Articles Published in: 2014

September 18, 2014

FHA Minimum Property Requirements: Central Air

A reader asks, “I am trying to purchase a home with an FHA loan. The central air in the house I’m trying to purchase is not working, however, the owner has window units in each room. They all work and cool the house very nicely. I was planning on replacing the central air after purchasing the home. I’ve been told the house will not qualify because the central air is not working. Won’t the window units suffice as meeting the minimum standards of living?” One interpretation of the FHA minimum property standards in this situation would be that it’s not the presence of the window units in the home that would be the issue, but rather than an installed appliance/system in the home is not functioning properly. The home may | more...

September 18, 2014

FHA Mortgage Rate News For The Week of September 15 2014

By Joe Wallace

We’ve seen recent trends in FHA mortgage loan rates towards higher numbers, but this Wednesday was a much anticipated day for the rates as investors and market watchers waited to hear the Fed made a policy announcement. The announcement did put upward pressure on rates, but we’ve seen some important movement in them already– September 12 was the day when best execution rates for FHA mortgage loans were pushed out of the previous single number comfort zone of 3.75% and back into a range of rates between 3.75% and 4.0, best execution. This is the first time in many weeks, if not months, that we’ve seen rates for FHA mortgages (best execution) move back into the 4% zone. On Wednesday, September 17, the range of FHA loan rates persisted, thanks | more...

September 17, 2014

HUD Announces Settlement in Housing Discrimination Case

By Joe Wallace

The FHA/HUD official site recently issued a press release stating there was a settlement in a housing discrimination case involving a home loan applicant on maternity leave. According to HUDNo.14-105, “The U.S. Department of Housing and Urban Development announced today that Jackson, TN-based mortgage lender FirstBank Mortgage Partners will pay $35,000 to settle allegations that it violated the Fair Housing Act when it denied a mortgage loan to a couple because one applicant was on maternity leave.” Federal housing laws forbid lenders from discriminating against home loan applicants, “in the terms, conditions, or privileges associated with the sale or rental of a dwelling on the basis of sex or familial status, including denying a mortgage loan or mortgage insurance because an applicant is pregnant or on maternity leave.” According to | more...

September 15, 2014

Assessments Versus FHA Appraisals: A Reader Question

By Joe Wallace

A reader asks, “How is the home value assessed for a 203K, fixer-upper loan? For instance if we bought a home for $200,000, and also borrowed $30,000 in repair funds to improve the home, would the home value continue to be assessed at $200,000 or could an appraisal actually be used in this case? I have read that home value with FHA PMI purposes will only be assessed at the LOWER of an appraisal and the original loan amount.” For questions like these, terminology is important when it comes to arriving at the answer needed. For example, there is a big difference between an assessment and an appraisal–and appraisal is done by an FHA-assigned professional to determine the value of the property to be purchased or financed by an FHA | more...

September 12, 2014

FHA Condo Loan Questions

By Joe Wallace

A reader asks, “I live in a condominium of 275 homes. We are getting complaints from mortgage companies that we are not FHA approved. We meet all legal guidelines that are required just not for FHA approval.” “We were told by someone that FHA has just recently stopped approving condos for mortgages, is this true? Also what is the percentage of FHA approved condos in Pennsylvania and what is the percentage of FHA approved condos in the entire United States. We have been told it was 10-20 percent. Also what are guidelines that a HOA must meet to be approved for FHA if it were to be considered. Thank you for your help in advance.” We have seen no guidance from the FHA stating that condos would no longer be | more...

September 12, 2014

FHA Down Payment Rules: When More Is Required

By Joe Wallace

We get frequent questions about FHA loan rules concerning down payments. Borrowers want to know how much money down the FHA requires for a single family home loan transaction, and unfortunately some borrowers mistakenly believe there is a single dollar amount that must be paid. The reality is that the required FHA down payment amount is a percentage of the loan rather than fixed dollar amount. That means every FHA loan down payment can be different depending on the transaction. Typically the FHA down payment requirement is 3.5%. That down payment requirement can be higher if the borrower has marginal credit qualifications that might force the lender to seek “compensating factors” in order to justify the loan. A bigger down payment can be one of those compensating factors. Another reason | more...

September 11, 2014

FHA Loan Myths: Refinancing With Your Existing Lender

By Joe Wallace

So you have a home loan–a conventional mortgage, VA loan or even an existing FHA loan–and you want to refinance. Some borrowers go right for their existing lender to apply, even if the interest rate or terms & conditions aren’t as advantageous as those offered elsewhere. Are you REQUIRED to use your existing lender for a refinance loan? No. Borrowers are free to refinance an existing home loan with another financial institution. This is true even of an existing FHA mortgage that you might be paying on–if you wish to refinance, you can search for another participating FHA lender who can work with you and your circumstances. The key to getting a better deal on your interest rate and terms is to comparison shop between your existing lender and any | more...

September 10, 2014

FHA Loan Reader Questions: Bank Statements

By Joe Wallace

A reader asks, “Is a bank statement, showing the amount needed at closing, required with my application? What is a lender required to ask me for?” In some cases the FHA gives the lender the option of collecting a bank statement, and in others the bank statement is FHA-required. Lender standards may insist on bank statements, so what the FHA allows and what the lender requires may differ; the FHA may not require a bank statement in some cases, but the lender is free to. We can find evidence of this in HUD 4155.1 Chapter Five Section B under the heading, “Cash and Savings/Checking Accounts as Acceptable Sources of Funds” states: The lender must verify and document the deposit amount and source of funds, if the amount of the earnest | more...

September 9, 2014

FHA Loan-To-Value Ratios, Down Payment Requirements

By Joe Wallace

FHA loans are different than conventional loans for a variety of reasons, including the amount of the down payment required. The comparatively lower down payment for FHA loans is one of the biggest advantages–borrowers who have to budget for a smaller down payment have more money to use in other areas of the FHA loan such as the fees for appraisals and compliance inspections. One important question on the minds of many borrowers involves how much the FHA will guaranty on the loan, what the down payment on that amount might be, and how these numbers are calculated. The maximum amount of the FHA loan is different than the maximum amount the FHA will guaranty on the loan. The borrower and lender could theoretically agree on a loan amount higher | more...

September 8, 2014

FHA Home Loan Advice: “Shop Before You Buy”

By Joe Wallace

The FHA official site, www.FHA.gov, has links to helpful videos that can instruct those new to the FHA mortgage loan program. One of those videos produced by the FHA/HUD is titled, “Shopping For Your Home” and offers some expert insights into how to make the best choices in the FHA loan process. One bit of advice the FHA offers is that borrowers can benefit by taking advantage of the option to get a referral to an FHA/HUD approved housing counselor. Borrowers who do this early in the loan planning process can save themselves time and even money thanks to the advice of the housing counselor. Borrowers will learn through the video what it takes to determine how much home you can afford by using a mortgage loan calculator. The video | more...