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Articles Published in: 2011

April 26, 2011

Rules Governing FHA Loan Fees

By Joe Wallace

In recent blog posts we’ve discussed the fact that the FHA does not set interest rates on the loans it insures. Forces in the marketplace already determine the state of housing market interest, for the FHA to get involved in setting rates for FHA-guaranteed loans would involve a whole new layer of effort and study to keep up with ever-changing market conditions. Instead, the FHA allows lenders and borrowers to negotiate the rates. What the FHA does do is to control the fees and charges associated with an FHA loan. FHA rules state fees and costs must be “reasonable and customary”. For example, FHA rules allow the lender to collect an origination fee. For loans through the end of 2009, the fee was limited to one percent. The one percent | more...

 

April 26, 2011

FHA Home Loan Interest Rates

By Joe Wallace

One of the most common misconceptions of the modern FHA loan program is that FHA or HUD is responsible for setting interest rates on the home loans insured by an FHA loan. It’s easy to understand why some might think that is true; the FHA does place limits on certain fees, how closing costs and down payments are paid and by whom. Why wouldn’t the FHA also regulate the interest rates of an FHA-insured mortgage? The FHA does regulate (but does not set) interest rates in some cases. Any FHA-insured adjustable rate mortgage, for example, has built-in limits on when the rates can be adjusted, and how often. There are even caps on how many percentage points may be changed over the lifetime of the variable rate loan. But what | more...

 

April 25, 2011

FHA Loans: What Costs Can the Seller Pay for the Buyer?

By Joe Wallace

Negotiating isn’t easy, no matter which side of the table you’re sitting on. The buyer wants to get the best deal for money spent, but doesn’t want to make an offer that is too low for fear of scaring off the seller. From the seller’s point of view, getting the most out of a major investment like a house is crucial, but ask too much and the buyer may look elsewhere. When it comes to buying a home with a FHA guaranteed mortgage, the FHA loan program has some options buyers and sellers alike should consider to make the purchase more attractive. In the course of buying a home with a FHA-guaranteed mortgage, buyers and sellers can negotiate a sales price, but what if that price is higher than the | more...

 

April 25, 2011

FHA Loans: Comparing Adjustable Rate Mortgages

By Joe Wallace

Some borrowers decide an adjustable rate mortgage is an option they’d like to look into. While there is a natural risk involved with adjustable rates–the interest rate can increase and raise the amount of monthly payments–borrowers who shop around and compare terms may be able to get into an adjustable rate mortgage that has more favorable terms. It’s a smart idea to go into an adjustable rate mortgage with the notion that you should refinance later into a fixed rate loan. The FHA streamline refinancing program has a way to do just that for those who have FHA ARM loans. Other refinancing options may be available for conventional-to-FHA loans, we’ll explore refinancing issues in another blog post. What should a borrower do to find the best adjustable rate mortgage? To | more...

 

April 20, 2011

FHA Loans and Retirement Income Verification

By Joe Wallace

When applying for an FHA home loan, the borrower must list all sources of income so they can be verified as part of the loan approval process. The lender is required to check all sources of income to insure they are dependable and “likely to continue” into the future, according to the FHA official site. Income verification helps the lender accurately determine a borrower’s debt-to-income ratio; without knowing that ratio it’s impossible to issue a loan with any degree of certainty that it would actually be repaid.

 

April 19, 2011

FHA and HUD Turn Up the Heat on Mortgage Scammers

By Joe Wallace

Recent announcements by the FHA and HUD have increased the pressure on housing market scammers, but consumers should still be on the lookout for warning signs of a scam artist at work. The most recent announcement from FHA/HUD comes in Mortgagee Letter 2011-17, which revises HUD

 

April 19, 2011

New HUD Awareness Campaign Targets Foreclosure Con Artists

By Joe Wallace

FHA borrowers have a new resource to look to in order to become more educated borrowers and avoid foreclosure scams. The Department of Housing and Urban Development has announced a new awareness campaign called Know It. Avoid It. Report It. According to an April 18, 2011 HUD press release, the campaign has launched in Miami, Chicago and Los Angeles and has two missions; one to direct homeowners in financial trouble toward reputable counselors and anti-foreclosure resources, the other to get the help of homeowners to shut down scams and con artists. The HUD press release warns home owners, “Newly deceptive scam artist tactics lure homeowners into misleading agreements. Their tactics include giving the false impression that they are affiliated with the government, charging illegal up-front fees, and executing fraudulent lease-back, | more...

 

April 18, 2011

FHA Loans: Facts About the Good Faith Estimate

By Joe Wallace

The HUD GFE Good Faith Estimate is paperwork the borrower is given as part of the the FHA loan process. This is a very important document–it explains the nature of the FHA loan including potential interest rate increases, the amount of monthly mortgage payments that could increase as a result, and plenty of other data crucial to making a budget for the new mortgage and other living expenses. The form states, “This GFE gives you an estimate of your settlement charges and loan terms if you are approved for this loan. For more information, see HUD