Articles Published in: August 2014

August 29, 2014

FHA Maximum Loan Amounts: Some Basics

FHA loan applicants often want to know how much they can borrow with an FHA mortgage. There’s no set answer to that question since the FHA loan amount depends on the appraised value of the home and other factors. Borrowers will need the amount of the sale price of a home before a loan amount can be properly calculated. Some borrowers want to know if they can apply for more than the sale price of the home with the intent of taking the excess funds for other purposes. This is not permitted for FHA home loans, so borrower who ask “how much can I borrow?” with that idea in mind should know it’s not a possibility. But the FHA loan basics for maximum loan amounts are spelled out for the | more...

August 28, 2014

FHA Mortgage Rate News For Thursday August 28 2014

By Joe Wallace

FHA mortgage loan rates have been lower this week in small increments, and while many borrowers could see the difference in rates reflected in their closing costs rather than the actual rate number itself, the move lower does benefit the borrower. Mortgage loan rates in general have approached their lowest levels of the year (best execution), and we’ve seen movement both upward and downward this summer only in a narrow range. The causes of this summer’s rate changes are varied, including breaking financial news from Europe. Add to that investor reaction to the Ukraine crisis, plus the situation in Gaza. At home, bond auctions, economic data releases such as the GDP and Employment Situation Report and other financial information have also influenced rates within the narrow range we’ve seen all | more...

August 28, 2014

FHA Loan Questions: Loan Changes

By Joe Wallace

A lengthy reader question came in recently, which we have edited for space and brevity’s sake. The reader asks, “I am a first time homebuyer & the originator of my FHA loan was (lender name deleted). In qualifying, it was clear my max affordable payment, including principle & interest, escrow, MIP, & interest was $1500 per month.” “During the underwriting process I kept in touch with the broker to ensure no substantial increase in my monthly payment. On the day of closing my payment came in over $400 higher than originally quoted due to an increase in escrow estimation. My broker acted like he was surprised, then told me he later his primary concern was getting my loan closed within 90 days to prevent a new credit report being pulled | more...

August 27, 2014

FHA Eliminates Post-Payment Interest Charges

By Joe Wallace

The FHA has announced the elimination of certain interest payments previously owed beyond the date the FHA mortgage was paid in full. According to the press release HUDNo.14-104, titled, “FHA To Eliminate “Post Payment” Interest Charges, “borrowers who prepay their FHA-insured mortgages will not have to make interest payments beyond the date their mortgage is paid in full.” A new FHA rule known as “Handling Prepayments: Eliminating Post-Payment Interest Charges”, will apply for FHA mortgages closed on or after January 21, 2015. According to the press release, the new rule, “explicitly prohibits lenders from charging borrowers post settlement interest, which is broadly defined as a ‘prepayment penalty’ by the Consumer Financial Protection Bureau (CFPB), for all FHA Single Family mortgage products and programs.” This is an important development for borrowers | more...

August 26, 2014

FHA Streamline Refinance Loan Rules: A Reader Question

By Joe Wallace

A reader asks, “I currently have an FHA loan that I have had for 5 years and would like to streamline,but the maximum loan amount has changed since I got the loan and the new limit is less than what I owe. Does the new limit apply to streamline loans as well as new loans?” The FHA and HUD issued some guidance back in 2013 to clarify the rules for maximum loan amounts for FHA Streamline Refinancing. According to Mortgagee Letter 2013-29, the following clarification affects how the maximum amount is calculated, and what can be included in the loan amount when calculating that maximum. “Mortgagees are reminded that when processing an FHA-insured streamline refinance mortgage, the new maximum mortgage amount must always be calculated starting with the outstanding principal balance on | more...

August 25, 2014

FHA Loan Down Payment Rules: A Reader Question

By Joe Wallace

A reader asks, “Without having the 20% down on a property at the purchase of a home, can the loan be refinanced, to achieve the 20% in a short time period less than 3 years?” It’s not entirely clear what the reader is getting at in this question, but in general, FHA loan requirements include a minimum down payment of 3.5% which must be paid on or before the loan’s closing date. This is known as the “minimum cash investment” and is non-negotiable. It must be paid up front. Some lenders may, depending on circumstances, require a larger down payment as a condition of loan approval. This may be due to credit issues which require the loan to have “compensating factors” which can include a down payment of more than | more...

August 22, 2014

FHA Mortgage Rate News For Friday August 22 2014

By Joe Wallace

If you are looking for an FHA home loan, chances are good you are paying attention to the rise and fall of FHA mortgage rates. There are many reason why these rates can change day to day or week to week. One factor—economic data releases that suggests weakness in the economy. This data can influence rates and push them lower, or, conversely, when economic/jobs data indicates improvement, rates can and sometimes do move higher as a result. But other factors can push rates higher or lower, too. We found a good example of that recently–mortgage rates moving lower based on investor reaction to world headlines. Last Friday, mortgage rates hit their lowest levels in the last eight weeks or so. That drop in rates was attributed to how investors reacted | more...

August 21, 2014

FHA Loan Rules For Verifiable Income: Retirement Pay and Social Security Benefits

By Joe Wallace

When applying for an FHA loan, many borrowers want to know if certain types of income will count towards their debt to income ratio. The debt to income ratio is calculated by the lender using income that qualifies according to the loan rules spelled out in HUD 4155.1. Not all income can be used–some types of income are not verifiable because the income isn’t considered stable, reliable, or likely to continue. But what does the FHA loan rulebook say about retirement pay and Social Security income? When it comes to retirement pay, the lender is required to document the income and its source. There’s also a consideration as to how long that pay might continue according to HUD 4155.1 Chapter Four Section D, which states: “Retirement income must be verified | more...

August 20, 2014

FHA Loan Appraisal Requirements: A Reader Question

By Joe Wallace

A reader asks, “We are looking at purchasing a home that was built in 1871 almost everything has been replaced but the owner can not find the well. They have an idea of where it is but not sure.” “They just put in a UV Water system and replaced the septic tank, but I am concerned that we will not get approval with an FHA loan. Any advice or suggestions would be greatly appreciated. I have already contacted our county property surveyor and health inspector and there is no information with the county on the property because in NY only new properties get surveyed.” Questions like this are very difficult to answer for one simple reason–FHA minimum property standards aren’t the only rules at work when it comes to appraisals. | more...

August 19, 2014

FHA Loan Rules: Qualifying Commission Income

By Joe Wallace

There are many questions about who can qualify for an FHA mortgage loan. One type of question involves whether FHA rules have a minimum income requirement (they do not) and other types of FHA loan questions involved what kind of income may qualify for an FHA mortgage. FHA loan applicants who earn some or most of their income through commissions do well to ask these sorts of questions–what do the FHA loan rules say about commission earnings? The FHA loan rulebook, HUD 4155.1, spells out the requirements for verifiable commission income. If income is declared verifiable, it may be counted towards the debt to income ratio your lender will calculate when processing your loan. HUD 4155.1 Chapter Four discusses commission income as follows: “Commission income must be averaged over the | more...