Articles Published in: April 2016

April 29, 2016

FHA Loan Questions: Minimum Income?

Recently we were asked if FHA home loans have either an income limit, or a minimum amount the borrower must earn per month/year in order to qualify. FHA loan rules in HUD 4000.1 do not specify a maximum income. FHA loans are designed for those who want to purchase a home and want an alternative to conventional mortgages. FHA home loans are not created for a specific income bracket. Let’s examine the rules for income in HUD 4000.1: “The Mortgagee must document the Borrowers income and employment history, verify the accuracy of the amounts of income being reported, and determine if the income can be considered as Effective Income…” “…The Mortgagee may only consider income if it is legally derived and, when required, properly reported as income on the Borrowers | more...

April 28, 2016

HUD Charges Massachusetts Landlord With Fair Housing Act Violations

By Joe Wallace

April is Fair Housing Month, and as the month winds to a close, there are still a variety of government actions involving violations of federal fair housing law-actions taken against landlords, lenders, and others associated with housing. We report on these issues as press releases are issued from the Department of Housing and Urban Development for several reasons. The most important of those reasons is to raise awareness of Fair Housing laws and to remind our readers that the first line of defense against violations of the Fair Housing Act is often found at the consumer level. Those who report housing discrimination complaints to HUD help end future discrimination as well as get government action on the case at hand. Fair Housing Act violations affect everyone–borrowers, buyers, renters, lenders, etc. | more...

April 27, 2016

FHA Loan Rules For Credit Qualifying: Credit Reports For Each Applicant

By Joe Wallace

One of the most common questions about FHA home loans involves who gets their credit reports reviewed in the application process. FHA home loans permit co-signers, co-borrowers, and non-occupying co-borrowers, and with so many options open to the applicant(s), it can be confusing when trying to figure out who will need to furnish what information in order to apply. FHA loan rules in HUD 4000.1 instruct the lender on who is to have credit reporting data pulled. On page 171 we learn: “The Mortgagee must obtain a credit report for each Borrower who will be obligated on the mortgage Note. The Mortgagee may obtain a joint report for individuals with joint accounts.” But that’s not the only instruction to the lender. We also learn, “The Mortgagee must obtain a credit | more...

April 27, 2016

Mortgage Rate Trends: Holding For Now

By Joe Wallace

We’re writing more this week on mortgage loan interest rate trends due to the upward movement and the potential for this week’s economic data releases (and scheduled Fed statement) to influence those rates. After dropping to year-long (or greater) lows, rates moved higher, but not yet into the four percent range we’ve seen in the past. At the time of this writing (ahead of the Fed statement due out on Wednesday) 3o-year fixed rate mortgages were holding at a best execution 3.75%, though some holdouts may still be offering rates a bit lower for now. FHA mortgage rates are still in a range between 3.25% and 3.5% best execution. If the Fed statement has investors reacting in ways that put upward pressure on mortgage loan rates, we could see that | more...

When Is An FHA Loan Better Than A Conventional Loan?

April 26, 2016

FHA Loans and Borrower Debt: Recent Credit Applications

By Joe Wallace

When applying for an FHA mortgage, like any home loan, a borrower’s debt-to-income ratio will be an important factor in loan approval. The lender needs to know that the borrower can afford both monthly financial obligations as they exist at application time, and those financial commitments plus the amount of the monthly mortgage payment. For that reason, the lender will examine a borrower’s existing debt and compare it with verifiable income to see what percentage of the applicant’s income is taken up by bill payments each month. But what about a borrower’s potential future debt? Lenders have access to the borrower’s credit reports, and that access is used to see what current FICO scores are plus the applicant’s credit history. One thing that shows up on your credit history? Credit | more...

April 26, 2016

Mortgage Loan Interest Rate Trends: Higher Ahead of Fed Statement

By Joe Wallace

Last week on Friday, rates moved higher. The week ended with 30-year fixed rate mortgages in a higher range between 3.625% and 3.75%, and FHA rates in their own new range between 3.25% and 3.5%. On Monday, things stayed more or less the same, though market watchers say it could be a difficult week due to a variety of factors including the Fed Statement due to be released on Wednesday. (The Fed meets on Tuesday, but releases a statement the following day.) That statement has great potential to move rates. According to a report by Marketwatch.com, the Fed is expected to keep the option for a June interest rate hike on the table. In the past any talk of rate hikes is enough to bring knee-jerk reactions by investors over | more...

April 25, 2016

FHA Loan Borrower Ownership and Occupancy Requirements

By Bruce Reichstein

FHA loan rules for all single-family home loans, reverse mortgages, and refinance loans are found in HUD 4000.1. Those rules include a variety of instructions for the lender on how to process and approve FHA home loans. But there are also some regulations the borrower must follow, too. For example, FHA single family mortgage loans are intended for owner-occupiers only. HUD 4000.1 states that the borrower must take possession of the property within a reasonable time after closing, usually 60 days or less. There are also rules for borrower ownership and the nature of the borrower’s obligations under the FHA mortgage loan program. HUD 4000.1, page 128 has the following instructions: “To be eligible, all occupying and non-occupying Borrowers and co-Borrowers must take title to the Property in their own | more...

April 25, 2016

HUD Announces Agreement in Fidelity Bank Discrimination Case

By Joe Wallace

The Department of Housing and Urban Development has announced a settlement in a case involving Fidelity Bank and allegations of Fair Housing Act violations. According to HUDNo.16-054, “The U.S. Department of Housing and Urban Development (HUD) announced today a $1 million agreement between the Fair Housing Project of North Carolina Legal Aid and North Carolina-based Fidelity Bank to resolve allegations the mortgage lender engaged in unfair lending practices against minority applicants”. Federal law makes it illegal to “make housing unavailable or to discriminate in the terms, conditions, or privileges of the sale of a dwelling because of race” according to the press release on the FHA/HUD official site. “The Fair Housing Act also makes it unlawful for any person or entity whose business includes residential real estate-related transactions to discriminate | more...

April 22, 2016

Mortgage Loan Interest Rate Trends: Higher

By Joe Wallace

Mortgage rates are definitely in an upward trend, short term, which some market watchers blame in part on bond market activity. The European Central Bank (ECB) meeting this week was also a possible factor; some financial headlines indicate that markets were “mixed” in Europe following the scheduled event. Regardless of how much or how little that may have changed rates here in the the U.S. mortgage loan rates are at the time of this writing being reported at four-week highs. 30-year fixed rate conventional mortgages are at a best execution range between 3.625% and 3.75%. More significantly, FHA rates have broken into a range of rates with the previously held 3.25% now at the bottom end of that range with 3.5% on the top side. FHA rates tend to change | more...

Can I buy a manufactured home with an FHA loan?

April 21, 2016

FHA Loan Rules and Individual Lender Standards

By Joe Wallace

A recent question in the comments section reminds us of the need to differentiate between lender standards and FHA loan rules. Both will have a say in loan approval, terms and conditions, and more. The reader asks, “I was just in bank office today and yesterday. Yesterday before the lender saw my pay stubs i was pre-qualified for 70,000, now after seeing my work hours plus my W2. I’m now approved for only 30,000. How did that happen? I lost 40,000 just by not having 80 hours a week.” There are several issues at work here. The first is the nature of being pre-qualified for a mortgage loan. When you pre-qualify, your lender is giving you an estimate of what you may be able to borrow based on some initial | more...