Articles Published in: January 2016

January 7, 2016

FHA Loan Down Payment Requirements

A recent question in our comments section asked if the down payment for an FHA home loan could be financed, or does it need to come “out-of-pocket”. This is an important factor for FHA single family home loans as there is what the FHA describes as a “minimum cash investment” or down payment required that a potential FHA home loan applicant will need to budget for. That down payment is, at the bare minimum, 3.5% of the “adjusted value” of the property. This is stated in HUD 4000.1 which says specifically: “Minimum Required Investment (MRI) refers to the Borrowers contribution in cash or its equivalent required by Section 203(b)(9) of the National Housing Act, which represents at least 3.5 percent of the Adjusted Value of the Property.” This must be | more...

January 7, 2016

FHA Loan Rules For Up Front Mortgage Insurance Premiums (UFMIP)

By Joe Wallace

When you buy a home with an FHA mortgage, there’s a requirement to pay an Up Front Mortgage Insurance Premium or UFMIP. This is not to be confused with Private Mortgage Insurance (PMI), and according to the FHA loan rules published in HUD 4000.1 most FHA loans require UFMIP. “Most FHA mortgage insurance programs require the payment of UFMIP, which may be financed into the Mortgage. The UFMIP is not considered when calculating the area-based Nationwide Mortgage Limits and LTV limits.” There are exceptions as found in HUD 4000.1: –Streamline Refinance and Simple Refinance Mortgages used to refinance a previous FHA-endorsed Mortgage on or before May 31, 2009 –Hawaiian Home Lands (Section 247) –Indian Lands (Section 248) How is the UFMIP calculated? “The UFMIP charged for all amortization terms is | more...

January 6, 2016

HUD 4000.1 On Self Employment Income For FHA Home Loans

By Joe Wallace

HUD 4000.1 has rules that govern the procedures a participating FHA lender must use to verify the income of a self employed borrower or owner of a family business. The fact that an FHA mortgage loan applicant is self-employed is not a barrier to loan approval, but there are different requirements for those who own a family business or who are considered self employed. HUD 4000.1 has instructions for the lender in these cases, beginning with a definition of who is affected by these rules: “Self-Employment Income refers to income generated by a business in which the Borrower has a 25 percent or greater ownership interest. There are four basic types of business structures. They include: –sole proprietorships; –corporations; –limited liability or S corporations; and –partnerships.” How does a lender | more...

January 6, 2016

FHA Home Loan Rules For Employment: Seasonal Work, Family Businesses

By Joe Wallace

In our last blog post we discussed FHA loan rules for employment/income verification for salary, hourly, and part time work. FHA loan rules published in HUD 4000.1 also cover other aspects of income from sources such as family businesses and seasonal work. It might be easy to assume that because a borrower does work that does not last the entire year due to its seasonal nature that a lender might dismiss it–but FHA loan rules anticipate this type of income too, and have specific requirements for lenders to use when considering it for the purposes of a debt-to-income ratio calculation for an FHA mortgage. For seasonal work, FHA loan rules in HUD 4000.1 define the income as follows: “Seasonal Employment refers to employment that is not year round, regardless of | more...

January 5, 2016

Mortgage Rate Trends: 14-Day Lows

By Joe Wallace

On Monday we reported that mortgage loan interest rates had moved slightly higher to close out 2015–rates for 30-year fixed rate conventional mortgages ended the year in a range between 4.125% and 4.25% (best execution) and 2015 rates for FHA mortgages closed out at a best execution 3.75%. On the first day back from the New Year’s holiday, mortgage rates lost no time regaining some of that lost ground. Mortgage rates for 30-year fixed rate conventional home loans are now in a range between 4.0% and 4.25% (best execution). FHA mortgage loan rates did not move out of their best execution comfort zone of 3.75%, though if there is sustained improvement we could see rates for FHA mortgages shift into a range rates with the current best execution rate at | more...

January 4, 2016

FHA Home Loans, Domestic Partnerships, And Identity Of Interest Transactions

By Joe Wallace

Recently a reader got in touch with us in the comments section to ask the following question about FHA loans, identity-of-interest transactions, and whether a domestic partnership could require additional consideration for assuming an FHA loan or applying to buy a home from a domestic partner: “I have lived in a residence with my boyfriend for the last 3 years. He currently owns the property and is going to be moving. I would like to stay in the residence and purchase his home from him. I have resided here rent free (on paper anyway no lease agreement). He has paid his mortgage, while I have paid all of the other household expenses (utilities, groceries, etc). Question #1: Am I considered a tenant of the property even though there is no | more...

January 4, 2016

Mortgage Loan Rate Trends: Closing Out 2015 Higher

By Joe Wallace

In the last week of 2015, we saw mortgage loan rates creeping higher, staying above the four percent mark for 30-year fixed rate mortgage loans. A holiday week can keep rate movements conservative, and two holiday weeks in a row can make things quite calm, but that quiet did not prevent the upward drift of rates. 30-year fixed rate conventional mortgages closed out 2015 in a best execution range between 4.125% and 4.25%. FHA mortgage rates, in spite of the upwards creep we’ve seen in the past two weeks, did not move from their best execution comfort zone of 3.75%. That best execution rate tends to vary more among participating lenders than with conventional loan equivalents, so your experience may depend on the lender. Additionally, best execution rates are not | more...