Articles Published in: 2011

July 25, 2011

FHA Loan Down Payments

FHA insured loans feature down payments as low as 3.5%. Borrowers considering the purchase of a home with an FHA or conventional mortgage should anticipate this expense as they make a budget that includes the new home purchase. There are a variety of costs associated with a home loan including the down payment, closing costs, appraisal fees and other expenses. The down payment can be daunting for some borrowers–having enough time to save up for the expenses of a new home purchase is one reason most real estate experts and financial planners recommend borrowers spend at least a year preparing for a home loan. But even for those who take the time to plan and save, the down payment requirement may be more than they can afford. Is there any | more...

July 22, 2011

FHA Loans and Appraisals: Who Sets the Appraisal Fee?

By Joe Wallace

The appraisal process is one of the most important steps toward buying a home with an FHA-insured mortgage. Borrowers cannot be approved for an FHA loan without the FHA appraiser doing his or her work to establish fair market value of the property and make sure the home meets FHA requirements. Like almost everything else in the FHA insured loan process, there are rules and regulations that guide appraisers, the lender who hires them, and how the work is to be done. One area the FHA is quite clear about in the rules is the appraisal fee. FHA does not have a fee structure or table for appraisers–there are no fixed dollar amounts for appraisal services. But that does not mean the FHA doesn’t have rules covering how high these | more...

July 21, 2011

FHA Streamline Refinance Loans and Mortgage Term Reductions

By Joe Wallace

FHA loans are available with terms of 15 and 30 years. Borrowers can choose shorter loans with higher payments, or they can choose a longer loan term and lower payments depending on what their financial priorities are. The shorter-term loan with higher monthly payments can result in less money being paid in interest over the lifetime of the loan, but for many borrowers the higher monthly obligation isn’t as affordable. Choosing the right loan term for your financial goals and monthly budget can be tricky. Some choose the longer loan term to maintain their monthly budget, but as people progress in their careers it may be more affordable later to take on those higher payments. Some decide simply to pay more than the monthly amount due, but others may seek | more...

July 21, 2011

FHA Loans And Appraisal Expiration Dates

By Joe Wallace

When a buyer finds a home to purchase using an FHA insured mortgage, the property must be appraised to establish the market value and make sure the home meets FHA standards before the loan can be approved. Once the home has been appraised and approved for sale, the borrower and lender can work out an agreed closing date. But FHA appraisals have an expiration date–they don’t remain valid indefinitely due to housing market changes and other variables. One common question about the appraisal process is whether the FHA allows an appraisal to be extended if it expires prior to the closing date. The short answer is that the appraisal may be extended for thirty days to allow the loan to close, “If a sales contract is signed or the borrower | more...

July 20, 2011

FHA Requirements For Condo Units

By Joe Wallace

In our last blog post we discussed FHA rules on condo units that affect their eligibility for FHA mortgages. The FHA does not approve condo loans for any property that features deed restrictions which penalize the borrower for selling or transferring ownership of the condo to someone else. FHA regulations state that any property purchased with an FHA mortgage must be freely transferable without penalty. But those aren’t the only requirements on FHA condo loans. FHA rules include provisions for proper documentation (in conjunction with applicable state law) of homeowner’s agreements, and statements of understanding between condo owners about shared responsibility for property management. FHA borrowers new to condominium ownership might not know that the responsibilities of condo ownership include shared duties and costs such as facility maintenance, code compliance, | more...

July 20, 2011

FHA Condo Loans and Deed Restrictions

By Joe Wallace

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...