Articles Tagged With: FHA Loan Questions

July 26, 2017

What Is An FHA Loan Modification?

What Is An FHA Loan Modification? According to the FHA loan handbook, HUD 4000.1, such modifications are part of a loss-mitigation program from the FHA and HUD designed to help FHA borrowers avoid foreclosure and keep their homes. HUD 4000.1 states that FHA loan modification is available through a program called FHA-HAMP, or the FHA Home Affordable Modification Program. “The use of an FHA-HAMP Option is to both alleviate the Borrower’s burden of immediate repayment of arrears and to adjust monthly payments to a level sustainable by the household’s current income. The FHA-HAMP Option may or may not include a Partial Claim.” A “partial claim” is defined in the FHA loan rules as follows: “The total amount available is the lesser of: (1) the unpaid principal balance as of the | more...

July 25, 2017

What Can I Improve With An FHA 203(k) Mortgage?

By Bruce Reichstein

An FHA 203(k) mortgage is basically a rehab loan, which can be used as a new purchase loan or a refinance loan for the purpose of repairing/rehabbing an eligible property. The FHA single family home loan handbook, HUD 4000.1, has a list of requirements and guidelines for FHA 203(k) loans, which includes a set of allowable improvements as well as a list of things FHA loan money cannot be used for. Let’s examine what is permitted with an FHA 203(k) loan first. Borrowers who are approved for an FHA rehab loan may use the loan for any of the following projects acceptable to the lender: – costs of construction, repairs and rehabilitation; – architectural/engineering professional fees; – the 203(k) Consultant fee subject to the limits in the 203(k) Consultant Fee | more...

FHA Loan Approval and Late or Missed Housing Payments

July 10, 2017

When Is An FHA Loan A Good Idea? Part Two

By Joe Wallace

When is an FHA loan a good idea? There are plenty of new purchase options, but those who have existing home loans and want to refinance into lower payments or interest rates should also explore their FHA mortgage options. FHA Loans Are For Those Who Want To Refinance FHA Loans Borrowers with existing FHA mortgage loans should consider the FHA Streamline Refinance loan option. This type of FHA refi loan does not offer money back to the borrower (except for refunds of money paid up front for things that later get financed into the loan amount) but does require a benefit to the borrower in one of several forms: A lower monthly payment A lower interest rate A fixed rate (when refinancing out of an adjustable rate mortgage loan) There | more...

June 29, 2017

What Is An FHA Loan Inspection?

By Joe Wallace

What is an FHA loan inspection? That is a tricky question to answer because the very phrase “FHA home inspection” implies something that is not true; that the FHA puts a stamp of approval on homes promising the borrower that they are defect-free once “inspected”. There is no such thing as an FHA home inspection. There IS, however, an FHA home APPRAISAL. But borrowers tend to mistakenly assume that the appraisal process is the same thing as a home inspection. These two things could not be further apart. Home Inspections Are Optional, But Very Necessary A home inspection (not an FHA appraisal) is an optional process the borrower is responsible for arranging and paying for and is not associated with the FHA appraisal in any way. The inspection should be | more...

Can I buy a manufactured home with an FHA loan?

May 18, 2017

FHA Loan Questions: Credit Score

By Joe Wallace

Do FHA loan rules require more than one credit score for a borrower to qualify for a mortgage loan? That’s what one reader wants to know this week: “Can you tell me if FHA can lend if someone only has one score? It’s a 621 score. This home buyer had a short sale four years ago and did not rebuild credit as she decided not to get any credit cards. She has a debit card and that is it. Please advise if one score would be accepted?” FHA loan rules for credit score requirements are found in HUD 4000.1, the FHA single-family home loan rule book. HUD 4000.1 has instructions to the lender for credit score requirements which include the following about what is called the Minimum Decision Credit Score: | more...

May 17, 2017

FHA Loan Appraisal Questions: Well Water Guidelines

By Joe Wallace

A reader asked us an FHA loan appraisal question this week about a recent post we did on water quality issues. “We have been requiring a safe water test to verify the water standards are meet per the guidelines but we now have an Loan Officer arguing that it is not required unless the appraiser notes an issue. Is a water test really not required have I been reading the guidelines wrong since 2015?” The “we” in this case would seem to be a participating FHA lender. Is the loan officer mentioned in the question correct? We turned to the relevant passages in HUD 4000.1 to reaffirm what the FHA loan rule book says about water quality. “The Mortgagee must confirm that a connection is made to a public or | 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...

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 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...

May 3, 2017

Work Absences And FHA Loans

By Joe Wallace

Can FHA loans depend on a borrower not having medical leave or temporary absences from work? That’s what one reader wants to know this week: “I was out from work one month do to a job related injury. Can I get an FHA loan? How long I have to wait to qualify? I have been working for the same company three years.” FHA loan rules may be non-specific on certain types of circumstances, preferring to defer to state law, lender standards, or other guidelines. However, this situation is not one of those. HUD 4000.1 specifically addresses the issue of temporary absences from the applicant’s place of employment. HUD 4000.1 describes this as a “temporary reduction of income”, stating: “For Borrowers with a temporary reduction of income due to a short-term | more...