Articles Published in: 2015

August 5, 2015

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

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...

August 1, 2015

FHA Mortgage Loan Interest Rate Trends: 60-Day Lows

By Joe Wallace

Mortgage loan rates have been in a recovery mode of sorts over many days–tiny increments of rate improvements have brought closing costs down over time but the basic best execution rates we’ve been reporting on here haven’t changed–until Friday, when a weaker-than-expected jobs data report brought a more dramatic move lower for mortgage rates. The move was sharp enough to pull both conventional 30-year fixed rate mortgage loan interest rates and FHA loan interest rates out of their previously reported best execution range of rates and back into a single number on Friday. Conventional 30-year fixed rate mortgages are now reported at, best execution, 4.0% with some more aggressive lenders offering borrowers with the best FICO scores and credit histories rates in the high three percent range. FHA mortgage loan | more...

July 31, 2015

FHA Loan Assumptions

By Joe Wallace

There are people on both sides of a potential loan assumption transaction–home owner and house hunter–who want to know if FHA home loans are assumable. Is it possible for a person who has purchased a home with an FHA mortgage loan to sign that loan over to someone else and allow them to assume responsibility for the loan and take ownership of the home? FHA loan rules say that loan assumptions are permitted for FHA single family home loans. Depending on when the loan was issued, there may be different requirements. For example, “If the loan application was signed by the borrower before December 1, 1986, the FHA-insured mortgage generally contains no restrictions on assumability.” That information is found in HUD 4155.2 Chapter Three and basically allows the loan assumption | more...

July 31, 2015

FHA Loans and “Pre-Payment”

By Joe Wallace

One of the important selling points of an FHA mortgage loan is the basic differences FHA mortgages have from conventional loans; the lower down payment, more forgiving credit requirements, and a rule that a borrower is able to freely dispose of the property in any way he or she sees fit once the deal is closed and the borrower has taken up residence in the home. But there’s another important difference between some conventional mortgages and FHA loans. Did you know that under the FHA loan program you cannot be penalized or charged for early payoff of the loan? HUD 4155.2 Chapter Three has a section that governs what the FHA terms, “pre-payment”. It says that a borrower may pre-pay an FHA mortgage “in whole or in part”. It also | more...

July 30, 2015

FHA Loans, Escrow Accounts, And Real Estate Taxes

By Joe Wallace

There are many FHA loan questions regarding the use of escrow accounts, especially when it comes to new purchase loans. Applicants sometimes get confused when the lender requires an escrow account. Since FHA loan rules do not require the use of escrow, some borrowers may wrongfully believe they don’t have to use them, period. But your lender may require the use of escrow and this is fully permitted under the FHA loan program. In fact, FHA loan rules anticipate some lenders requiring escrow for a variety of loan transactions; one use of escrow is to collect and pay property taxes. According to the FHA/HUD official site, “It is the lender’s decision whether the borrower must maintain an escrow account for the purpose of paying taxes and other items. The HUD | more...

July 30, 2015

FHA Loan Settlement Dates, Per Diem Interest At Closing

By Joe Wallace

The rules for FHA home loans regarding closing dates and related details are found in HUD 415.2 (at the time of this writing) in Chapter Six under the heading, General Loan Closing Requirements. There are a few items in this section that should be noted in case FHA borrowers have questions–including the basic definition of a closing date as described in the rulebook: “The date of closing/settlement is generally considered the date on which the note and mortgage are signed by the borrower. This is also the date defined as the settlement date on the HUD-1 Settlement Statement. However, the 60-day endorsement submission clock begins on the date that the lender relinquishes control of the loan proceeds (disburses the mortgage funds), for both purchase money mortgages and refinance transactions.” FHA | more...