Articles Published in: August 2016

August 31, 2016

FHA Loan Debt To Income Ratio Rules: Student Loans

When the lender is adding up an FHA loan applicant’s income and monthly financial obligations for the purpose of calculating debt ratios, there are some debts that can be more complicated than others. Student loans, for example, can be tricky because a borrower may have student loan debt that is in “deferred” status, while others may be paying on their loans at the time of the loan application or soon thereafter. Here’s a recent reader question on the subject: “I cannot find anything that talks about NON deferred student loans. I have a client with a $63 payment on their credit report ($25,000 student loan balance). The loan is NOT in deferment, he pays $63 per month. The u/w is telling me I must use the greater of 1% of | more...

August 31, 2016

Mortgage Loan Interest Rate Trends: Slightly Higher For Some

By Joe Wallace

Monday saw mortgage loan interest rates taking back a bit of ground from Friday’s move higher; Tuesday saw some lenders keeping things unchanged while others moved a bit higher. There are some question marks around scheduled economic data releases on Wednesday and Friday, which could resolve as upward pressure on rates depending on investor reaction to Wednesday’s Pending Home Sales report and a national employment report also due on Weds. These reports in and of themselves don’t “do” anything to mortgage loan rates, it’s the behavior of the investors in the wake of those reports that creates the changes in rates we see depending on how those reports go. Friday is another day of employment data with the Employment Situation report-something that has moved rates in the past due to | more...

August 30, 2016

FHA Announces Changes To Help Delinquent Borrowers Avoid Foreclosure

By Joe Wallace

The FHA has issued a press release announcing changes to its loss mitigation program guidelines to help borrowers avoid foreclosure and remain in their homes in times of financial difficulty. According to HUDNo.16-127, “The Federal Housing Administration (FHA) today announced new procedures to strengthen the process mortgage servicers use to help struggling families avoid foreclosure and remain in their homes. FHA is streamlining its loss mitigation protocols that servicers must use when evaluating and deploying home retention options, foreclosure alternatives that allow delinquent borrowers to retain their home.” By way of background, the FHA official site (in Mortgagee Letter 2016-14) explains, “The evolution of FHAs loss mitigation guidance has also led to improved consumer engagement, the streamlining of FHAs Pre-Foreclosure Sale option, and a new loan modification by which Mortgagees | more...

Buying A Fixer-Upper With An FHA 203(k) Rehab Loan

August 30, 2016

FHA Loans and Foreclosure Avoidance: The FHA HAMP Loan

By Joe Wallace

When you purchase your home with an FHA mortgage loan, chances are you’re thinking more about moving in, getting settled, and making the home your own than you are the possibility that you could encounter financial hardship at some point and miss mortgage payments. But these things do happen to some borrowers, and the FHA has a program set up to help those who get into financial trouble. The FHA HAMP program was created to help borrowers avoid foreclosure and keep them in the home. FHA HAMP is a loan modification program and not a refinance loan, which is an important distinction to make. Under the terms of the FHA HAMP program, the FHA permits ” the use of a partial claim up to 30 percent of the unpaid principal | more...

August 29, 2016

FHA Loan Questions: Home Inspections

By Joe Wallace

A reader asks, “So what do I do if I bought a house with an FHA loan and 2 weeks after closing the roof leaks? You can visually see more than 3 layers of roofing without setting foot on the roof or a Ladder? Obviously the roof didnt have 2 years of life left in it and obviously it was in need of repair. Also the inspector I hired didnt go up on the roof either. What are my options now? Also code in my area is no more than 3 layers of roofing and after getting estimates the house has 5 layers on it.” FHA loan appraisals and home inspections are two different things. The reader question in this particular case seems to indicate that the borrower paid for | more...

August 29, 2016

Mortgage Rate Trends: A Mostly Flat Week

By Joe Wallace

Mortgage loan rates were mostly unchanged last week, budging a bit on Friday after Fed chairperson Janet Yellin’s speech at an important event in Jackson Hole, Wyoming. Rates seemed to be in defensive mode in advance of this speech, which many looked to as a possible spoiler for mortgage loan rates. Why? Because at the present moment, investors are looking hard for any hint from the Fed that another interest rate hike might occur, the timing of such a hike, and the severity. The Fed’s rate hike issues have affected mortgage rates in months and years past as investors react to the news or lack of it. Investor behavior is responsible for the Fed-related volatility in mortgage loan rates rather than the Fed itself, so it’s important to make the | more...

August 26, 2016

FHA Loan Rules: Post-Bankruptcy

By Joe Wallace

There are many questions about FHA loans and bankruptcy. Here’s an example of the kinds of questions we answer on a regular basis about becoming eligible once more for an FHA mortgage in the wake of a bankruptcy discharge: “My credit score is low and I will be discharged from bankruptcy coming this November. What can I do to raise my credit score and qualify for a FHA loan?” It’s very important for borrowers in this situation to know that FHA loan rules in HUD 4000.1 require a minimum waiting time (also known as a ‘seasoning period’) before a borrower can apply for an FHA mortgage. This waiting time begins at the time the bankruptcy is discharged, not from when it was initially filed. The waiting time depends on the | more...

August 25, 2016

FHA Loan Appraisal Rules: A Reader Question

By Joe Wallace

A reader asks, “I have been told by my realtor and the lender that an appraisal on a house I own will be on record for 180 days. They said that the appraised value will be on record and no other FHA appraisal can be made during this 180 day period. Is there a master list that other lenders and appraisers cross reference during this six month period? My reading of your blog indicates that if another FHA buyer makes an offer on my property. a different appraisal would need to be performed.” HUD 4000.1 does indeed contain language that leads one to believe that a new appraisal may be required. On page 120, we find the following: “The Mortgagee must order a new appraisal for each Mortgage or refinance | more...

August 25, 2016

Identity Of Interest Transactions: Another Reader Question

By Joe Wallace

A reader asks, “I have a client that inherited property along with 2 siblings from the Mothers estate. The client has resided in the subject property for 1 year and now wants to buy the other siblings out. Is it correct, that this scenario would meet the exempt status of identity of interest guidelines?” The reader is asking this question in reference to an earlier post we wrote about FHA loans and identity of interest transactions. An FHA mortgage typically requires a minimum 3.5% down payment for new purchase loans. But the required down payment can be higher if there is an “identity of interest” as described in HUD 4000.1: “An Identity-of-Interest Transaction is a sale between parties with an existing Business Relationship or between Family Members. Business Relationship refers | more...

August 24, 2016

FHA Loan Basics You Should Know

By Joe Wallace

If you are thinking about buying a home and are weighing your options for an FHA home loan, there are some basics you should know about FHA mortgages that can help you better prepare for an FHA loan application. FHA home loans are for all financially qualified applicants; there are no income minimums OR maximums. Borrowers should know that FHA mortgages are designed to help borrowers at all income levels find an affordable home. Your debt to income ratio (the amount of money coming in each month compared to your monthly expenses and financial obligations) is an important factor in loan approval, but you will not be disqualified because of an income threshold based on your annual income or monthly income alone. FHA mortgages allow you to purchase a home | more...