Articles Published in: October 2015

What if my home was damaged in a natural disaster?

October 30, 2015

HUD 4000.1 On FHA New Construction Loans

When you review your options for an FHA home loan, you’ll run across loan information about FHA mortgages for “existing construction” loans and “new construction” or “under construction” loans. The requirements for new construction versus existing construction may differ due to a variety of reasons including the fact that the borrower can’t always take possession of a new or under construction home right away once the loan has closed. FHA loan rules for existing construction include appraisal requirements that may differ (procedurally) from new construction loans. For these reasons, the FHA has specifically defined what constitutes a new, proposed, or under construction property versus one that is “existing construction”. Existing construction is more or less a home that has already had an owner and has been in existence for a | more...

October 29, 2015

FHA Home Loans: How Mortgage Payments Are Calculated

By Joe Wallace

The FHA loan rulebook for single-family home loans has a section instructing the lender, “For all transactions, except non-credit qualifying Streamline Refinances, the underwriter must calculate the Borrowers Total Mortgage Payment to Effective Income Ratio (PTI) and the Total Fixed Payment to Effective Income ratio, or DTI…” This is required to help the lender determine whether the borrower can afford the new loan or not. And borrowers should know how the mortgage payment is calculated for the same reason. It’s easy to assume that your monthly mortgage payment will be the amount of your home loan divided but the term of the loan (plus any interest), but as you’ll see, it’s not quite that simple. FHA loan rules in HUD 4000.1 spell out a list of things that must be | more...

October 29, 2015

Mortgage Rate Trends: Moving Higher Post-Fed

By Joe Wallace

The Fed announcement on Wednesday did not include a statement that interest rates would be raised, but mortgage loan rates pushed a bit higher yesterday regardless. There were indications from the Fed that December’s statement could include more specific information about a rate hike, and that served to put upward pressure on mortgage loan rates as investors reacted to those indications. Not everything the Fed says and does is clear cut–sometimes the tone of the announcements can be enough when it comes to whether or not a rate hike might happen–when the Fed is down on the economy in general, that’s a good sign that a hike in rates is not forthcoming. But when the Fed makes more positive statements, it can be interpreted as the foreshadowing of actions to | more...

October 28, 2015

Mortgage Rate Trends: Sideways to Slightly Better Pre-Fed

By Joe Wallace

Wednesday is potentially a big day for mortgage rates–there’s an FOMC announcement today that could influence mortgage loan rates depending on the contents of that announcement and investor reaction to it. The Fed has been debating a hike in interest rates once the economy is deemed in the right position to accept the hike. Any talk of raising rates has in the earlier times put investors in a mood to react in ways that put upward pressure on mortgage rates. That said, some feel there’s no rate hike coming–at least not today. According to a Marketwatch.com piece this morning by columnist Frank Gold, “Almost no one is looking for the Federal Open Market Committee (FOMC) to raise short-term interest rates when it ends its October meeting on Wednesday.And few expect | more...

October 27, 2015

FHA Mortgage Loans: Late Charges

By Bruce Reichstein

What happens if a borrower misses the deadline for his or her FHA mortgage loan payments? While it’s true that no borrower goes into a home loan planning to have missed or late payments, knowing what happens when the payment is late or missed can be a big help–taking the mystery out of these issues is important, especially for new borrowers. FHA loan rules for late payments are found in HUD 4000.1 Part Three Section A. There, you’ll find a section titled “Late Charges” which begins by defining what the FHA views as a late payment: “Late Charges are charges assessed if a Mortgage Payment is received more than 15 Daysafter the due date.” Furthermore, FHA loan rules in this section state, “The Mortgagee may consider a Borrowers payment late | more...

When Is An FHA Loan Better Than A Conventional Loan?

October 27, 2015

FHA HECM Loans And Mandatory Counseling

By Joe Wallace

FHA HECM loans–home equity conversion mortgages, sometimes known as “reverse mortgages”–come with a requirement for all borrowers to be obligated on the FHA HECM to go through HECM loan counseling. This is not a requirement for other types of FHA mortgages, which leads some to wonder why FHA HECMs have this feature. Why do the borrowers have to complete FHA required counseling sessions as a condition of the loan? There are many reasons. Since HECM loans feature no monthly payments, cash back to the borrower, and specific requirements for that cash back, counseling is necessary for the applicants to know exactly what they can and cannot get with their HECM loans. This FHA loan program has changed a great deal in the last two years, and the terms and | more...

October 26, 2015

FHA Loan Rules For Appraisals Under HUD 4000.1

By Joe Wallace

When the FHA and HUD published the new single family home loan rules found in HUD 4000.1, the agencies did not provide a list of every single rule or portion of the rules affected by changes in HUD 4000.1. HUD specifically stated at publication time that it’s the lender’s responsibility to be familiar with the rules as they are today. We’ve been discussing the new rules with that notion in mind. One important area of the new rulebook that’s important to be familiar with? FHA appraisal requirements, which go beyond minimum property standards and other rules. FHA loan rules spell out what is expected of the lender during the appraisal process, starting with this statement found in Section II Part A under “Loan Origination and Processing”: “The Mortgagee must order | more...

October 26, 2015

Mortgage Rate Trends: Lower, Then Slightly Higher

By Joe Wallace

On Thursday, mortgage loan rates went to lows we haven’t seen in several months, but Friday brought with it slightly higher rates. Even so, best execution rates for 30-year fixed rate mortgages is still being reported in a range between 3.75% and 3.875. FHA mortgage rates are being reported, best execution, at their previously mentioned 3.5%. These “best execution” rates are not available to all borrowers or from all lenders. Your access to these rates depends on your FICO scores, loan payment history and other financial qualifications. Your experience may vary. The end of the week saw some market volatility, and there are questions going into the new week about the Fed and global economic issues. Many industry professionals are using the word “lock” when discussion mortgage rate commitments–some believe | more...

October 23, 2015

FHA Loan Income Verification Rules: Seasonal Employment

By Joe Wallace

We’ve been examining FHA loan rules for income verification including requirements for full-time and part-time employment. But some FHA loan applicants have unique jobs that keep them employed on a seasonal basis. Does the FHA loan rulebook, HUD 4000.1, have provisions for these types of soon-to-be homeowners, too? According to the rules, participating FHA lenders may verify seasonal employment if it meets certain FHA standards. HUD 4000.1, Section II Part A includes the following, starting with a definition of “seasonal employment” as acceptable to the FHA: “Seasonal Employment refers to employment that is not year round, regardless of the number of hours per week the Borrower works on the job.” The FHA instructs the lender, “The Mortgagee may consider Employment Income from Seasonal Employment as Effective Income if the Borrower | more...

October 23, 2015

HUD Proposes New Anti-Housing Discrimination Rule

By Joe Wallace

The Department of Housing and Urban Development has issued a press release about a proposed new rule that would create new, formal and standardized claims procedures for discrimination complaints in connection with housing transactions. HUDNo.15-136 was released Wednesday, October 21, 2015, stating, “The U.S. Department of Housing and Urban Development announced today that it is issuing a proposed rule that would formalize standards for victims of harassment in housing to bring claims under the Fair Housing Act.” HUD’s proposed rule, called Quid Pro Quo and Hostile Environment Harassment and Liability for Discriminatory Housing Practices under the Fair Housing Act, was published in the Federal Register and is open to comments by the public for a limited time. “A home should be a refuge where every woman and man deserves to | more...