Articles Published in: May 2016

May 13, 2016

FHA Loan Questions: Non-Borrowing Spouse Debt

FHA loan rules for calculating a borrower’s debt to income ratio are found in HUD 4000.1. There’s an issue some borrowers face when applying for an FHA mortgage that involves whether or not a non-borrowing spouse’s financial data needs to be included in the debt ratio calculation. This issue affects borrowers in states that have community property laws. Such laws govern how a legally married couple’s debts and other financial affairs are viewed in the context of the legal relationship. The debts and financial obligations incurred by legally married couples in these states are often shared regardless of who actually takes out the loan, applies for the credit card, etc. So in these states, certain extra considerations are required of the lender in the home loan application process. If you | more...

May 12, 2016

FHA Loan Rules On Down Payment Assistance, Gift Funds

By Joe Wallace

We’ve gotten several questions recently about FHA loan rules for down payment assistance programs and related topics. While we’ve addressed issues like this before, it never hurts to revisit topics like these, especially since the FHA transitioned from its previous single family home loan rule books into the single, comprehensive HUD 4000.1. In the past, certain types of down payment assistance grant programs such as NewSong, Grant America, and Nehemiah operated by providing what was known as “seller provided down payment assistance”. In 2008, President Bush signed an act that prohibits such assistance, so all seller-provided down payment funds were no longer possible. But there are state and local programs that do provide some type of down payment assistance. If these programs meet FHA guidelines and requirements, a borrower may | more...

May 12, 2016

FHA Appraisals and Roof Issues: A Reader Question

By Joe Wallace

A reader got in touch with us recently to ask about FHA loan rules for a home in need of certain types of repair. “If the home needs a new roof, will FHA allow a clause or let money sit in escrow for roof repairs after closing?” While the question is too general to give a specific yes or no answer to, there is at least one option that may be possible. Much depends on what the FHA appraiser recommends for that property. Does the roof need to be replaced completely? Or are there simple repairs required? Has the appraisal happened yet, or is the borrower aware of a situation with the roof that could interfere with loan approval unless repaired or corrected? An FHA appraiser will recommend corrections in | more...

May 11, 2016

HUD Fair Housing Decision Upheld By Appeals Court

By Joe Wallace

An appeals court has upheld a HUD Fair Housing determination. According to the press release at HUD.gov (HUDNo.16-070), “The U.S. Department of Housing and Urban Development announced today that it has won an important Fair Housing Act victory in the United States Court of Appeals for the First Circuit.” According to the press release, the appeals court decision backs a “Final Order of the Secretary of HUD” following a trial before an administrative law judge, “that a condominium association discriminated against a resident with disabilities by refusing to allow him to keep an emotional support animal.” Federal Fair Housing laws prohibit discrimination against people with disabilities to include “no pet” rules that affect a home owner or renter’s ability to keep a support animal (that would include home owner or | more...

May 11, 2016

Mortgage Rate Trends: Moving Lower

By Joe Wallace

Mortgage loan interest rates have improved this week, hitting new lows that put conventional mortgages into a new range of rates (best execution) that are now, on paper at least, overlapping the current best execution FHA mortgage rate range. This development has encouraged some industry professionals to begin speculating as to whether the new lows are the “floor” of the improvements or whether new lows could be reached (however short-term they may be). Time will tell whether that speculation has any merit, but rates could easily be pushed in the opposite direction depending on circumstances. 30-year fixed rate conventional mortgages are at the time of this writing in a best-execution range between 3.5% and 3.625%. That range is close to the FHA mortgage loan best execution range, which at the | more...

May 10, 2016

FHA Loan Credit Score Requirements: Which Score Gets Used?

By Joe Wallace

How does the lender decide which FICO score to use when processing a borrowers mortgage loan application? This is a common question about FHA mortgage loans, and its not surprising why there is confusion in this area. After all, many borrowers will have three FICO scores, reported from the three major credit reporting agencies. Which of the three will the lender use? FHA loan rules governing this are found in HUD 4000.1 starting on page 127. This section begins by describing what the FHA loan rulebook calls the Minimum Decision Credit Score. According to HUD 4000.1: The Minimum Decision Credit Score (MDCS) refers to the credit score reported on the Borrowers credit report when all reported scores are the same. That doesn’t help clear things up for the borrower confused | more...

May 10, 2016

FHA Loan Appraisal Requirements and State/Local Code

By Joe Wallace

Recently we received a question in the comments section about FHA requirements for homes served by wells. The reader want to know if a “shallow well” was permitted. FHA loan rules do address an aspect of this reader question, stating that for existing construction the well must deliver a specified amount of water: “Existing wells must deliver water flow of three to five gallons per minute”. For new construction, FHA loan requirements state, “Wells must deliver water flow of five gallons per minute over at least a four-hour period”. But one thing that is very important to keep in mind is that for well water and many other appraisal issues including electrical systems, septic, plumbing and many other features, FHA requirements are not the only ones that must be observed. | more...

May 9, 2016

Mortgage Rate Trends: Moving Lower After Jobs Report

By Joe Wallace

Friday the much-anticipated Employment Situation Report had data that wasn’t as favorable as expected. That helped rates further recover some losses seen in late April, resulting in some market watchers to declare Friday’s gains as the “lowest in three years” (best execution) for some financial institutions. On Friday, 30-year fixed rate conventional mortgages were, best execution, in 3.625% territory. That’s down from a late-April range with 3.75% at the upper best execution end. FHA mortgage rates remain in a range between 3.25% and 3.5%. FHA rates tend to vary more among participating lenders, so it is a very good idea to shop around for the best rates. As always, best execution rates are not available to all borrowers or from all lenders. Your access to rates like these depends greatly | more...

May 6, 2016

FHA Loan Tools

By Joe Wallace

If you are in the planning stages of a new home loan, there are plenty of FHA loan tools you can use to help you prepare. The planning stage of your new home loan is just as important as the house hunting, home inspection, and negotiation stages. Do you have the right tools to get started? FHA Loan Limits Knowing how much loan the FHA guarantees in your area is an important part of the process. FHA loan limits are not the absolute maximum you can borrow, but getting a bigger home loan above and beyond those limits may require you to work with a loan officer to determine what you need to do to apply for a “Jumbo Loan”. Learn what the FHA loan guaranty limit for your area | more...

What you should know about FHA 203(h) Loans For Disaster Victims

May 5, 2016

HUD Launches Healthy Homes App

By Joe Wallace

If you have been looking for a new home to purchase with an FHA mortgage, or if you have recently purchased a home, you may be interested in the latest app from the Department of Housing and Urban Development. The Healthy Homes app was created to raise awareness of healthy homes issues including mold, asbestos, pest control, carbon monoxide, and more. According to a press release on the HUD official site, “…this Healthy Homes app offers a convenient tool for users to learn about common health and safety risks in the home. The app provides extensive content in clear, simple language so that users can quickly understand the potential hazards throughout a home. The app also helps residents who live in condominiums, single- family detached homes, townhouses, or in apartment | more...