Articles Published in: August 2015

August 7, 2015

FHA Loan Fees Which Are Not Considered Closing Costs

There are a variety of fees and expenses associated with FHA home loans; typical costs that the borrower should be saving up for during the planning stages of a new home loan. The FHA requires a minimum 3.5% down payment, for example, and that down payment is considered separate from the borrower’s closing costs. And then there are expenses which are not considered part of the down payment OR closing costs. The FHA loan rules found in HUD 4155.2 at the time of this writing explain these costs. Discount points (a prepaid amount designed to lower the interest interest rate) are included in such expenses–not a down payment, not a closing cost. Chapter Six of HUD 4155.2 describes discount points as follows: “Discount points charged by the lender on a | more...

August 6, 2015

FHA Loans And Derogatory Credit Information

By Joe Wallace

Many borrowers want to know what might be considered a problem when it comes to the lender’s review of credit histories and FICO scores. Lender standards apply in all such situations, so FHA minimums aren’t the only requirements to be concerned with, but in general there are some credit issues that could require the lender to process your loan paperwork “by hand” or take a closer look at your financial qualification data. What are these issues? According to the FHA/HUD official site, delinquency is an important factor: –Bankruptcy, foreclosure, collection account, charge-off, tax lien, or judgment; –Any mortgage trade line including mortgage line-of-credit payments, during the most recent 12 months, consisting of: –3 or more late payments of greater than 30 days, or –1 or more late payments of 60 | more...

August 6, 2015

Participating FHA Lenders: Direct Endorsement Versus Conditional Approval Authority

By Joe Wallace

There are two types of participating FHA lenders. One has “automatic authority” or “direct endoresement” (DE) authority to approve your FHA loan application in most cases, and the other has “conditional approval” authority which requires the lender to submit your FHA loan paperwork to the FHA for final review before the loan can be closed. FHA loan rules for these two different types. Found in HUD 4155.2 Chapter One Section A, we learn the following: “Under FHAs Direct Endorsement (DE) program, approved lenders may underwrite and close mortgage loans without FHAs prior review or approval. This includes all aspects of the mortgage loan application, property analysis, and borrower underwriting.” Chapter One includes a note, adding: “This assumes that the lender is a DE lender with unconditional approval. If the lender | more...

August 5, 2015

FHA Mortgage Rate Trends: Higher After Fed Talk Of Rate Hike

By Joe Wallace

Mortgage loan interest rates have been recovering, but on Tuesday the Fed’s discussion of a possible September interest rate hike caused a reaction that brought rates higher. 30-year fixed rate conventional mortgage loan interest rates, best execution, moved back to 4.0% after a brief flirtation with the high three percent range, though some lenders may still be offering sub 4% rates to the most qualified applicants. At the time of this writing, FHA best execution rates are still at 3.75% which is a change from the previously held range of rates with 4.0% at the upper end. Remember, best execution means rates that are offered to borrowers with ideal financial qualifications. Your FICO scores, plus other financial qualifications, will determine your access to rates or rates similar to them. Your | more...

August 5, 2015

FHA Condo Loans: Site Condos and Manufactured Housing Condo Projects

By Joe Wallace

In our last post we discussed basic eligibility rules for FHA condo loans–a condo project must be on or added to the FHA approved list in order to be approved for an FHA mortgage. But there are additional rules in some cases. For example, site condo projects don’t require being added to the FHA approval list IF those condo projects meet certain requirements. These requirements may vary depending on the nature of the condo project, state law, and other factors. The FHA condo project requirements are found in a PDF file you can download directly from the FHA/HUD official site. It contains the following provisions for site condos: Condominium project approval is not required for Site Condominiums meeting all of the below defined requirements. Site Condominiums are defined as: –Single | more...

August 5, 2015

FHA Condo Loans: Eligibility Rules For Adding Condo Projects To The FHA Approved List

By Joe Wallace

We get frequent questions about FHA condo loans–are they available? What are the rules? It is true that FHA mortgage loans are available for condos, town homes and other properties that aren’t typical suburban homes. Condo loans have special rules due to the unique nature of these building projects. The communal residency issues associated with condos (homeowner associations, shared roof repair costs and related upkeep issues, for example) requires any condo project for consideration for an FHA mortgage loan to conform with certain guidelines, which is why all condo projects must be on or added to the FHA approved list before a home loan can be approved for a unit in that project. How does a condo get added to the FHA approved list? Before any decisions can be made, | more...

August 4, 2015

FHA Loan Rules: Prohibited Payments And Loans

By Joe Wallace

There is a group of rules in HUD 4155.2 that describes payments and loans that are not permitted under the FHA single-family home loan program. Chapter Six, Section A has a description of the rules preventing the payment of “unearned fees”, below market-rate loans and other practices. For example, Chapter Six instructs the lender: “A lender is not permitted to pay any fee, compensation, or thing of value other than for services actually performed, including –kick back fees –fees above that actually paid for the service –finders fees or payments to any party referring the loan –payment to a party that has received, or will receive other payment for the service, unless it is a commission for selling a hazard insurance policy at the borrowers request, and –fees prohibited by | more...

August 4, 2015

HUD Announces Multi-Million Dollar Anti-Discrimination Initiative

By Joe Wallace

The Department of Housing and Urban Development have announced a large amount of funding that has become available to fight housing discrimination. According to HUDNo. 15-097, HUD, ” …is making $39.2 million available to fight housing discrimination under HUD’s 2015 Fair Housing Initiatives Program(FHIP) Notice of Funding Availability (NOFA). This year’s funding notice also creates six new types of grants that support fair housing capacity building, education and outreach activities, and testing in rental and sales transactions.” Fair Housing laws affect all types of housing transactions including FHA mortgages. The $39 million is being made available to “support organizations interested in the enforcement of fair housing laws and policies as well as educating the public, housing providers, and local governments about their rights and responsibilities under the Fair Housing Act” | more...

August 3, 2015

FHA Reverse Mortgages and the FHA Back To Work Progam

By Joe Wallace

A reader got in touch with us recently about the FHA’s Back To Work program, which was announced in 2013 as a way for lenders to offer FHA mortgage loans to people who have had financial hardship in the past that might otherwise disqualify them from a home loan. Back To Work requires the borrower and lender to work together to document the causes of a pre-foreclosure sale, foreclosure, bankruptcy or other financial hardship to show that the issue was circumstantial and not representative of a borrower’s actual credit worthiness. The following guidance to lenders is from FHA Mortgagee Letter 13-26: “As a result of the recent recession many borrowers who experienced unemployment or other severe reductions in income, were unable to make their monthly mortgage payments, and ultimately lost | more...

August 3, 2015

Applying For An FHA Loan

By Joe Wallace

When you apply for an FHA home loan, what is your lender going to require of you besides the information you put on the application itself? Some requirements may vary from lender to lender, but in general you will need to be prepared to furnish bank statements, tax data, and information on any additional sources of income you want to be counted along with your primary earnings. The lender will ask for tax data for a variety of reasons, but the tax data is especially important if you are an independent contractor, freelancer, or small business owner. Your bank statements can also be important–the lender may require two months or more in order to get a more complete picture of your spending habits. Your income needs to be verifiable–any part | more...