Articles Published in: July 2011

July 20, 2011

FHA Condo Loans and Deed Restrictions

There are many differences between the different types of FHA loans available; there are new purchase loans, FHA construction loans, home equity conversion mortgages, and many other types. Just as there are different types of loans, there are also many different kinds of property you can buy with an FHA-insured mortgage. Mobile homes, mixed-use property, multi-family units, and condos can all be purchased with an FHA loan if the properties meet FHA requirements. When it comes to buying a condo, the loan approval process is more unique than for other types of properties. Condos, unlike a traditional suburban home, must be approved by the FHA and included on the list of FHA-approved process. A typical suburban home would require an FHA appraisal, but a condo must be on the FHA’s | more...

July 19, 2011

FHA HECM Loan Interest Rate Lock-Ins

By Joe Wallace

One frequently asked question about FHA Home Equity Conversion Mortgages has to do with the interest rate on the loan. Can the borrower get an interest rate lock-in on an FHA HECM? On HECM loans, the borrower’s principal loan limit could be affected if interest rates change between the time the loan is applied for and the time the loan closes. Do FHA rules allow a lender to fix the interest rate on these mortgages? According to the FHA official site, HECM loans are permitted to feature an interest rate lock-in at the time the loan application is submitted. “FHA will allow for mortgage lenders to set the expected interest rate for HECMs at the time the loan application is signed by the borrower rather than on the date of | more...

July 18, 2011

FHA Loans For Manufactured Homes: For New Models Only?

By Joe Wallace

Not all FHA loans have the same rules or requirements. There are different rules for FHA-insured new purchase home loans for existing construction properties, condo projects and manufactured homes. For example, house hunters may encounter no age restriction on many new purchase home loans when it comes to typical suburban homes or condos–as long as the property meets FHA standards and the lender is willing to approve the loan. That’s not necessarily true for FHA mortgages on manufactured homes. FHA rules state that manufactured homes are only eligible if they have been built after June 15, 1976. FHA rules for manufactured homes also include a space requirement. “Manufactured homes are homes built as dwelling units of at least 320 square feet in size with a permanent chassis to assure the | more...

July 15, 2011

Verifiable Income Rules For FHA Borrowers Between Jobs

By Joe Wallace

FHA loan applications require the borrower to submit information on past and current employment including gross income, how long the job has lasted, and other details. This data is not accepted at face value by the lender; the FHA requires the loan officer to verify sources of income to make sure they are legitimate and acceptable.

July 14, 2011

FHA Loans, Gift Funds and Inducements to Purchase

By Joe Wallace

When a borrower applies for an FHA home loan, a down payment is required for all transactions. Unlike VA home loans, FHA mortgages do not have a zero-money-down option. Some buyers may struggle to come up with a down payment on the FHA mortgage, which is why the rules allow borrowers to accept funds from outside sources to help pay for up-front expenses like down payments and closing costs as permitted by FHA regulations. But the source of that income determines whether the money is considered a bona fide gift, or if it is considered an “inducement to purchase” which affects the amount of the FHA mortgage loan. Gift funds that come from anyone with “an interest in the sale of the property” can be considered inducements to purchase, and | more...

July 14, 2011

FHA Loan Debt-To-Income Ratios: What’s Not Counted As ‘Debt’

By Joe Wallace

Getting approved for an FHA home loan means submitting a lot of personal information to the lender which is used to calculate a potential borrower’s ability to repay the loan. Your lender will ask for information on your current debts, credit lines, loans and other details. All of that information is compiled and compared to the amount of money the borrower gets from income sources the lender can verify. Once those details form a complete financial picture, the lender can make an educated decision on whether or not to approve an FHA home loan. The FHA allows 29% of your total monthly income to be used for housing costs and 41% towards housing expenses and other long-term debt. Getting that “debt picture” can be tricky–some income sources are not considered | more...

July 13, 2011

FHA Loan Amounts for Loans With Non-Occupying Co-Borrowers

By Joe Wallace

FHA loans permit a buyer to apply for the mortgage with a non-occupying co-borrower, which is defined as someone financially obligated on the mortgage and required to sign all legal paperwork to that effect, but who is not living on the property purchased with the FHA loan as their principal residence. In these cases, FHA rules state that the loan amount is limited to a 75% LTV, which means the borrowers must provide the remaining 25% of the purchase price. Some borrowers may read that feeling defeated before they start if that remaining 25% is too much to come up with, but FHA loan applicants should keep in mind an exception on this 75% LTV requirement for non-occupying co-borrowers who are also related to the occupying borrower. Specifically, FHA requirements | more...

July 12, 2011

FHA Loan Rules For Co-Signers, Co-Borrowers

By Joe Wallace

When a borrower applies for an FHA insured mortgage, he or she has the option of bringing a co-signer or co-borrower to the deal. It may be easy to assume the two terms are interchangeable, but they aren’t. Co-signers and co-borrowers have different rights and responsibilities under FHA regulations and it’s important to know which is which–especially if you’re the co-signer or co-borrower. The major difference between the two is that a co-borrower “takes title to the property”, meaning that there is shared ownership between co-borrowers. Co-signers sign the legal paperwork and are obligated to pay on the mortgage. Regardless of what financial arrangements have been made privately between the co-borrowers, on paper co-borrowers share responsibility for the mortgage payment. Co-borrowers must qualify for the VA loan together. Compare those | more...

July 12, 2011

Fidelity National Financial to Pay 4.5 Million in RESPA Kickback Settlement

By Joe Wallace

FHA borrowers come to the bargaining table with a set of consumer protections on their side in the form of the Real Estate Settlement Procedures Act, or RESPA for short. One of those protections is a policy that lenders may not get any financial compensation for referring business to third parties such as home warranties, insurance, etc. This rule prevents a conflict of interest in the real estate industry; RESPA laws are designed to keep buyers from being steered towards goods and services based on hidden relationships between lenders and third parties. HUD recently issued a press release announcing a settlement involving Fidelity National Financial, which was found to have engaged in illegal kickbacks and referral payments. The press release says Fidelity National Financial, “engaged in a widespread and years-long | more...

July 11, 2011

More Information on the FHA Loss Mitigation Program for Unemployed Borrowers

By Joe Wallace

The FHA offers help for those in trouble on their FHA mortgages in the form of the Loss Mitigation Program. The FHA recently sent out additional guidance aimed to specifically help homeowners who struggle to pay on their FHA loans during period of unemployment. The FHA’s “Unemployment Special Forbearance” was temporarily amended and clarified to further help prevent unemployed homeowners from going into default and foreclosure. “In Mortgagee Letter 2000-05, FHA provided mortgagees with additional guidance concerning the Loss Mitigation Program that all mortgagees must follow, when applicable, to reduce FHA insurance losses in those circumstances, as determined by the mortgagee, where delinquent mortgagors might be able to find an alternative to foreclosure.” Previous changes to the program as described in past FHA Mortgagee Letters permitted FHA lenders to “offer | more...