Articles Published in: 2015

August 17, 2015

FHA Mortgage Loan Interest Rates

FHA home loans have a set of rules that govern interest rates. HUD 4155.1 explains that lenders must inform the borrower that FHA loan interest rates are negotiable–FHA does not set or regulate the rates, though it does require interest rates on FHA loans to be reasonable and “customary” compared to similar loans of its type. Chapter One of HUD 4155.1 states: “Under all currently active FHA single family mortgage insurance programs, the borrower and the lender negotiate the interest rate and any discount points.” We write regularly about FHA loan interest rate trends, and discuss something called the interest rate lock or interest rate lock-in, which is an agreement between the borrower and lender to commit to a mortgage rate for a specific period of time, to protect the | more...

August 15, 2015

FHA Mortgage Loan Interest Rate Trends: Higher, Lower, Higher, Lower…

By Joe Wallace

Mortgage rates had a back-and-forth week, with rates starting off higher, wiping out the gains seen on the previous Friday. Then on Tuesday, news of China’s currency policies pushed rates back down into the high three percent range (best execution) for 30-year fixed rate conventional mortgage loans. FHA rates stayed in their comfort zone of 3.75% that day in spite of the improvements; FHA rates tend to take longer to adjust until there’s been a sustained move in one direction or the other, or a dramatic change in rates on a single day or two. Overseas currency drama over the value of the Yuan had an effect on rates all week–either waxing or waning influence, depending on the day and sometimes even the time of day. On Wednesday, rates began | more...

August 14, 2015

FHA Loan Income Rules: Government Income, Assistance Income, And Military Income

By Joe Wallace

We’ve written elsewhere about the importance of the borrower’s verifiable income when it comes time to fill out an FHA loan application and have the lender review the amount of money coming in versus how much goes out for financial obligations. A borrower’s employment income is very important, but the job you have may not be the sole source of income at application time. For some applicants there may be military income, public assistance or other types of government income for the lender to consider. What are the FHA loan rules for this type of income? Is it allowed at all? The loan rules for the income types mentioned above are found in HUD 4155.1 Chapter Four Section E. We’ll start with military income. Basic pay and allowances are not | more...

What happens to my FHA loan in a natural disaster?

August 14, 2015

FHA Loan Income Rules: Does Alimony/Child Support Count As Income?

By Joe Wallace

For any applicant trying to get an FHA loan to purchase a home, the debt-to-income ratio is very important. How much money you have coming in versus how much you have going out for monthly bills and other financial obligations is a very big part of the lender’s calculations to see whether a borrower can afford the new loan. One area that concerns some is whether alimony/child support is able to be used as part of the borrower’s potential income for those calculations. FHA loan rules currently available in HUD 4155.1 have plenty to say on how and why such income might be used. This type of income can indeed by used, as long as it meets FHA minimum requirements for “effective income” or “verifiable income”: “Alimony, child support, or | more...

August 13, 2015

FHA Loan Rules For Income and Co-Borrowers

By Joe Wallace

When two borrowers want to apply for an FHA loan together, there are often questions about whether one borrower can make up shortcomings for the other. For example, can a borrower who earns less be offset by the borrower who earns more? As with many areas of the FHA single family home loan process, lender standards may apply, but it’s good to know the basic FHA loan requirements that apply. When it comes to income, FHA loan rules found in HUD 4155.1 at the time of this writing address the issue in Chapter Four Section D: “The lender must analyze the income of each borrower who will be obligated for the mortgage debt to determine whether the borrowers income level can be reasonably expected to continue through at least the | more...

August 13, 2015

FHA Loan Employment Rules

By Joe Wallace

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...