Articles Published in: July 2016

July 20, 2016

Using a Co-Signer With an FHA Mortgage Loan

The video above gives some basic information about what a co-signer is, but there are some other details you should know about using a co-signer. FHA loan rules governing cosigners and related issues are found in HUD 4000.1 in a variety of places. One of the first things you’ll learn about co-signing an FHA mortgage is that the cosigner will need to verify identity using a Social Security Number. FHA loan rules differentiate between a co-borrower, who has shared ownership of the property purchased with the FHA mortgage, and the co-signer, who does not. In some cases, community property laws for legally married couples may affect how co-borrowing or co-signing is carried out. FHA loan rules in HUD 4000.1 state: “To be eligible, all occupying and non-occupying Borrowers and co-Borrowers | more...

July 20, 2016

FHA Loans For Properties With PACE Assessments

By Joe Wallace

The FHA has announced it will insure mortgages on qualifying homes that have PACE assessments. According to a press release on the FHA/HUD official site, the move was initiated to help encourage the use of clean energy. “In order to enable homeowners seeking clean energy technologies in their homes to leverage a range of financing options, the Federal Housing Administration (FHA) today announced guidance that makes clear the circumstances under which it will insure mortgages on properties that include Property Assessed Clean Energy (PACE) assessments. FHA will now approve purchase and refinance mortgage applications in states that treat PACE obligations as special assessments similar to property taxes.” That’s according to the July 19, 2016 press release, which explains that the reason PACE assessments have been troublesome in the past is | more...

July 19, 2016

FHA Loan Appraisal Rule Questions: A New Appraisal For A New Lender?

By Joe Wallace

A reader asks, “I am selling a home that has a septic system that does not meet local requirements but has been grandfathered. The septic system has been inspected and is in good working condition. The appraiser said that because the age of the septic (greater than 30 years) that it would need to be replaced.” “We bit the bullet and decided to replace the septic but under new requirements we are going to also have to replace our water well to fit the new septic on our property. The combined cost of replacing both system will approximately $15k. Should I ask the buyers to try a different lender or is this going to be an issue with all lenders/appraisers?” FHA loan rules governing this issue can be found on | more...

July 19, 2016

Mortgage Rate Trends: Unchanged To Slightly Higher

By Joe Wallace

Mortgage loan interest rates were unchanged to slightly higher on Monday, though some borrowers will have noticed Monday’s changes in the form of slightly higher closing costs rather than an actual change in mortgage rates. We’re watching an overall upward trend in rates at the moment. World headlines continue to have potential to move rates, though the market hasn’t given much attention to certain issues such as the unrest in Turkey. 30-year fixed rate conventional mortgages were still at or near 3.375% best execution, depending on the lender and other factors. Some lenders are higher, some reflect the most recent moves in terms of adjusted closing costs (as mentioned above). FHA mortgage loan rates remain in their 3.25% best execution comfort zone. “Best execution” refers to the rates offered under | more...

When Is An FHA Loan Better Than A Conventional Loan?

July 18, 2016

FHA Loan Rules On Seller Contributions Part Two

By Joe Wallace

In our last blog post, we answered a reader question about whether or not it’s permitted for the seller to contribute to the buyer’s closing costs and down payment. FHA loan rules do not permit anyone with a financial stake in the outcome to contribute towards a buyer’s down payment, but the rules DO permit the seller or other interested parties to contribute up to six percent of the sales price of the home. There’s a caveat to that listed in HUD 4000.1. Any contributions by the seller (or other interested parties) that exceeds the six percent limit is classified as an “inducement to purchase”. HUD 4000.1 explains what this means on page 221: “Inducements to Purchase refer to certain expenses paid by the seller and/or another Interested Party on | more...

July 18, 2016

FHA Loan Questions: Down Payment Assistance From The Seller?

By Joe Wallace

A reader asks, “Can the buyer use seller assist for the down payment and closing costs? If yes, what is the limit?” This is a more common question than it may seem at first-sellers can and often do contribute toward the closing costs of an FHA loan, but the FHA loan rulebook definitely has some things to say about how much and what kinds of contributions a seller may make. FHA loan rules governing these contributions are found on page 220 of HUD 4000.1 and cover more than just the seller’s assistance. Any financial help toward the closing costs coming from what the FHA terms “interested parties” is governed by these rules. To begin with, no one with a financial stake in the outcome of the sale of the property | more...

July 15, 2016

Mortgage Rate Trends: Rising

By Joe Wallace

Mortgage loan rates have been on the rise most of the week; three out of four business days were marked by higher numbers or closing costs and with Brexit, overseas terrorism headlines, and domestic scheduled economic data releases, it’s possible we’re going to see rates creeping up over the short term next week much the way we did this week. At the time of this writing, 30-year fixed rate conventional mortgages are, best execution, reported at or near 3.375%, up this week from the previous week’s range bottoming out at 3.25%. FHA mortgage loan rates are currently holding in their 3.25% comfort zone. How long can they persist at or near these levels? Next week will be interesting to watch. (As always, best execution rates listed here assume ideal conditions; | more...

July 14, 2016

FHA Loans and Bankruptcy

By Joe Wallace

A Few Words About Bankruptcy from FHA.com on Vimeo. Some borrowers want to know how credit issues such as foreclosure, Chapter 7 bankruptcy, and Chapter 13 bankruptcy can affect their ability to get an FHA mortgage loan or refinance loan. While those who have been through such proceedings may have a better understanding of what happens to your credit, many who are facing the option of filing bankruptcy, going into loan default and foreclosure, or even doing a deed-in-lieu of foreclosure may not understand what’s at stake. The video above explains some basics about bankruptcy. But how does bankruptcy in particular affect your ability to get an FHA loan? Like foreclosure and deed-in-lieu, filing bankruptcy usually requires a mandatory “seasoning period” or waiting time between the bankruptcy and the new | more...

July 14, 2016

FHA Loan Questions: Refinancing After Foreclosure

By Joe Wallace

A reader asked us recently, “Is it true that I have to wait to refinance my FHA mortgage after having had a foreclosure on another property I own?” FHA loan rules regarding new loans in the wake of a foreclosure are found in HUD 4000.1, page 247 which states: “A Borrower is generally not eligible for a new FHA-insured Mortgage if the Borrower had a foreclosure or a DIL of foreclosure in the three-year period prior to the date of case number assignment. This three-year period begins on the date of the DIL or the date that the Borrower transferred ownership of the Property to the foreclosing Entity/designee.” FHA loan rules do provide certain exceptions. “The Mortgagee may grant an exception to the three-year requirement if the foreclosure was the | more...

July 13, 2016

FHA Loan Appraisal Fees: What You Should Know

By Joe Wallace

The Appraisal Fee from FHA.com on Vimeo. FHA loans, like their conventional counterparts, have closing costs, fees, and expenses all borrowers will need to budget and save for. One such fee is the FHA appraisal fee. The video above helps explain the appraisal fee, but there are some common issues related to appraisals you should also keep in mind. One is that sometimes appraisals require corrections as a condition of loan approval. And that can require a follow-up known as a compliance inspection. Compliance inspections, where required, also come with a fee. This fee is for services rendered and must be paid regardless of the outcome. The same is true of your appraisal fee-the service provided by the professional is what the fee is for, so the outcome of the | more...