Articles Tagged With: Borrower’s Rights

February 17, 2012

FHA Loan Reader Question: Bankruptcy and Job Loss

A reader recently sent us a lengthy comment as part of a request for assistance on FHA loan topics. He writes, “I had a foreclosure in a bk chap 7 that was discharged in Nov 2009. This was due to a job lost in 2008 like most of the country. I had to get unemployment for I went over one year looking for another job. I went back to work full time in Dec 2009…” We won’t reproduce the entire correspondence here, but we thought it important to address the issues mentioned above as there are plenty of other readers who may be facing similar circumstances. Is it possible to get a new FHA home loan with conditions like the ones previously mentioned as part of the borrower’s history? Let’s | more...

February 16, 2012

Historic Settlement Between Federal Government and Five Major Banks

By Joe Wallace

The Department of Housing and Urban Development recently announced a $25 billion settlement between the government and the five largest banks in the U.S. United States Attorney General Eric Holder, Department of Housing and Urban Development (HUD) Secretary Shaun Donovan, Iowa Attorney General Tom Miller and Colorado Attorney General John W. Suthers announced the “landmark $25 billion agreement with the nation’s five largest mortgage servicers to address mortgage loan servicing and foreclosure abuses.” According to the press release, this is the largest federal-state civil settlement ever obtained and is the result of “extensive investigations by federal agencies, including the Department of Justice, HUD and the HUD Office of the Inspector General (HUD-OIG), and state attorneys general and state banking regulators across the country.” The settlement includes Bank of America Corporation, | more...

February 14, 2012

FHA Loan Questions: Debt-To-Income Ratios

By Joe Wallace

When you apply for an FHA home loan, you’re required to list all current debts and other financial obligations. This helps the lender calculate the debt-to-income ratio, which must fall within the FHA required percentage. Borrowers should know what the FHA and HUD.gov say about the debt-to-income ratio percentages; “…monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, 4 should total no more than 41% of income. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.” Borrowers should be concerned with the amount of debt they currently have before applying for an FHA home loan. Paying off credit cards and closing unneeded open lines of credit should | more...

February 9, 2012

FHA Loans and Inducements To Purchase

By Joe Wallace

Recently we got a reader question about seller concessions and FHA home loans. Under the rules for an FHA mortgage, the seller is allowed to contribute certain concessions (interest rate buydowns and other contributions) as long as the concessions don’t exceed the FHA’s maximum rate. According to FHA loan rules at the time of this writing, “The seller and/or third party may contribute up to six percent of the lesser of the property

February 3, 2012

Reader Question: Can I Get an FHA Debt Consolidation Loan?

By Joe Wallace

A reader asks, “Is it possible to get an FHA loan and consolidate my house and credit card?” According to FHA loan rules, new purchase FHA loan amounts are limited to the statutory loan limit for the area, or “a percentage of the lesser of the appraised value, or sales price.” This would preclude getting cash back on the deal unless the borrower was owed a refund of some kind–FHA loans also require at least a 3.5% minimum down payment. The borrower must provide funds to close the deal. But FHA refinancing loans do feature a cash-out refinancing loan option. FHA rules do technically permit FHA cash-out refinancing for debt consolidation, but advises lenders, “Cash out refinancing for debt consolidation represents considerable risk, especially if the borrowers have not had | more...

February 1, 2012

FHA Announces New Fair Housing Rules

By Joe Wallace

Nearly 30 percent of same-sex couples were treated differently when trying to buy or rent a home. That figure was published in a 2007 report by Michigan’s Fair Housing Centers. FHA and HUD have announced new regulations designed to end that sort of discrimination and much more. According to HUDNo.12-014, new regulations have been implemented to “ensure that HUD’s core housing programs are open to all eligible persons, regardless of sexual orientation or gender identity” according to the press release.

January 31, 2012

FHA Loans, Effective Income, and Alimony

By Joe Wallace

One important section of the rules for FHA loans states a borrower’s income must be verified by the lender as “effective income”. This means that the income must be stable and likely to continue. Some types of income can’t be counted. A part-time business selling goods on eBay, for example, might not qualify. But what about other types of non-employment income like child support, alimony, or maintenance payments? There are plenty of borrowers who receive or are eligible to start receiving these types of payments. Does the FHA recognize them as effective income? In certain cases, yes. Alimony, maintenance payments as part of a divorce decree, and/or child support can qualify and be counted toward a borrower’s debt-to-income ratio provided the payments meet standards set by they FHA. According to | more...

January 30, 2012

FHA Loan Reader Question: FHA Condo Loan Approval

By Joe Wallace

FHA loan rules for home purchases are different than the rules for FHA insured loans for condominium units. Since there are unique requirements for condo loans–including a requirement that condos to be considered for FHA mortgages be on an FHA-approved list–the FHA has published a set of guidelines for condo mortgages. One reader wrote in to ask, “Is there a list of the FHA requirements that a condo project needs to comply with in order to be listed on the FHA approved list? Where can it be obtained? Thanks.” The list of FHA requirements for a condo to be approved and listed can be downloaded at: www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-19ml.doc What do these guidelines cover? According to the FHA, condo projects must consist of two units or more, and be covered by hazard | more...

January 25, 2012

FHA Loan Applications and Income Rules

By Joe Wallace

Borrowers who apply for an FHA insured mortgage are required to submit application data including specific details about employment, income, and the sources of that income. FHA income requirements aren’t limited to just dollar amounts and the history of the borrower’s employment–the sources and stability of the income listed on the application are also reviewed. A borrower’s debt-to-income ratio, the amount of money going out versus the amount of money coming in, is calculated using only verifiable and reliable income. The FHA has rules about the nature of the income that can be used for this calculation; if a borrower has a job that isn’t “stable and reliable” when it comes to income, it won’t help the borrower for the purposes of qualifying for an FHA mortgage. Specifically, the FHA | more...

January 24, 2012

FHA Loan Rules: Proposed Seller Concession Changes

By Joe Wallace

When a house hunter wants to buy a home with an FHA insured mortgage, he or she may find a seller willing to offer incentives–known as seller concessions–to make the deal more attractive. Seller concessions can include interest rate buydowns, discount points or other contributions that are related to closing costs. At the time of this writing, FHA loan rules state that these concessions can total no more than six percent of the sales price. Any more than six percent is considered an inducement to purchase the property and the FHA requires an adjustment in the loan amount. According to the FHA official site, “Each dollar exceeding FHA