Articles Published in: July 2013

July 17, 2013

FHA Streamline Refinance Loans: Adding or Deleting Borrowers To The Title

When borrowers with existing FHA mortgages want to apply for streamline refinancing, one question that sometimes comes up is whether or not a borrower is permitted to add or delete someone from the title of the loan at the time of refinancing. FHA loan rules do address this issue. Those rules are found in HUD 4155.1, Chapter Six, Section C under a section titled Borrower Additions or Deletions to the Title on a Streamline Refinance. The concern for some borrowers is whether or not adding or deleting someone might trigger the due-on-sale clause making the entire loan amount payable according to the terms of the clause. The FHA does permit additions and deletions to the title as described in Chapter Six: “Individuals may be added to the title on a | more...

July 17, 2013

Credit Qualifying FHA Streamline Refinances

By Joe Wallace

FHA Streamline Refinances are designed to lower a borrower’s monthly payments and/or get a lower interest rate. For many borrowers this is a no-appraisal/no new credit application type of loan. But in some cases, a borrower’s payments may actually increase with a streamline refinance loan depending on whether permitted add-ons are included in the loan amount. In cases where the payments increase to 20% or more, there is a credit-qualifying requirement for the new loan. This requirement is found in the FHA loan rules for Streamline Refinancing loans, which say: “A credit qualifying streamline refinance must be considered when a change in the mortgage term will result in an increase in the mortgage payment of more than 20% when deletion of a borrower or borrowers will trigger the due-on-sale clause | more...

July 16, 2013

FHA Streamline Refinances: Does The FHA Require An Appraisal?

By Joe Wallace

Borrowers who apply for FHA home loans to buy their dream home have to have that property appraised as a part of the loan process. The appraisal helps insure the property lives up to FHA minimum standards and establishes the fair market value of the property. When it’s time to refinance, depending on the lender and the type of refinance loan you may be required to get a new appraisal–FHA cash-out refinancing, for example. In order to determine the loan amount, the current market value of the property is required. But what about refinancing that has no cash back to the borrower and is only intended for a lower interest rate or monthly payment? The FHA refinance loan program known as Streamline Refinancing, for example, which does just that. A | more...

July 15, 2013

FHA Loan Reader Questions: Mortgage Insurance and Down Payments

By Joe Wallace

A reader asks, “If a buyer is making a 25% down payment on a home purchase, is the mortgage insurance premium mandatory? This down payment is for a home sale that is appraised for the sale price or higher.” FHA loan rules for mortgage insurance premiums changed in early 2013. There were several changes, but one of them was to eliminate the exemption for mortgage insurance for those making a large down payment. According to the FHA/HUD official site, FHA mortgagee letter 2013-04 “rescinds the automatic cancellation of the annual MIP collection” announced in previous mortgagee letters (ML) and also “rescinds ML 2011-35, under which mortgages with terms of 15 years or less and LTVs of less than or equal to 78 percent at time of origination were exempt from | more...

July 12, 2013

FHA Loan Reader Questions: Is There A List Of Acceptable Down Payment Sources?

By Joe Wallace

A reader asks, “I am trying to find the complete FHA list of acceptable sources for down payments. For example, can a client refinance an existing land or home loan as a source of obtaining the necessary funds needed for downpayment?” FHA loan rules are very specific about acceptable sources of down payment funds. A borrower is required to make a minimum cash investment or down payment of at least 3.5% for a typical new-purchase FHA mortgage. That 3.5% can come from the borrower’s own funds, or be a bona fide gift, or come as the result of the borrower cashing out investments, bonds or other resources. What exactly IS the down payment a percentage of? How does the borrower know what to expect in this area? The FHA loan | more...

July 11, 2013

FHA Streamline Refinance Loans With Appraisals

By Joe Wallace

FHA refinancing loans include something known as a Streamline Refinance option; the FHA Streamline Refinance allows a borrower with an existing FHA mortgage to apply for refinancing to lower mortgage rates or monthly payments. No cash back is permitted and no FHA-required credit qualifying is needed. Additionally, FHA Streamline loans have no FHA-required appraisal. But what about situations where there IS an appraisal with an FHA Streamline Refinance? FHA loan rules for no-appraisal streamline loans describe the maximum loan amount as follows: “The maximum insurable mortgage for streamline refinances without an appraisal cannot exceed the outstanding principal balance • minus the applicable refund of the UFMIP, • plus the new UFMIP that will be charged on the refinance. Note: The outstanding principal balance may include interest charged by the servicing | more...

July 10, 2013

FHA Loan Answers: Can I Add Appraiser-Required Repairs/Improvements Into My FHA Loan?

By Joe Wallace

When you want to purchase a home with an FHA mortgage, one of the most important steps after choosing the property is the appraisal. An appraisal is required in order to establish the fair market value of the home and to make sure the home lives up to FHA minimum property standards. Appraisals may result in some required improvements, corrections or alterations to the home in order to bring it up to minimum standards. In such cases, the appraiser may make FHA loan approval conditional upon the completion of these changes and require a compliance inspection to make sure the fixes or alterations now bring the home up to standard. In such cases, is the borrower permitted to include the cost of this work in the sales price of the | more...

July 9, 2013

FHA Cash-Out Refinancing Loan Amounts

By Joe Wallace

When borrowers choose the refinance a home loan using an FHA cash-out refinancing loan, many come to the application process not sure how much they can apply to borrow. For FHA cash-out refinance loans, there are specific rules found in HUD 4155.1 that govern the amount of the loan. There’s no single, set dollar amount limit placed on cash-out refinancing. Instead, the FHA/HUD provide a set of guidelines that determine the maximum loan-to-value percentage based on how long the borrower has owned the home and lived there as the principal residence, and how much the home has been valued at based on a new FHA appraisal. HUD 4155.1 Chapter Three Section B states, “If the property has been owned by the borrower as his/her principal residence for 12 months or | more...

July 8, 2013

FHA Loan Rules For Earnest Money

By Joe Wallace

In previous posts, we’ve discussed the rules for FHA loans when it comes to the sources of your required minimum cash investment or downpayment. But did you know the FHA has rules concerning the source of your earnest money, too? In some cases the source of your earnest money may be scrutinized in a manner similar to the verifications required for down payment funds. FHA loans require downpayments from approved sources such as personal savings, cashed-in investments, bona fide gifts that meet FHA loan rules, etc. So what are the rules for earnest money paid for a home to be purchased with an FHA mortgage? According to the FHA loan rules found in HUD 4155.1 Chapter Five, Section B, “The lender must verify and document the deposit amount and source | more...

July 3, 2013

FHA Loans: Broker and Agent Fees

By Joe Wallace

As with many other aspects of the FHA home loan process, there are rules and regulations that cover broker and real estate agent fees. Those rules are spelled out in Chapter Five of HUD 4155.1. In a section titled “Settlement Requirements Needed To Close” we find detailed rules on how such fees can be issued and paid. For example, FHA loan rules require real estate broker fees to be included in the HUD-1 settlement statement. The specific rule says, “If a borrower is represented by a real estate broker and must pay any fee directly to the broker, that expense must • be included in the total of the borrower’s settlement requirements, and • appear on the HUD-1 Settlement Statement.” The rules are different when the seller is paying a | more...