Articles Published in: 2014

November 6, 2014

HUD Resolves American Bank Housing Discrimination Case

The FHA and HUD have announced a resolution in a housing discrimination case brought by HUD against a Maryland-based lender. According to HUDNo.14-139, “The U.S. Department of Housing and Urban Development (HUD) announced today that it has entered into an Initial Decision and Consent Order with American Bank, resolving HUD’s charge that the Rockville, Maryland-based lender discriminated against applicants with disabilities when it allegedly required applicants to provide documentation regarding their disabilities and attempted to obtain information about the nature and extent of those disabilities.” Federal Fair Housing laws state that it is a violation of federal law to discriminate against borrowers, “in the terms and conditions of a loan to an individual based on a disability, including imposing different application or qualification criteria. The Fair Housing Act also makes it | more...

November 5, 2014

FHA Loans and Social Security Numbers: A Reader Question

By Joe Wallace

A reader asks, “I live in a community state property. My husband does not have a social security number to run his credit. How can I proceed with a FHA loan without being able to run a credit report on my husband?” FHA loan rules are very specific when it comes to the identity and documentation requirements for all parties to be obligated on an FHA home loan. According to HUD 4155.1 Chapter One, Section B, the following applies: “All borrowers, including United States (U.S.) citizens, must have a valid Social Security Number (SSN) and must provide evidence of that SSN to the lender. The lender is responsible for • documenting an SSN for each borrower, coborrower, or cosigner on the mortgage • validating each SSN either through − entering | more...

November 4, 2014

FHA FICO Score Minimums: A Reader Question

By Joe Wallace

A reader asks, “If I only need a fico score of 580 to qualify for a FHA loan, why would my (lender name deleted) agent tell me that I need 600 score before he could preapprove me for a mortgage loan?” This reader question reveals a common misconception about the FHA single-family home loan program. It is true that the FHA does list a minimum FICO score for borrowers–borrowers who have FICO scores below 580 won’t qualify for the lowest downpayment amount of 3.5% and borrowers with scores below 500 don’t qualify at all. However, these score requirements are the FHA minimums, not the lender’s standards. Lender FICO scores can and do vary from the FHA loan rules–they can be more strict than the FHA loan rulebook’s own FICO requirements. | more...

October 31, 2014

FHA Loans: What Can Affect Your Loan Amount?

By Joe Wallace

One of the first questions on the minds of many borrowers is a logical one: “How much can I borrow?” There’s no single answer for this as county loan guaranty limits apply, and in general the amount of the FHA home loan is based on the sale price of the home or the appraised value, whichever is lower. When it comes to home loan refinancing, the appraised value of the property is very important. There are factors that can affect the amount of the FHA home loan for new purchases or refinance loans beyond those factors. For example, if you choose to finance allowable fees and expenses (including some discount points depending on the transaction and lender policies) your loan amount will increase. If you make a larger down payment, | more...

October 30, 2014

FHA Loans and Earnest Money: A Reader Question

By Joe Wallace

A reader asks, “I have a property listed and in escrow with an FHA buyer who was so confident that she would get the loan (the lender provided a fully approved letter, contingent on final review and appraisal), that she agreed to unconditionally release the EMD to my seller.” “Long-story-short, the buyer decided that in light of suspicions that she might not be approved in the final review, she would cancel the loan process and kill the deal. Now she wants her released EMD back and her agent claims there are FHA regulations that demand the return. I cannot find them. Do they exist? What do they say?” The reader doesn’t specify, but we assume the acronym “EMD” stands for “earnest money deposit”. With that in mind: This is a | more...

What you should know about FHA 203(h) Loans For Disaster Victims

October 29, 2014

FHA Mortgage Rate News: Rates Move Higher After Fed Announcement

By Joe Wallace

Our discussion last week of mortgage rate trends going into this week’s Fed announcement included the notion that mortgage rates might retreat into a defensive posture–defensive as in, little change (if any) in the two trading days leading into Wednesday’s scheduled announcement by the Fed. When the word came from the Fed on Wednesday, talk included the end of the Fed’s Quantitative Easing (QE) program. QE saw the government putting billions of dollars into markets in order to help stabilize the nation economically. Those investments affected mortgage rates, but when talk began of tapering off the program and eventually ending it, investor reaction was negative. Mortgage loan rates can and did move higher with more talk of the ifs and whens of the end of that program. Today following the Fed | more...

October 29, 2014

FHA Loan Rules and Seller Costs: A Reader Question

By Joe Wallace

A reader asks, “What costs will a seller incur if a buyer is using an FHA loan to purchase?” That is a difficult question to answer for a variety of reasons–state real estate law, lender requirements and FHA loan rules all have a say in the closing costs of a FHA home loan. There’s no itemized list of seller costs listed in the FHA loan rulebook, HUD 4155.1, but the FHA does make a list of certain costs and/or seller contributions to the sale that are and are not permitted. For example, the borrower is not to be charged for pest/termite inspections. The borrower can’t pay for the lender’s legal counsel, and the FHA has a set of regulations that dictate how much the seller can contribute toward the sale | more...

October 28, 2014

FHA Appraisals and Leaking Roof Issues: A Reader Question

By Joe Wallace

A reader asks, “My daughter bought home with FHA approved loan FHA appraisal did not said roof is in bad condition. After 4 months roof is leaking in 4 spots. She called roofing company to see what’s going on and they said roof should be replaced but with FHA regulations roof should last at least 2 years. What should she do now?” The FHA and HUD address this specific issue in a document for FHA loan applicants titled, “For Your Protection, Get A Home Inspection“. It says in part: “An appraisal is different from a home inspection. Appraisals are for lenders; home inspections are for buyers. An appraisal is required to: — Estimate the market value of a house; — Make sure that the house meets FHA minimum property standards/requirements; and — Make sure | more...

October 27, 2014

FHA Minimum Property Requirements: Acceptable Wells

By Joe Wallace

A reader asks, “I just inspected a home with a buried point well. Public water is not available. This type of well is common and legal in th area. Is this an acceptable well for FHA guidelines. No survey was provided so it is impossible for me to determine well location and distance from the septic.” FHA loan rules in this area tend to defer to the local authority. The FHA does not have detailed rules for wells that would cover all situations. The key to the acceptability of wells in connection with an FHA appraisal depends greatly on whether the wells are acceptable to the local authority. It’s impossible to determine the nature of an individual well mentioned in a reader question, but in general borrowers should know that | more...

October 24, 2014

FHA Loan Refinancing: A Reader Question

By Joe Wallace

A reader asks, “We currently have a FHA loan on our house and our mortgage company says we can not do a refi with a adjustable rate even know we will not be in our house 5 yrs or more. and now we have a 4.75 fixed rate for 30 yrs so what is our best option to get a lower rate cause we will be taking our retirement and social security in the next 2 months and will be in a hardship crisis.” This is a difficult reader question to answer. There are many reasons why a borrower could be turned down for a refinance loan, and some of those reasons can depend on the type of refinancing being applied for–cash out refinancing, for example, may be difficult for | more...