage, would you do so to shorten your loan term? FHA Condo Loans, FHA Manufactured Homes Are you surprised there are separate FHA loans for each property type listed above? These different loans are needed simply because each property type’s considerations differ. Manufactured homes can’t be older than regulations allow, but existing construction homes don’t have the same rule. Condo | more...

FHA Home Loans And First Time Home Buyers

July 24, 2023

FHA Lender Requirements and Bank Policies

By Joe Wallace

Here is a variation on a typical question we are frequently asked. “I applied for a loan and was told I must submit proof of filing a tax extension for a previous tax year. I was told by my loan officer that I need to show proof of an extension to be approved to close. Is this correct?” There are two critical issues in a situation like this to remember. One is how FHA loan rules work and how lender policies work. The FHA loan program is a voluntary one for financial institutions. Not all lenders participate, but those who do have to meet FHA loan standards and observe FHA guidelines for the loan program. Most financial institutions have their own guidelines above and beyond FHA loan program regulations. If | more...

July 21, 2023

Will Your FHA Home Loan Be Approved?

By Joe Wallace

Will your FHA home loan be approved or denied? There are several reasons why your loan application could be turned down, and some of those reasons have more to do with the property than with the borrower’s credit history or FICO scores. And in some cases, getting turned down for a mortgage is the borrower’s fault due to credit history or FICO score issues. But what about when the borrower’s credit, employment, and other qualifying factors are acceptable to the lender, but the home loan application is turned down anyway? For some, it could be a question of the property’s condition, location, or type. Location Counts Some don’t realize at first that to be approved for an FHA residential home loan, the property cannot be situated within a specific range | more...

July 13, 2023

FHA Loan Approval and Late or Missed Housing Payments

By Bruce Reichstein

What is the connection between FHA loan approval and late or missed housing payments? The simplest formula given to most borrowers is that you should come to the home loan application process with nothing but on-time payments on all financial obligations for the last 12 months leading up to the day you apply. Not all borrowers take that advice, and many want to know what the consequences of having a late or missed payment might be; in some cases the issue may be more problematic than others. This is true of having late or missed housing payments on your record. The lender will review your record of housing payments as one of the indications that a borrower is a satisfactory credit risk. But what do the FHA loan rules tell | more...

July 11, 2023

FHA Loan Options Post-Bankruptcy

By Joe Wallace

There is a common reader question that goes something like this: “I had a bankruptcy discharged recently. How long do I have to wait to purchase another home? I have been working on my credit and improving my scores.” Post-bankruptcy, a borrower must work hard to establish the best credit possible in order to qualify for a new home loan. Lenders may be willing to work with borrowers with credit scores starting at around 620 or higher. But credit isn’t the only factor determining how soon after bankruptcy you can apply for a home loan. The nature of a borrower’s wait time to apply after bankruptcy depends on the nature of the bankruptcy. The rules governing this are found in the FHA Single-Family Lender’s Handbook, which advises that bankruptcy “does | 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...

July 3, 2023

Can An Eligible Veteran Build on Their Own Lot or Buy Land with a VA loan?

By Bruce Reichstein

If you are interested in purchasing a piece of land and financing it through a VA-approved lender, there are several loan options available for you. While a standalone VA land loan is not offered, the VA loan program does allow for the purchase of land when combined with the construction costs to build a new home. This loan product is known as a VA One-Time Close construction to permanent loan. It is a convenient loan option that includes the cost of the land plus the cost of the construction and even allows any VA funding fee to be financed into the loan. This Zero out-of-pocket financing allows eligible Veterans to have a true $0 down loan. To utilize the VA loan for buying land and constructing a new home, | more...

June 29, 2023

FHA Mortgage Loans: Second Appraisals

By Joe Wallace

If you or the seller don’t agree with the results of the appraisal, is it possible to get a second appraisal and a reconsideration of value of the home? FHA loan rules specifically prohibit ordering a second appraisal just because one party or the other is hoping for a different result. HUD 4000.1, the FHA Single-Family Lender’s Handbook, states the lender is prohibited from “ordering an additional appraisal to achieve an increase in value for the Property and/or the elimination or reduction of deficiencies and/or repairs required.” FHA loan rules note the lender is permitted to order a second appraisal “for Mortgages that are in accordance with requirements on Property Flipping”. But what circumstances permit a second appraisal? HUD 4000.1 says that the original mortgagee or lender is allowed to | more...

June 27, 2023

FHA Loan Seller Concessions: What’s Allowed?

By Joe Wallace

When it is time to negotiate the price of a home using an FHA home loan, borrowers should know that sellers can, and often do, contribute to the buyer to make the deal more enticing or help the borrower reduce up-front costs. Such contributions are known as seller concessions. The FHA Lender’s Handbook says for FHA mortgages, concessions are permitted within a certain set of boundaries and are limited to six percent of the sales price of the home. Any seller contributions that exceed that six percent limit require a dollar-for-dollar reduction in the loan amount. According to FHA loan rules, “Sales concessions influence the price paid for real estate. For this reason, FHA requires that appraisers identify and report sales concessions and properly address and/or adjust the comparable sale | more...

June 26, 2023

Is It Possible To Have Multiple FHA Loans?

By Joe Wallace

Many people want to know if they can apply for more than one FHA loan at a time. In some cases this is because the potential borrower wants to buy a home they don’t intend to use as their primary residence. In others, the issue might be that a larger home is needed due to a change in family size. Are these reasons for having more than one FHA loan valid under FHA loan rules? What FHA Loan Rules Say FHA loan rules for the single-family home loan program in the FHA Single-Family Handbook generally permit FHA loans only for owner-occupiers. The short answer to the question, “How many FHA loans can I have at the same time?” is ONE. The home must be occupied by at least one person | more...