About real estate: FHA makes borrowing tougher, but some can get around the new rules
Q. I applied for an FHA loan to buy a house, but my application was rejected because the credit report my lender ordered showed a collection agency has filed a $1,200 claim against me for an unpaid credit-card bill. I admit that I didn't pay the bill, but I am disputing it because the $1,200 refrigerator I bought on my card from a department store didn't work properly, and I returned the crummy fridge. What can I do now?
A. You, like many of my other readers, have been snared by new regulations that the Federal Housing Administration enacted April 1.
More than 1 million people each year purchase a home with a low-down-payment loan that's insured by the FHA, the federal government's primary program to help low- and moderate-income buyers. The agency guarantees the lender that if the borrower defaults, it will pay the bank for some or all of its losses.
The FHA once ignored most collection accounts when granting its approval, but not anymore. The new rules instituted earlier this month basically mean that any mortgage application will be rejected — even if the borrower is disputing a credit-card charge or medical expenses — if the total amount exceeds $1,000.
Ironically, you are kind of in the driver's seat now. Though you are disputing the $1,200 bill for your faulty fridge, the collection agency may compromise for about half that amount and wipe your credit clean so you can qualify for the FHA loan.
Those with larger unpaid or disputed loans are eligible for a waiver, if they can prove their hardship was caused by a divorce, a death in the family, unemployment or a handful of other factors. Call the FHA for details, (888) 466-3487, or go to the agency's website, www.hud.gov.
Q. I saw an advertisement for a home that is on a "flag lot." What does this mean?
A. A flag lot is a parcel that, from a bird's-eye view, sort of looks like a flag standing on a pole. A long but narrow path or driveway connects to the street — that's the "pole" — and the bulk of the parcel and home (the "flag") sits to the left or right at the top of the connection.
Flag lots are fairly common, especially in rural areas and second-home communities. But they're also sometimes found in urban areas, where the original developer built one house that fronts the street and another behind it on the flag.
Buying a home on a flag lot can be a tricky proposition. The key concern is the buyer must make sure the long driveway or path is included in the purchase, or at least ensures that he or she can use it at all hours of the day.
I met a reader at one of my public appearances several years ago who said he bought a small house on a flag lot, only to find the driveway leading up to his house was owned by the family who lived in the home that directly faced the street. He had to pay those owners $50 a month just to use the driveway that led to his house in the back.
Q. Is it true all homes and public buildings in Florida must have doors that swing outward, rather than inward? This would seem like a pretty stupid law, especially because the high winds that come with a hurricane would blow an open door right off its hinges!
A. Florida and a few other states have laws requiring that most public buildings have doors that swing outward rather than inward, but the rules don't apply to personal residences.
True, a door you have to pull rather than push when you enter a building can cause problems when there are high winds. But a greater risk is if there's a fire or other emergency inside, say, a movie theater or nightclub. If the doors opened inward, the throngs of people trying to get out could cause a human logjam: Those closest to the door might be trampled, and the rest would be trapped inside.
I think that such laws are sensible. Though outwardly swinging doors are more apt to snap off their hinges in high winds, there's a much greater chance that folks who are already inside might need to escape if there's a fire or other emergency. And besides, having lived through one hurricane and a few tornadoes myself, I didn't really think about going to a movie or bar and worrying about how the doors of the establishment might swing as the winds were approaching.
• For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers, P.O. Box 4405, Culver City, CA 90231-4405.
© 2012, Cowles Syndicate Inc.
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