Articles Published in: August 2011

August 9, 2011

FHA Loans and Down Payment Assistance

FHA home loans require a “minimum investment” or down payment from the borrower in order to be approved. The amount of the down payment for FHA insured loans at the time of this writing is a minimum 3.5% of the price of the home. Some loans may require more due to certain factors, but 3.5% is the FHA minimum. The buyer must pay the down payment, and it should be noted that other up-front costs such as closing expenses, appraisal fees and other charges do not count towards this minimum. The down payment amount all by itself is a serious amount of money for any borrower, and it’s one reason why financial experts always recommend borrowers take at least a year to prepare for the costs of a home loan–making | more...

August 8, 2011

Am I Ready For An FHA Home Loan?

By Joe Wallace

Buying a home with an FHA insured mortgage is an important investment, and many borrowers at the start of their journey not knowing whether they are ready for their entry into home ownership. We’ve said time and again that the best course of action is to take the advice of financial experts who recommend preparing at least a year before making a full commitment to buy a home. But why is that recommended? Some first time home buyers don’t understand the expenses connected to purchasing a home. The down payment required on FHA loans–3.5%– is the lowest you’re likely to find compared to conventional loans which often require 10% down or more. That down payment is only one of the expenses. There are closing costs, appraisal fees, and optional money-saving | more...

August 5, 2011

FHA Loans and Earnest Money Verification

By Joe Wallace

When a house hunter finds a home they want to make a serious offer on, they move out of one phase of the home buying process and into another. The shopping phase is what some view as the cost-free part of finding a home to buy with an FHA insured mortgage. Once the right property is found, that’s when the borrower starts to tap into the money he or she has set aside to deal with the costs of purchasing real estate. One of those expenses? Using earnest money–the amount an FHA borrower puts down to show a seller they are making a serious offer on the property. According to the FHA official site, earnest money “must be substantial enough to demonstrate good faith and is usually between 1-5% of | more...

August 4, 2011

FHA Loan Options for HUD Homes

By Joe Wallace

A HUD home is defined by the FHA as “a 1-to-4 unit residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage.” When a home owner with an FHA mortgage loses the property because of loan default and foreclosure proceedings, the Department of Housing and Urban Development takes ownership and puts the house back on the market. According to the official site, HUD homes are sold as-is and have no warranty. There are two basic types of HUD homes available. One is considered “insurable” which means they meet the FHA’s minimum property requirements and would theoretically be eligible to be purchased with an FHA home loan. The other type is classified as “uninsurable” which means the property does not live up to FHA MPRs. | more...

August 4, 2011

FHA Rules For Termite Treatment

By Joe Wallace

When an FHA loan applicant wants to buy a home with an FHA-insured mortgage, the property must be appraised and an FHA-approved appraiser, who reviews the home to make sure it meets FHA standards. Depending on where the home is located, FHA loan rules or local ordinances may require pest control treatments on the property. The appraiser may also require them if evidence of termites or other insects is evident at appraisal time. The FHA rules for termite treatment are spelled out at FHAOutreach.gov. Those rules include guidance on the particular types of treatment, references, and guidelines on reporting and licensing requirements for pest control agencies used to treat a property to be purchased with an FHA mortgage. For new construction properties in “termite prone areas,” FHA rules say “acceptable | more...

August 3, 2011

FHA Section 203(k) Loan Facts

By Joe Wallace

The FHA Section 203(k) loan, sometimes called a rehab loan, the Federal Housing Administration’s “primary program for the rehabilitation and repair of single family properties” according to the official site. The FHA 203(k) is sometimes used in partnership with state or local agencies, non-profits and other groups to rehab homes, but the 203(k) can also be used by individuals to purchase and repair individual properties. The 203(k) section at FHA.gov states, “When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and | more...

August 2, 2011

FHA Home Loans, Appraisals, and Mold

By Joe Wallace

When looking for a home to purchase with an FHA loan, some borrowers find themselves in a situation where the results of the appraisal recommend mold abatement. Some potential borrowers challenge the mold abatement requirement–you can find many Q&A forums on real estate issues where posters have stated, “I’ve searched and did not find any documents that say that FHA requires mold to be remediated.” FHA standards for homes to be purchased with an FHA insured mortgage loan include a requirement that the property be free from defects and conditions which could affect the health or safety of the purchaser. A borrower may not find a “chapter and verse” type statement saying “Mold abatement is required”, but the health and safety clauses built into FHA loan regulations can and do | more...

August 2, 2011

FHA Disaster Assistance Announced For Kentucky, Wyoming, and New Hampshire

By Joe Wallace

2011 will likely go down in history as the “year of the storm,” if press releases from the FHA and HUD are any indication. Recent FHA announcements on the latest areas affected by storm and flood damage include press releases detailing FHA assistance for Kentucky, Wyoming, and New Hampshire. According to the FHA, federal disaster assistance is on the way in these areas to provide support for homeowners–including those with FHA mortgages. HUD Secretary Shaun Donovan is quoted in a recent FHA press release, saying “Families who may have been forced from their homes need to know that help is available to begin the rebuilding process…” Donovan added, “Whether it’s foreclosure relief for FHA-insured families or helping these counties to recover, HUD stands ready to help in any way we | more...

August 1, 2011

FHA Takes Action Against Hundreds of Lenders

By Joe Wallace

Elsewhere in this blog, we’ve written about the emphasis FHA/HUD places on consumer protection, the importance of the Fair Housing Act, and the FHA’s approach when it comes to protecting the customer. While it’s true that sometimes the customer is the first line of defense against discriminatory and otherwise illegal practices, the FHA doesn’t simply wait for consumers to lodge complaints. A good example of this is the August 1, 2011 press release issued by the FHA about its actions against 240 FHA-approved lenders. The FHA has something called the Mortgagee Review Board which scrutinizes FHA lenders; the most recent outcome of that scrutiny includes “hundreds of administrative actions against FHA-approved lenders who failed to meet its requirements” according to the press release. The Mortgagee Review Board, or MRB for | more...