Articles Published in: May 2016

May 23, 2016

Mortgage Rate Trends: Higher After Fed Minutes Released

Mortgage rates closed out the week sharply higher, moving upwards on Wednesday after the release of Fed minutes which indicate that a June or July interest rate hike by the Fed is a possibility. Since Wednesday there was a bit of recovery, but rates have held at the higher numbers and it’s possible we’ll see the rates listed here persist unless there is further recovery–something that may not be as likely if investors are jittery about a possible interest rate increase soon. The Fed raising interest rates doesn’t mean they are directly adjusting mortgage loan interest rates, but investor reaction to the Fed’s actions can and likely will have some kind of reciprocal effect even if it’s just in the short term. At the time of this writing, 30-year fixed | more...

May 20, 2016

FHA Appraisal Rules: A Reader Question

By Joe Wallace

A reader got in touch with us recently to ask a question about wells and FHA loan approval. “Is a flow test required on a pre-existing drilled well in order to get financing using FHA? This is in a town where there is no public water and a drilled well is the normal. Well has passed all other test to determine all health safety and has been approved by the FHA appraiser.” FHA loan rules state that “Wells must deliver water flow of five gallons per minute over at least a four-hour period”. Furthermore, “The Mortgagee must ensure that new wells are drilled and are no less than 20 feet deep and cased. Casing should be steel or other casing material that is durable, leak-proof, and acceptable to either the | more...

May 19, 2016

What is an FHA Reverse Mortgage?

By Joe Wallace

In a recent blog post we wrote about the steps the FHA and HUD are taking to further improve the FHA Home Equity Conversion Mortgage (HECM) loan program. The FHA HECM, also known as a reverse mortgage or FHA reverse mortgage, is a different type of home loan than a typical “forward mortgage” for a new purchase or refinance on a previous mortgage. The FHA reverse mortgage or HECM is for qualified borrowers age 62 or older who either own their property outright (with the mortgage paid off in full and documentation of that paid-in-full status) or are very close to paying off the current loan. According to the FHA official site, HECM loans are a “…special type of home loan that lets you convert a portion of the equity | more...

May 19, 2016

FHA Proposes New Rule To Strengthen Reverse Mortgage Program

By Joe Wallace

The FHA has announced a new proposed rule intended to strengthen the Home Equity Conversion Mortgage (HECM) loan program. According to the FHA official site, the proposal would “codify several significant changes to FHAs Home Equity Conversion Mortgage program that were previously issued under the authority granted to HUD in the Housing and Economic Recovery Act of 2008 and the Reverse Mortgage Stabilization Act of 2013, and to make additional regulatory changes”. A press release at FHA.com states the new rule would, once approved, “make certain FHA-insured reverse mortgages remain a viable and sustainable resource for senior homeowners hoping to remain in their homes and age in place.” The agency has spent the last two years working on reforms intended to improve the FHA HECM program. “We’ve gone to great | more...

May 18, 2016

Preparing For Your FHA Loan: Important Questions To Ask

By Joe Wallace

Are you in the planning stages for an FHA loan? Considering your refinance loan options? Regardless of which choice you’re making (new purchase or refinance) there are some important questions to ask yourself when preparing to apply. The first of those is one of the most important. “Am I giving myself enough time to prepare?” Some borrowers need more preparation time than others. If you don’t have 12 months of on-time payments on all financial obligations, for example, you should definitely take the time to make sure you bring that to the bargaining table. Lenders will be looking for that 12 months-or-better reliability to establish your creditworthiness. Some borrowers need more time to save up for certain closing costs and, in the case of new purchase FHA loans, the required | more...

May 18, 2016

Mortgage Rate Trends: Higher Ahead of Fed Minutes

By Joe Wallace

Mortgage rates took a turn higher on Tuesday, with some market watchers pointing out that investor behavior ahead of the scheduled release of Fed meeting minutes on Wednesday afternoon could be responsible for some of that upward pressure on mortgage rates. 30-year fixed rate conventional mortgage loans moved out of their previous range and into a single best-execution 3.625%. This best execution rate is still low compared to past numbers but the elimination of the previous range means conventional mortgages are a bit farther away than their FHA counter parts. Previously there was some on-paper overlap between conventional and FHA rates, though FHA mortgage loan rates tend to vary more among participating lenders. FHA mortgage loans are still in a best execution range between 3.25% and 3.5%. It may take | more...

May 17, 2016

FHA/HUD Appraisal Standards Part II

By Joe Wallace

In our previous blog post we discussed FHA loan appraisal standards and answered a reader question about what it means for FHA/HUD standards to include the term “whenever feasible” in relation to certain features such as city utilities (versus wells or cisterns, for example). Further clarification of the FHA and HUD position on minimum property standards is available from the HUD official site (www.HUD.gov), which includes the following background information: “Until the mid-1980’s, HUD maintained separate Minimum Property Standards for different types of structures. Since that time, HUD has accepted the model building codes, including over 250 referenced standards, and local building codes, in lieu of separate and prescriptive HUD standards.” But, the official site adds, there is an important difference when it comes to the FHA/HUD standards versus other | more...

May 17, 2016

FHA Mortgage Appraisal Requirements: A Reader Question

By Joe Wallace

We get many questions about the FHA loan appraisal process in our comments section. Here’s one of the latest: “What does whenever feasible mean? My lender is telling me I need a quote on connecting to the public sewerage system and that this should be more than 4% of the purchase price to be considered not feasible. Where are they getting this information?” This question is in reference to an older blog post we made in 2014 discussing FHA/HUD appraisal standards for septic systems. Here is the specific part of the post the reader is referencing: “In general, the FHA minimum property requirements for sewer systems, as listed in HUD Handbook 4940.3 states: ‘Whenever feasible, connection shall be made to a publicly owned or publicly controlled system that is adequate | more...

May 16, 2016

FHA Loan Occupancy, Primary Residence Rules

By Bruce Reichstein

FHA single family home loans permit a qualified borrower to choose from many different types of property to buy with an FHA mortgage. You can choose a typical suburban home, a townhouse, condo, or a manufactured home. Other options include condos, modular homes, and mixed-used property that meets FHA loan requirements. But one thing is required no matter what kind of eligible property you decide to purchase with an FHA mortgage; borrowers must meet FHA loan occupancy rules as a condition of loan approval. What does this mean? HUD 4000.1, page 135 has the FHA loan rules for occupancy, stating that all FHA loans require the borrower to take possession of the property as the principal residence within a reasonable time once the loan has closed. According to HUD 4000.1: | more...

May 16, 2016

Mortgage Rate Trends: Slightly Lower After Late Week Losses

By Joe Wallace

After last week’s move into the best rates of the year (best execution), then losing ground, mortgage rates closed out the week slightly lower. That raised hopes for some that continued improvement could come in the short term. At the time of this writing, 30-year fixed rate conventional mortgage loan rates were in a best execution range between 3.5% and 3.625%. That puts conventional rates closer to the FHA range of rates than is typically seen, though FHA mortgage loan rates do tend to vary more between participating lenders. At the time of this writing, FHA mortgage rates are in a best-execution range between 3.25% and 3.5%. FHA mortgage loan rates tend to take a bit more time to reflect gains and losses in the market as they affect mortgage | more...