Articles Published in: August 2015

August 13, 2015

FHA Loan Employment Rules

One of the most common questions about FHA home loans involves employment issues. How long does the FHA require an applicant to be on the job before he or she is eligible to apply for a loan? What happens is a borrower switches jobs, has a gap of employment between jobs, or has only recently started up with a new employer? The rules that define these issues are, at the time of this writing, found in HUD 4155.1. They will soon be referenced in a new FHA loan handbook, but for now, HUD 4155.1 Chapter Four Section D is the source for these rules. Chapter Four says: “To be eligible for a mortgage, FHA does not require a minimum length of time that a borrower must have held a position | more...

August 12, 2015

FHA Loans, Debt-To-Income Ratios, and Cosigning

By Joe Wallace

We received an excellent reader question recently about how being a co-signer on someone else’s financial obligation might affect a borrower’s chances for an FHA mortgage loan. Does being a co-signer have any influence on how the lender views your credit? Your debt-to-income ratio? FHA loan rules published in HUD 4155.1 address these issues. Chapter Four Section C has a heading titled “Contingent Liability On Cosigned Obligations” and addresses this reader question directly. The rules begin by describing what is considered a contingent liability for the purposes of processing an FHA mortgage loan appication: “A contingent liability exists when an individual is held responsible for payment of a debt if another party, jointly or severally obligated, defaults on the payment.” Simple enough. But the FHA goes further in the next | more...

August 12, 2015

FHA Refinance Loan Maximum Mortgage Calculation

By Joe Wallace

In recent posts we have discussed the maximum mortgage amount for FHA home loans. The borrower is required to make a minimum down payment on all new purchase FHA mortgage loans (3.5%) so that the maximum financing allowed would be 96.5%. Some borrowers may have to make larger down payments depending on credit scores and credit history. The FHA’s loan-to-value maximums can also be different depending on the type of transaction. With those ideas in mind, what are the FHA loan rules for refinance loans? For non-streamline, appraisal-required FHA refinance loans that feature no cash back to the borrower, FHA loan rules say the following: The maximum mortgage for a no cash out refinance with an appraisal (credit qualifying) is the lesser of the –97.75% Loan-To-Value (LTV) factor applied to | more...

When Is An FHA Loan Better Than A Conventional Loan?

August 11, 2015

FHA Loans And More Situations That Affect Loan-To-Value: Building On Own Land

By Joe Wallace

We’ve been discussing factors that can require an FHA borrower to make a large payment. Such factors can include loans where there is a non-occupying co-borrower, loans where there is an “identity of interest”, and situations where a parent is both the seller and the co-borrower on an FHA single family home loan. What other factors can require a larger down payment on your FHA home loan? In certain instances where an FHA borrower is building a home on his/her own land, the down payment requirement may change depending on specific details of the loan. HUD 4155.1 Chapter Two Section B states of these transactions: “A borrower is eligible for maximum financing if he/she acts as a licensed general contractor and is building a home on land that he/she already | more...

August 11, 2015

FHA Mortgage Rate Trends: Starting Out Higher

By Joe Wallace

In our last report we mentioned that Friday saw a rally for mortgage rates; the following Monday, August 10, served to wipe out those gains. In spite of that move higher, many lenders are offering best execution rates for 30-year fixed rate conventional mortgages (at the time of this writing) between 3.875% and 4.0%. We’ve had many days of improvement with minor adjustments here and there and a variety of sources report the rate activity we’re currently seeing could be deemed fairly typical. Overseas headlines about the Greek debt crisis have lost their influence on rate activity at home, it seems, but the China stock market woes could easily become an influence again if breaking news that influences investor behavior occurs. FHA mortgage loan interest rates are holding steady in | more...

August 11, 2015

HUD Mortgage Board Takes Action Against Two Lenders

By Joe Wallace

A press release on the FHA/HUD official site announces HUD action against two Texas-based lenders. HUDNo.15-102, published Monday August 10, 2015, states: “The U.S. Department of Housing and Urban Developments Mortgagee Review Board (MRB) today announced settlement agreements with two Texas mortgage lenders following allegations they engaged in a scheme to charge bogus fees to consumers, which improperly inflated mortgages for borrowers purchasing newly constructed manufactured housing.” 11 violations of FHA lending rules were alleged in the case. According to the press release, the HUD Mortgage Review Board claims, “American Home Free Mortgage, LLC (AHFM) of Prosper, Texas, artificially increased mortgage costs by an average of $12,000 per loan through illegitimate fees paid to a company owned and operated by its sales manager. In addition, HUD alleged that there were | more...

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

August 10, 2015

FHA Loan Maximum LTV Amounts

By Bruce Reichstein

In our last blog post we discussed some of the basics about FHA loans, loan-to-value limits, and how certain circumstances might affect the maximum LTV on an FHA mortgage. Normally FHA single-family home loans for new purchases have a maximum LTV of 96.5%, requiring the borrower to make a 3.5% down payment. But FHA loans can have different LTV percentages if certain conditions apply. Homes that are purchased with non-occupying co-borrowers, for example, may require a higher down payment. According to HUD 4155.1 Chapter Two Section B, “A non-occupying borrower transaction involves two or more borrowers where one or more of the borrower(s) will not occupy the property as his/her primary residence. When there are two or more borrowers, but one or more will not occupy the property as his/her | more...

August 10, 2015

What Affects My FHA Home Loan Amount and Down Payment?

By Joe Wallace

FHA home loans offer a potential maximum financing of 96.5%, with a required minimum down payment (also known as a minimum investment) of 3.5%. But not all borrowers are eligible for the maximum financing amount. Some borrowers may be required to put more money down depending on circumstances. What are these circumstances? The most obvious one hinges on a borrower’s credit history and FICO score. Borrowers who have “marginal” FICO scores or who don’t otherwise meet the lender’s minimum standards for the loan may be required to put more down as a “compensating factor”. But credit isn’t the only thing that can affect the FHA loan’s maximum financing amount on a given transaction. HUD 4155.1 Chapter Two Section B has the guidelines for calculating the maximum financing amount permitted in | more...

August 8, 2015

FHA Mortgage Loan Interest Rate Trends: Back And Forth

By Joe Wallace

Mortgage loan rates had a tug-of-war this week. On Monday rates pushed back into the high three percent range (best execution) for 30-year fixed rate conventional mortgages, but after that rates moved higher due to comments from the Fed on interest rates, and kept moving higher the next day as scheduled jobs data release time approached. But once that jobs report came out, there was already one day of recovery, and Friday saw reports of a rally by day’s end, not higher numbers–the final count for the week was three days of improvement against two days in a row for some upward movement. But we’re still seeing rates hovering at or near the high three percent zone. 30-year fixed rate conventional mortgage loans are, best execution, sometimes dipping back into | more...

August 7, 2015

FHA Refinance Loan Options

By Joe Wallace

If you are considering a refinance loan, there are many options under the FHA single-family home loan refinance program. You can refinance from a conventional or non-FHA mortgage into an FHA loan, get out of a variable or adjustable rate mortgage into a fixed rate loan, and even refinance with added funds for approved energy-efficient features or upgrades. FHA home loans allow non-FHA borrowers to refinance using cash-out or no-cash-out refinancing. These types of refinance loans require a new appraisal and credit check. Borrowers should know that even if it’s only been a short amount of time since loan closing, any appraisal used on a home where the loan has closed cannot be re-used for the purpose of a new loan. Borrowers who want to refinance early should expect to | more...