Articles Published in: July 2016

July 13, 2016

Mortgage Loan Interest Rate Trends: Moving Higher

Mortgage loan rates moved decisively higher on Tuesday, marking the first real upward trend we’ve seen since the Brexit vote. It’s true that you can’t have a sustained drop in rates without some kind of eventual pushback; that’s what we’re seeing now for a variety of reasons. 30-year fixed rate conventional mortgages have left their previous range behind; last week the bottom end of that range rivaled FHA mortgage rates at 3.25% best execution for some of the most aggressive lenders. Now it’s back up to 3.375% territory, and some lenders are offering best execution rates higher than this. FHA mortgage loan rates are still holding at 3.25% at the time of this writing, but if there is more significant change to rates in the coming days we’re likely to | more...

July 12, 2016

More On FHA Loans And Down Payment Gift Funds

By Joe Wallace

In our last blog post we answered a reader question about whether it’s acceptable to receive gift funds from a family member for an FHA borrower’s down payment. FHA loan rules in HUD 4000.1 permit this, but the gift funds must come from approved sources. For example, no one with a financial stake in the outcome of the FHA loan can provide down payment gift funds for a borrower. And for down payment gift funds that do come from an approved source, the lender has specific instructions in HUD 4000.1 on how to proceed. For example, on page 219 of HUD 4000.1, we learn: “The Mortgagee must obtain a gift letter signed and dated by the donor and Borrower that includes the following: –the donors name, address, and telephone number; | more...

July 12, 2016

FHA Home Loans and Down Payment Funds

By Joe Wallace

A reader asks, “Can I use gift funds from a family member to make my down payment on an FHA mortgage?” This is a common question. FHA mortgages do require a lower down payment than many conventional loans, but a down payment is still required and must come from approved sources. Your lender will be required to verify the source of down payment funds, which must not come from uncollateralized loans, credit card cash advances, “payday loans”, etc. The loan rules that affect down payments are found in HUD 4000.1 in a variety of places but our answers are coming from page 213-214, which begins by stating the FHA definition of a down payment. The rulebook calls the down payment a “Minimum Required Investment” or MRI for short: “Minimum Required | more...

What happens to my FHA loan in a natural disaster?

July 11, 2016

Home Loan Debt Ratios Explained

By Joe Wallace

Analyzing Your Debt Ratio from FHA.com on Vimeo. When you fill out a home loan application, your lender will need employment and income documentation in order to process your loan. The lender is responsible for verifying that you have employment and that your income is sufficient to justify the loan. Not all income counts as “verifiable” by the lender; FHA loan rules have guidelines that include making sure the income is stable and likely to continue. Your lender may also have standards which must be met where income is concerned. There are many types of income, and not all of it comes from employment. Do you receive government assistance, get payments from a trust fund, are entitled to pay or benefits from a government agency related to disability, child support, | more...

July 11, 2016

Mortgage Rate Trends: Higher, Then Steady After Friday Jobs Report

By Joe Wallace

In our last report we mentioned that it wouldn’t be a surprise that, in our next look at mortgage loan interest rate trends if we had some higher rates to discuss. That did happen last Thursday as mortgage loan rates crept a bit higher, but when markets closed on Friday after the much-anticipated jobs report, rates were holding steadier than the day before. That means that following a nine-day winning streak with lower rates, 30-year fixed rate conventional mortgages are now within a range, best execution, of between 3.25% for some lenders and 3.375% for others. It’s not often that conventional lenders offer rates in the same range as FHA loans, and FHA’s best execution 3.25% remains for now; if conditions stay the same (more or less) we could find | more...

July 8, 2016

FHA Loans Versus Conventional Loans

By Joe Wallace

Here’s the Scoop on Conventional Loans from FHA.com on Vimeo. What are the differences between FHA home loans and conventional loans? There are several, some features of mortgage loans can vary depending on the lender, and state law may also affect how your home loan is handled depending on circumstances, but there are a few very important general differences to keep in mind when comparing FHA loans to conventional loans. The first difference is the basic nature of the loan itself. Conventional loans are not backed by the government, unlike FHA home loans where the FHA guarantees a portion of the loan to make it more attractive to the lender to issue credit. In the event that a borrower defaults on an FHA loan, the lender and the FHA have | more...

July 7, 2016

FHA Loan Terms

By Joe Wallace

Understanding Your Loan Term from FHA.com on Vimeo. How long is an FHA mortgage? The answer to that question depends on a variety of factors including the initial choice of fixed or adjustable rate mortgage, whether you plan to pay off the loan early or not, whether you plan to refinance, etc. The typical length of a fixed rate, new purchase FHA mortgage can be 15 or 30 years. If you are refinancing, other variables may apply. Choosing a loan term depends on the individual borrower’s specific needs and goals. You may wish to apply for a 15-year mortgage if you are interested in saving money over the lifetime of the loan; borrowers who choose 15-year mortgages will make higher monthly payments than those who choose 30-year loans, but the | more...

July 7, 2016

Mortgage Rate Trends: Still Moving Lower

By Joe Wallace

Mortgage rates moved lower for an eighth straight business day on Wednesday. We’re devoting some extra coverage to rates this week as the historic lows continue, but it’s entirely likely that our next report in the short term could be on rates moving higher; this is a common factor in prolonged short-term rate improvements. There has been, in the past, a string of days where rates move lower due to a variety of factors, then a “bounce back” where the trend is broken due to economic data releases, breaking news, or some other issue that puts upward pressure back onto mortgage loan rates. Eight days of a downward trend is a long time in the short term, and while Brexit drama has been dominating the headlines and influencing rates here | more...

July 6, 2016

FHA Announces Changes To Distressed Note Sales Program

By Joe Wallace

The FHA has announced changes to its Distressed Assets Stabilization Plan that would “have purchasers of severely delinquent mortgages offer qualified borrowers principal reductions and protection from payment shock,” according to the official site. An FHA press release states, “Certain families with distressed mortgages insured by the Federal Housing Administration (FHA) may soon be eligible for a reduction of their outstanding loan amounts should their mortgages be sold through DASP” and steps are being taken to prevent blighted neighborhoods. “FHA’s latest enhancements prohibit investors from abandoning low-value properties in high-foreclosure neighborhoods to prevent blight. FHA is also offering greater opportunity for non-profit organizations, local governments and other governmental entities to participate in DASP. Loans are not eligible to be sold through DASP unless and until all FHA loss mitigation efforts | more...

July 6, 2016

Mortgage Loan Interest Rate Trends: Even Lower

By Joe Wallace

Tuesday marked the first day back from the long holiday weekend, and it brought with it lower rates. That makes seven consecutive business days in a row that mortgage loan rates have improved, and conventional rates are now in some cases, best execution, in line with FHA mortgage loan interest rates. We’ve seen a general downward trend in mortgage loan rates ever since Britain voted “leave” in its national referendum on staying in or leaving the European Union. The fallout from the “leave” vote continues, and as a result the negative economic consequences have helped rates stay low. 30-year fixed rate conventional mortgages are being reported (at the time of this writing) between 3.25 and 3.375% best execution. Compare that to FHA best execution rates of 3.25% and it’s clear | more...