Articles Published in: 2013

February 6, 2013

FHA Loan Rule Changes

The FHA has issued several rule changes recently including alterations to the FHA HECM and HECM Saver programs, new guidelines for mortgage insurance, and also the procedures for how some FHA loan applications must be processed with credit scores and debt-to-income ratios that exceed certain new guidelines. For example, FHA refinance loans for borrowers with negative equity in their homes have new guidelines which state, “Refinances of Borrowers in Negative Equity Position where the borrower has a decision credit score below 620 and the debt-to-income ratio exceeds 43.00% must be manually underwritten.” The same is true in cases of FHA Energy Efficient Mortgages. New FHA rules state, “While Energy Efficient Mortgages where the borrower has a decision credit score below 620 and the debt-to-income ratio exceeds 43.00% must be manually | more...

February 5, 2013

FHA Announces Changes To HECM Loan Program

By Joe Wallace

The FHA has issued a press release and Mortgagee Letter describing changes to the FHA Home Equity Conversion Mortgage (HECM) program. According to the FHA official site, the FHA will merge certain options associated with the HECM program and the FHA HECM Saver program as described below: “…FHA will consolidate its Standard Fixed-Rate Home Equity Conversion Mortgage (HECM) and Saver Fixed Rate HECM pricing options. This change will be effective for FHA case numbers assigned on or after April 1, 2013. The Fixed Rate Standard HECM pricing option currently represents a large majority of the loans insured through FHA’s HECM program and is responsible for placing significant stress on the MMI Fund.” The FHA press release adds, “To help sustain the program as a viable financial resource for aging homeowners, | more...

February 4, 2013

FHA To Increase Mortgage Insurance Premiums

By Joe Wallace

In the last week of January 2013, the FHA issued a statement announcing an increase in annual mortgage insurance premiums or MIP for its single family home loans. According to the FHA official site, “FHA will increase its annual mortgage insurance premium (MIP) for most new mortgages by 10 basis points or by 0.10 percent.” The FHA is also increasing the annual MIP for FHA Jumbo Loans, which are defined as mortgages at $625,500 or more, “by 5 basis points or 0.05 percent, to the maximum authorized annual mortgage insurance premium.” The FHA also says the increases mentioned here are excluding “certain streamline refinance transactions.” This change takes effect for FHA loans with case numbers assigned on or after April 1, 2013, with certain exceptions as granted by the FHA | more...

February 1, 2013

FHA Loan Amounts: A Reader Question

By Joe Wallace

A reader asks, “My son and I have a combined income of $68,000 yearly. His credit score is 643 and mine is 639. I also have a IRA worth $190,000 what do we qualify for from a FHA Loan?” This is a type of question that comes in frequently and unfortunately the answer isn’t as simple as doing the math and returning a loan amount. There are many variables that go into calculating an FHA home loan amount including the borrower’s financial qualifications, the lender’s requirements, the cost of the home and other factors. A house for sale in one part of the country for $150,000 might be worth much or (or less) in another part of the country. Since FHA loans for new purchases are calculated on the fair | more...

January 31, 2013

A Reader Question on FHA Minimum Property Requirements

By Joe Wallace

A reader asks, “Would a home that is missing just the cabinet doors in the kitchen qualify for FHA? It has the everything else, its just the doors that are missing.” From time to time we get questions like these that reference specific conditions in a home. Will X make my home ineligible for an FHA mortgage? Does Y disqualify the property? In answering these questions there are two important aspects to consider. One is whether or not a specific condition is described in FHA minimum property standards. Some are, but many more are not. For example, a home located in certain flood zones may not qualify for an FHA mortgage. A home with standing puddles of water in the basement or a leaky roof may require corrections or repairs | more...

January 30, 2013

New Hampshire Real Estate Agency Settles Housing Discrimination Case

By Joe Wallace

Those viewing FHA.gov will find a recent press release by HUD announcing a settlement in a New Hampshire housing discrimination case that many families looking for homes should definitely read. According to the press release HUDNo.13-009, Scott Walker and his company Premiere Real Estate, LLC, in Concord, New Hampshire, have agreed to pay $9,000, “to settle allegations that they refused to rent to families with children in violation of the Fair Housing Act.” The press release adds, “The days of ‘no children allowed’ are long over,” according to John Trasviña, HUD Assistant Secretary for Fair Housing and Equal Opportunity. “For 25 years, the federal Fair Housing Act has guaranteed families with children the same rights to housing as those without children, and HUD will continue to take swift enforcement action | more...

January 29, 2013

FHA Refinancing Loans: No Cash Out With An Appraisal

By Joe Wallace

The FHA refinance loan options you have to choose from can include cash-out and no cash out refinance. The FHA has different rules for these types of refinancing; what are the basics of the FHA No Cash Out With Appraisal refinance loans? Maximum Mortgage Loan Amount The maximum you can borrower on a no cash out refinance loan with an appraisal is either: 97.75% Loan-To-Value (LTV) factor applied to the appraised value of the property, or the amount of the existing debt. Whichever amount is lowest between these two will be used to calculate the FHA refinance loan amount. Loan Amounts and UFMIP FHA loan rules state, “The total FHA first mortgage is limited to 100% of the appraised value, including any financed upfront mortgage insurance premium (UFMIP)…Generally, the maximum | more...

January 28, 2013

FHA Loan Reader Questions: First Time Home Buyers and Down Payments

By Joe Wallace

A reader asks, “Is it true the first time buyer with an FHA Loan can purchase the home with no money down?” The FHA loan program is similar in some ways to another government-backed loan program–VA loans. VA guaranteed loans are for eligible veterans and feature a no-down payment option unique to that program. FHA home loans, which are also government guaranteed mortgage loans issued by a private lender, do not feature a no downpayment option. According to FHA home loan rules as described in Chapter Two of HUD 4155.1, says the following about down payments on FHA loans in a section titled Maximum Mortgage Amount For A Purchase: “The maximum mortgage amount that FHA will insure on a purchase is calculated by multiplying the appropriate loan-to-value (LTV) factor by | more...

January 25, 2013

FHA Loan Reader Questions: Multiple FHA Loans

By Joe Wallace

A reader asks, “I was told that I could apply for a second FHA loan if my family outgrew the first house. We have a 980 sqft home–2 bedroom 1 bath that was purchased when my wife and I had only one child. Now we are 4 and need a bigger home. I applied for the second FHA loan and was told last minute that I needed to sell the first home, or lower the balance down to 70% of balance. I hear different things from different banks and want to see if FHA can help me out on this.” According to the FHA, “To prevent circumvention of the restrictions on making FHA-insured mortgages to investors, FHA generally will not insure more than one principal residence mortgage for any borrower. | more...

January 25, 2013

FHA Loan Reader Questions: How Do FHA Loans Differ From Credit Union Mortgages?

By Joe Wallace

A reader asks, “What is the difference between an FHA loan and a loan from a credit union?” FHA loans differ from other types of loans for many reasons. Conventional mortgages, for example, often require much higher down payments and credit score requirements for conventional lenders. When it comes to credit unions, there may be many differences or similarities depending on which lender you’ve compared the FHA terms and conditions with. It’s not possible to say across the board how FHA loans may vary–credit unions are all different–but a quick look at some terms and conditions of individual credit unions can be revealing. For example, some credit unions we looked at offered qualified first time home buyers conventional loans with low down payments but did not offer at or near | more...