April 19, 2021
There are certain problems that crop up with home loan applications that can make it difficult for a mortgage lender to approve a loan application.
We have written many articles about credit scores, debt payment history, and the amount of debt you carry, and how these issues affect your ability to get home loan approval. But what about the lesser-known issues?
The Nature Of The Property Counts
Some property types have restrictions from either the lender or under FHA loan rules. Those rules are found in HUD 4000.1. Did you know that no mobile home built before June 15th, 1976 can be approved for an FHA mortgage?
No home may be sold under the FHA loan program for commercial purposes. That means the home purchased with an FHA loan can’t be used as for Air b-n-b rentals, as a time share, bed and breakfast, etc. Mixed-use property must be primarily residential. No matter what the property is zoned for, under FHA loan rules non-residential use must be secondary to the residential use of the property.
Changing Careers Or Jobs
Some FHA loan applicants have additional scrutiny on their employment history. Do you know why?
Major career changes younger than two years old at home loan application time can make it harder for the lender to justify the mortgage.
The loan officer’s job is to make sure your income is both reliable and stable. Any major job change within two years of your application makes it harder to get your loan approved. And major job changes DURING your home loan application? That can stop it dead in its tracks depending on circumstances.
What happens if you don’t change jobs too soon ahead of your home loan, but you experience a major change in the way your income is earned? A good example is switching from a salary to earning commissions.
Those who earn commissions are required under FHA loan rules to have earned them for a minimum amount of time. How long?
HUD 4000.1 addresses this, stating that the lender may “…use Commission Income as Effective Income if the Borrower earned the income for at least one year in the same or similar line of work and it is reasonably likely to continue.”
There are some parts of the country where you cannot get an FHA loan approved. It’s more rare than you might think but some need to know–FHA loans are not approved for purchases where the property is located on certain lands affected by the Coastal Barrier Resources Act. And there may be local restrictions in your area, too.
For example, your lender may also have issues with certain known natural disaster zones in your housing market, and there may be a general refusal to approve mortgage loans for certain zones prone to such disasters.
Or there may NOT be–do you know if the area you want to buy in has such issues? Know before you sign.
You may find that in some cases, home loans require extra insurance to approve. In areas where there are known disaster hazards, you may find that those hazards are NOT covered under general insurance coverages and require additional policy modifications. Make sure you know about these extra requirements and their financial implications as early as possible before you commit to the mortgage.