Articles Published in: June 2015

June 24, 2015

FHA Single Family Home Loans: Owner-Occupiers Only

Recently we answered a reader question in the comments section about the nature of FHA single-family home loans. The reader wanted to know if it was possible to get an FHA home loan on a home to be used as a rental property or as a guest house for visitors, etc. The short answer to this question is no. FHA loans are designed for those who intend to purchase a home and move into it when the loan closes. The borrower is required to occupy the home as his or her personal, primary residence as a condition of loan approval. This would prevent borrowers from purchasing the home to use as a rental property, vacation home or guest house. HUD 4155.1 Chapter Four Section B spells it out in black | more...

When Is An FHA Loan Better Than A Conventional Loan?

June 24, 2015

FHA Loan Minimum Property Standards

By Joe Wallace

When you’re shopping for the home you want to purchase with an FHA mortgage, it’s logical to wonder what kinds of standards the property must meet in order to qualify for an FHA loan. FHA minimum standards address a variety of issues including a home’s location, its condition, and how the current state of the home may affect its future value. At the time of this writing, HUD 4155.2 Chapter Four has a set of basic standards that guide the FHA appraiser, which start with the following: “The site conditions of a property must be free of health and safety hazards.” That’s followed by some guidance on homes with lead-based paint. “If the property was built before 1978: –the seller must disclose known information on lead-based paint and lead- based | more...

June 23, 2015

FHA Loans For Eligible Properties

By Joe Wallace

Recently we posted about two types of property you cannot purchase using an FHA home loan: houseboats and recreational vehicles. The reasons you cannot get an FHA-guaranteed home loan for these things is because they cannot be affixed to a permanent foundation. So what kinds of property can you purchase–or refinance–with an FHA loan? Many would assume that a typical suburban home is allowed, and that is true. But so are condo units in FHA-approved condominium projects, manufactured homes, and many other types of property you might not find in a typical neighborhood in the ‘burbs. FHA loan rules currently found in HUD 4155.2 at the time of this writing spell out the list of properties a lender may offer FHA loans for. They include the following guidelines to the | more...

June 22, 2015

FHA HECM Loan Changes To Non-Borrowing Spouse Policies

By Bruce Reichstein

Last week we discussed some recent changes to FHA HECM loan policies. There have been a number of updates and changes to FHA HECM loan policy, especially in the areas that affect non-borrowing spouses. If an FHA borrower applies for a Home Equity Conversion Mortgage and has a spouse that is not a fellow FHA borrower, can that spouse remain in the home after the FHA borrower dies? There may be good news for these non-borrowing spouses depending on circumstances and the lender. According to an FHA Mortgagee Letter, HUDNo.15-0753, “Under FHAs revised policy, lenders will be allowed to proceed with submitting claims on HECMs with Eligible Surviving Non-Borrowing Spouses and Case Numbers assigned before August 4, 2014 in accordance with the terms of the mortgagee letter by: –Electing to | more...

June 22, 2015

FHA Loans For Houseboats and RVs?

By Joe Wallace

One very common question about FHA loans involves the type of properties eligible for a single-family loan. FHA loan rules state that certain types of properties cannot be considered eligible for an FHA loan, including condo-hotels, time shares, and seasonal homes. One of the sticking points for these properties when it comes to the FHA loan rulebook is that there is either intermittent occupancy (due to the nature of a condo-hotel, for example) or occasional occupancy intended for the home to be purchased with the FHA loan. Unfortunately, in these cases the FHA loan occupancy requirement is often what bars the loan–you are required to be an owner-occupier of the property you buy with an FHA single-family mortgage loan. But what about properties where the borrower does intend to live | more...

June 20, 2015

FHA Mortgage Loan Interest Rate Trends: Recovering?

By Joe Wallace

It’s been an interesting week for mortgage rates–there was some breath-holding ahead of the Fed announcement that interest rates would not be hiked just yet, and we’re entering a period now where market watchers have labeled 2015 as a time of upward movement for rates in general. But the overall trend this week wound up being downward movement, however small. Rates fell a bit on Friday to end the week, but you’ll notice that a smaller number of lenders are offering the lower best execution 4.0% than those offering 4.125% best execution on 30-year fixed rate conventional mortgages. FHA mortgage loans still haven’t budged out of the best-execution comfort zone of 3.75% for the most qualified borrowers. Remember, best execution rates are not available to all applicants or from all | more...

June 19, 2015

FHA Amends HECM Loan Policy To Help Non-Borrowing Spouses

By Bruce Reichstein

After many changes to FHA Home Equity Conversion Mortgage (HECM) rules, another round of changes has been announced. The FHA HECM loan program has probably changed more in the last year or so than any other single-family FHA loan program, and many of the changes we’re seeing now address important issues related to what happens when the primary borrower dies and/or the HECM loan is about to be declared due in full. According to HUDNo.15-073, the FHA has “issued a revised policy under its Home Equity Conversion Mortgage (HECM) Program giving FHA-approved lenders expanded options to allow eligible non-borrowing spouses the potential to remain in their home following the death of the last surviving borrower.” In 2014 there were changes in FHA HECM policies, “to allow for the deferral of | more...

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

June 19, 2015

FHA Appraisals: Pass Or Fail?

By Joe Wallace

We field many questions about FHA home loans. Some of those questions have to do with a borrower’s appraisal process and whether certain conditions will cause the home to pass or fail an FHA appraisal. One variation on the types of questions we get concerning appraisals goes like this: “We are buying an a home that failed initial appraisal for small repairs. We made repairs to X, Y, and Z, but had to make the repairs to one area as a make-do or temporary fix. Will this pass the re-appraisal?” There are several issues at work here. The first is correcting a misconception about the appraisal process itself. When a home gets appraised for an FHA loan and corrections or repairs are listed which must be made as a condition | more...

June 18, 2015

FHA Loans For LGBT Borrowers: Equal Access Guaranteed

By Joe Wallace

During the month of June, the FHA/HUD official site has posted several things about Fair Housing rules that pertain to members of the LGBT community. Did you know that FHA and HUD rules require equal access for all financially qualified applicants and that you cannot be discriminated against in the housing process for non-financial reasons, including identifying as LGBT? And that’s not limited to FHA loans or refinance loans. According to the HUDdle blog at HUD.gov,” In 2010, HUD formally adopted the principle that gender identity discrimination is sex discrimination under the Fair Housing Act. This means that when HUD receives a fair housing complaint that alleges discrimination because someone does not conform to gender stereotypes, HUD now begins a formal investigation under the Fair Housing Act.” Since issuing this | more...

June 18, 2015

FHA Loans, Refinance Loans, and Missed Mortgage Payments

By Joe Wallace

We get many reader questions about FHA refinance loans. Some of those questions involve what the lender might do if the borrower has missed mortgage payments leading up to the refinance. The short answer to these types of questions is that it depends on the type of refinance loan in question and the reason for the loan. All FHA refinance loans require the borrower to be current or to be brought current on the loan–that could mean in some foreclosure avoidance scenarios that the missed mortgage payments are added into the new loan amount. For borrowers who are not seeking foreclosure avoidance, but rather simply refinancing the property, there may be a 12 month seasoning period or mandatory waiting period which must elapse between the last missed payment and the | more...