Articles Published in: 2012

July 27, 2012

How Do FHA Loans Differ From Conventional Mortgages?

FHA guaranteed home loans differ from conventional loans in many ways. The required down payment for FHA home loans is often lower (a minimum of 3.5% down is required, where conventional mortgages may ask higher down payments). FHA home loans feature no penalty for early payoff, may have lower interest rates and other costs, and FHA loans can be assumed–a borrower may transfer the loan to another qualified borrower rather than having the borrower apply for a new loan. But FHA home loans are also different because of the primary purpose of an FHA guaranteed single-family home loan–these loans are intended for residences. They are not for investment properties, time shares, etc. FHA loan rules state; “FHA

July 26, 2012

FHA Refinancing Loans and Up Front Mortgage Insurance Premiums

By Joe Wallace

A reader asks, “I refinanced my home with a lender March 2011. That same lender called me a couple of months ago and said they could refinance me again at a 1/2 % less than what I am paying now at no out of pocket costs.” “They are charging me upfront mortgage insurance premiums of over $2,000.00. Do I have to pay the FHA UFMIP again, or are the trying to stick me with junk fees?” FHA loan rules on this subject are found in Chapter Seven of HUD 4155.2, Refinancing Loans. According to the FHA; “In most of the FHA mortgage insurance programs, FHA collects an

July 25, 2012

FHA 203(h) Loans For Disaster Victims

By Joe Wallace

In recent weeks we’ve posted several announcements about presidential disaster areas which were declared in Florida, Colorado, New Jersey, and Minnesota. One important benefit for some disaster victims in such cases is the FHA 203(h) Loan For Disaster Victims. This FHA loan program is described on the FHA official site; “Under the Section 203(h), Mortgage Insurance for Disaster Victims program, FHA provides mortgage insurance to assist victims of presidentially-declared disasters.

July 24, 2012

FHA Appraisal Transfers

By Joe Wallace

In our previous blog post about FHA appraisal portability and transfers, we discussed the fact that FHA appraisals which have not expired can be transferred from one lender to another if the borrower decides to change lenders prior to the FHA loan closing. This transfer is not automatic–the borrower is required to request the transfer, according to the rules issued in FHA Mortgagee Letter 09-29. Those rules also address something known as appraisal shopping, where a lender orders more appraisals, “to assure the highest possible value for the property and/or the least amount of deficiencies and/or repairs are noted and required by the appraiser.” Appraisal shopping is expressly forbidden by FHA loan rules, but there are circumstances where a second appraisal might be warranted. According to the FHA, those situations | more...

July 24, 2012

FHA Loan Reader Question: Appraisal Portability

By Joe Wallace

Are FHA appraisals “portable”? One reader asks, “I applied for an FHA loan through a large company a few months ago. I have decided to switch mortgage companies as the customer service has been really awful and the process has been taking 2-3 months for a closing date.” “Can I use the appraisal from the FHA loan process that I am currently going through with the new mortgage company? It seems as though it would be valid for 120 days but I didn

July 23, 2012

FHA/HUD Assistance For New Jersey Storm Victims

By Joe Wallace

A recent HUD press release, HUDNo.12-117, announced disaster assistance for New Jersey storm victims, including those with FHA guaranteed mortgages. On Thursday, July 19th, President Obama announced a disaster declaration for Atlantic, Cumberland and Salem Counties. According to the press release, “The President

July 20, 2012

Closing an FHA Home Loan: Settlement Requirements

By Joe Wallace

FHA loan rules include a list of items–settlement requirements–needed to properly close the FHA mortgage loan. HUD 4155.1, Mortgage Credit Analysis for Mortgage Insurance, lists these requirements. They begin with the “Lender Responsibility for Estimating Settlement Requirements”. According to HUD 4155.1 Chapter Five Section A, “For each transaction, the lender must provide the initial Good Faith Estimate (GFE), all revised Good Faith Estimates and a final HUD-1 Settlement Statement, consistent with the Real Estate Settlement Procedures Act (RESPA), to determine the cash required to close the mortgage transaction.” FHA loan rules say that in addition to the down payment required for FHA home loans (3.5% at a minimum), other borrower expenses are to be included in the amount due at settlement time. “Such additional expenses include, but are not limited | more...

July 19, 2012

A Second Chance For Some FHA Borrowers? HUD Accepting Applications to Purchase Troubled Neighborhoods

By Joe Wallace

The FHA and HUD have issued a press release about the Distressed Asset Stabilization Program, which is described as “an expansion of an FHA disposition program that sells pools of defaulted mortgages headed for foreclosure and provides the opportunity for the purchaser and borrower to avoid a costly foreclosure.” HUDNo.12-116 says “Qualified entities interested in purchasing pools of severely distressed loans formerly insured by the Federal Housing Administration (FHA) can now submit applications for the Distressed Asset Stabilization Program“, stating that around 3,500 loans will be sold in four areas among the communities hardest hit by the foreclosure crisis. Those areas are Chicago, Illinois, Newark, New Jersey, Phoneix, Arizona and Tampa, Florida. This stabilization program is part of the Obama Administration’s efforts to stimulate “public/private partnerships to stabilize neighborhoods and | more...

July 18, 2012

FHA Loan Qualifying Factors–The Relationship of the Mortgage Payment to Gross Income

By Joe Wallace

When a borrower applies for an FHA home loan, the lender must analyze the applicant’s debt-to-income ratio in order to approve the loan application. That ratio is basically described in FHA loan rules as the amount of verifiable income versus the amount of debt the borrower has. But that’s not the only factor in the equation when the lender is trying to insure the borrower is a good risk for an FHA mortgage loan. According to the FHA official site, the lender must establish whether the borrower can afford his or her current financial obligations AND the amount of the new obligations under the FHA mortgage. According to Chapter Four of the FHA loan rules (HUD 4155.1), “The relationship of the mortgage payment to income is considered acceptable if the | more...

July 17, 2012

General FHA Refinancing Loan Rules

By Joe Wallace

There are many things borrowers ask when applying for an FHA refinancing loan for the first time. Some borrowers are interested in lowering their monthly payments, others are interested in cash-out refinancing loan options. But there are some basics every borrower should know about FHA refinancing loans, regardless of what kind of refinancing they wind up applying for. For example, FHA loan rules as written in HUD 4155.1 Chapter Three state that a borrower must be current on any loan being financed. “The borrower must be current on the loan being refinanced for the month due prior to the month in which he/she closes the refinancing, and for the month in which he/she closes.” “Example: