Articles Published in: February 2016

February 29, 2016

FHA Loan Rules in HUD 4000.1: Gaps In Employment, Temporary Reductions of Income

HUD 4000.1 is the FHA loan rule book for single family home loans and refinance loans. This rule book includes instructions to the lender on how to process FHA loan applications and how the lender should treat specific circumstances that can affect a borrower’s chances for FHA loan approval. Naturally these rules are FHA loan minimum standards and lenders may have additional requirements, but the basics for FHA loan approval are addressed. These basics include instructions to the lender on how the FHA views application issues such as having frequent gaps in employment or temporary reductions of income. What do these situations do to a borrower’s chances for FHA loan approval? HUD 4000.1 addresses the frequent gaps in employment issue directly, stating: “For Borrowers with gaps in employment of six | more...

February 29, 2016

Mortgage Rate Trends: Higher Friday

By Joe Wallace

Mortgage rates moved higher on Friday, pushing closing costs up for some, actual rates up for others. At the end of the day many were still offering a best execution 3.625% for 30-year fixed rate conventional mortgage loans. FHA mortgage loan rates are holding in a range between 3.25% and 3.5% depending on the lender and other factors. FHA mortgage loan rates tend to vary more among participating lenders than conventional rates, so your experience may vary. As always, the rates mentioned here are best execution rates, meaning your FICO scores, loan repayment history and other financial qualifiers will play a big role in your access to rates at or near the ones listed here. Best execution rates are not available to all borrowers or from all lenders. Even though | more...

February 26, 2016

FHA Loan Mortgage Insurance Premium Rules

By Joe Wallace

When you purchase a home using an FHA mortgage, you’ll be required to pay an Up Front Mortgage Insurance Premium (UFMIP) and monthly mortgage insurance premium (MIP). The rules governing this mortgage insurance are found in HUD 4000.1 and it’s important to know them before you start budgeting and planning for your new mortgage. FHA loan rules covering this insurance begin by defining terms. “FHA collects a one-time Upfront Mortgage Insurance Premium (UFMIP) and an annual insurance premium, also referred to as the periodic or monthly MIP, which is collected in monthly installments.” One thing important for borrowers to know is that the FHA does not consider these payments to be part of the mortgage guaranty limit–this is a fee assessed after those limits are calculated, even though the Up | more...

February 25, 2016

FHA Loan Questions: Are Military Members Eligible For FHA Mortgages?

By Joe Wallace

One common question about FHA loans involves whether or not military members are eligible to apply. Some military members may choose FHA mortgage options over VA loan benefits depending on circumstances, what do FHA loan rules tell lenders about veterans and currently serving members of the U.S. military? HUD 4000.1 contains the rules that apply in these cases. One of the reasons some could mistakenly assume military borrowers might not qualify for FHA mortgages has to do with the FHA’s occupancy rule for new purchase loans and refinances. But FHA loan rules include the following on occupancy for military applicants: “Borrowers who are military personnel, who cannot physically reside in a Property because they are on Active Duty, are still considered owner occupants and are eligible for maximum financing if | more...

February 25, 2016

Mortgage Rate Trends: Sideways To Lower

By Joe Wallace

Mortgage loan rates this week to date have been either holding their own (Monday) or moving slightly lower (Tuesday and Wednesday). While market activity did see some lenders raising rates, overall best execution levels are still at 3.625% for 30-year fixed rate conventional mortgages. FHA loans are still within a best execution range between 3.25% and 3.5%, some of the most favorable rates seen in quite some time. “Best execution” refers to rates offered to the most extremely well-qualified borrowers. Your FICO scores, loan repayment history and other financial qualifications will determine your access to these rates. Your experience may vary; the rates you see listed here are not available to all borrowers or from all lenders. Right now, rates are lower because of negative economic factors (among other things)–it | more...

February 24, 2016

FHA Refinance Loan Types

By Joe Wallace

Do you want to refinance your home loan into an FHA mortgage or refinance an existing FHA mortgage? There are many different types of refinancing options and when HUD 4000.1, the new single family FHA loan rulebook was published in 2015 the entire refinance loan program rules were included in the new volume. That means some policies were updated, some were changed or modified, and some were simply restated. HUD 4000.1 has a comprehensive list of the different types of FHA refinancing options open to those with single-family mortgages. Let’s examine them: FHA Cash-Out Refinancing A Cash-Out Refinance is described in HUD 4000.1 as, “a refinance of any Mortgage or a withdrawal of equity where no Mortgage currently exists, in which the mortgage proceeds are not limited” to specific purposes. | more...

February 23, 2016

HUD Announces Additional Funding For Housing Counseling Grants

By Joe Wallace

There are many times when, in the course of answering reader questions or discussing issues related to FHA loan prep, that we advise people to contact the FHA directly to request a referral to a HUD approved housing counselor. Housing counseling can be an important help for people–especially first time home buyers–who aren’t sure whether they qualify for an FHA mortgage or how to get started preparing for one. HUD has announced additional funding for housing counseling. According to a press release issued Friday February 19, 2016, “The U.S. Department of Housing and Urban Development (HUD) today announced it is making $40 million in grants available to support hundreds of housing counseling organizations across the country that assist families, including those buying their first home, struggling to locate affordable rental | more...

February 22, 2016

FHA Loans Credit Issues: Charge-Offs and Disputed Accounts

By Joe Wallace

There are many questions about FHA loan credit requirements. Some credit issues involve lender requirements which may go above and beyond FHA loan program minimums. Other issues involve FHA loan guidelines themselves-for example, the basic FHA policies toward charge-offs and disputed accounts on a credit report. How is the lender instructed to deal with these issues when processing an FHA loan application insofar as FHA loan minimum standards are concerned? HUD 4000.1 has the answers–we start with a look at the FHA definition of “charge-offs”, which the rule book defines as, “a Borrowers loan or debt that has been written off by the creditor”. If a lender encounters charge-offs in the borrower’s credit history, he or she must determine if the charge-off(s) happened due to one of the following: –the | more...

February 19, 2016

Mortgage Rate Trends: Ending The Week With A Move Lower

By Joe Wallace

After three consecutive business days of rates edging higher (hitting 14-day highs at one point), Thursday and Friday saw them moving back down, recovering some of the losses earlier in the week. Some industry pros were anticipating a possible slight move higher today due to bond market activity, but at the end of the trading day that did not pan out. That puts 30-year fixed rate conventional mortgage rates at a best execution 3.625% (depending on the lender), with FHA mortgage rates remaining in a range between 3.25% and 3.5% best execution. FHA rates will vary among participating lenders so your experience may vary. Also, best execution rates as seen here aren’t available to all borrowers or from all lenders. Your FICO score and other financial qualifications play a large | more...

February 19, 2016

FHA Loan Questions: Occupancy Rules

By Bruce Reichstein

We get many questions in the comments section about various aspects of FHA loan rules, including the nuances of the FHA loan occupancy requirements. Here’s one of the latest: “I have a married couple that wants to purchase FHA the Husband is a stay at home Father the wife is the sole bread earner. The home they want to purchase is 3 hours from her employment. But the Husband and Son will be home all during the week and she will come home on weekends. Can that loan be approved? If so I need to show the underwriter because they want to deny the loan.” In general FHA loans are intended for principal residences. FHA loan rules define a principal residence as, “…a dwelling where the Borrower maintains or will | more...