Articles Published in: August 2016

FHA Loans And Natural Disasters: What You Should Know

August 23, 2016

FHA Loan Questions: Identity Of Interest

A reader asks, “I am intending on purchasing a home from my boyfriend’s father. He bought the home for 70k and he is willing to sell it to me for 75k. We are in no way related. Is our relationship an identity of interest?” The “identity of interest” issue arises when a family member wants to sell a property to another family member who is using an FHA mortgage to buy the home. An identity of interest transaction can also be between two people who are business associates. HUD 4000.1 defines an identity of interest transaction as follows: “An Identity-of-Interest Transaction is a sale between parties with an existing Business Relationship or between Family Members. Business Relationship refers to an association between individuals or companies entered into for commercial purposes.” | more...

August 23, 2016

FHA Loan Question: Shared Wells

By Joe Wallace

A reader asks, “Theres a well shared by seven houses producing six gallons per minute for all seven houses. The well went dry and now we were told we have till December to Feb before it goes dry. Will the loan agencies finance homes at the tail end of a wells life?” We won’t presume to speak for financial agencies or their requirements, as standards may vary from lender to lender. However, we can reference FHA home loan rules to see what is permitted. FHA loan approval depends on a variety of factors, not just a borrower’s credit report or other issues. One factor is the condition of the property itself, which is determined by an FHA appraisal. The purpose of an FHA appraisal is to insure properties to be | more...

August 22, 2016

Mortgage Rate Trends: Slightly Higher

By Joe Wallace

Mortgage loan interest rates were up and down last week, closing on Friday slightly higher ahead of a week that could have major impact on interest rates depending on what Fed Chair Janet Yellin says during a conference in Wyoming. Anytime the Fed or its chairperson has something to say about the possibility or timing of another interest rate hike, we see great potential for volatility in mortgage loan interest rates. That’s due to investor reaction to the statements, as mortgage loan interest isn’t directly tied to events like these. The Wall Street Journal has something to say about this week’s event which may shed a bit of light on why so much attention is paid recently to the Fed and interest rate policy: “The proverbial ‘all eyes’ are turning | more...

August 22, 2016

HUD Charges Georgia Landlords With Fair Housing Act Violations

By Joe Wallace

The Fair Housing Act was passed to protect those in search of housing, whether they need to rent or purchase. Discrimination against a renter or potential renter is just as serious as discrimination against those who wish to purchase housing; many who want to buy a home must seek out rental property in the meantime and violations of the Fair Housing Act affect these renters who intend to be owners. The Department of Housing and Urban Development aggressively pursues cases of housing discrimination regardless of renter/buyer status and one of the most recent cases stems from a complaint lodged by a single mother in Georgia. According to a press release on the HUD official site, “The U.S. Department of Housing and Urban Development (HUD) today announced it is charging a | more...

August 19, 2016

FHA Loan Rules For Overtime Income

By Joe Wallace

A reader asks, “Can I use my current overtime income if Ive been working at this company 20 months but my previous company I also had overtime which I worked there for 1 year and my previous before that I worked for 4 years with overtime?” FHA loan rules require the loan officer to verify income that will be used toward calculating the borrower’s debt-to-income ratio. Only verifiable income can be used, which means the lender must determine that the income is stable, reliable, and likely to continue. Income from a variety of sources may be considered. Some FHA loan applicants have seasonal jobs, some have part-time employment, some get income from disability benefits, etc. All of these sources can be used provided they meet FHA loan standards. The same | more...

August 18, 2016

FHA Loans and 401K Income

By Joe Wallace

A reader got in touch with us recently in the comments section to ask a question about 401K retirement income as it relates to FHA loan approval. “Does the fact that you have a 401k count as income or does it benefit your chances in any way of getting a home loan?” FHA loan rules in HUD 4000.1 cover a variety of income sources including 401k income. Individual retirement account income from a 401K may be used to qualify a borrower for an FHA mortgage provided the income meets FHA and lender standards. HUD 4000.1 instructs the lender on how to review 401K income, beginning with a definition of it: “Individual Retirement Account (IRA)/401(k) Income refers to income received from an IRA.” With the definition spelled out, the FHA loan | more...

August 18, 2016

HUD Announces Federal Relief For Louisiana Flood Victims

By Joe Wallace

The Department of Housing and Urban Development has announced federal assistance for victims of recent flooding in Louisiana. According to HUDNo.16-122, “HUD will speed federal disaster assistance to the State of Louisiana and provide support to homeowners and low-income renters forced from their homes due to severe storms and flooding.” Earlier, the press release states, the President, “issued a disaster declaration for Acadia, Ascension, Avoyelles, East Feliciana, Evangeline, Iberia, Iberville, Jefferson Davis, Lafayette, Point Coupee, St. Landry, St. Martin, St. Tammany, Vermilion, Washington and West Feliciana” as well as East Baton Rouge, Livingston, St. Helena and Tangipahoaparishes. One of the benefits of this act is that victims of the flooding have access to foreclosure relief and other help. Families who may have been forced from their homes need to know | more...

August 17, 2016

FHA Loan Questions: Income Rules

By Joe Wallace

A reader got in touch with us to ask a question about FHA standards for income. “I am on contract and my lender just told me that I might not be qualify for FHA because of my income. Is that one of the requirements for FHA?” FHA loans require the borrower to financially qualify for the loan, which includes the lender making a determination about the borrower’s employment situation. While this reader question is far too general to answer with regards to the reader’s specific circumstances, we can observe the following about FHA home loans based on a reading of HUD 4000.1: The lender is required to verify a borrower’s income to insure it is stable, reliable, and likely to continue. Income that is deemed “verifiable” is allowed to be | more...

August 17, 2016

Mortgage Rate Trends: Up And Down Before Fed

By Joe Wallace

Mortgage loan interest rates are experiencing another week of ups and downs; on Tuesday rates were unchanged to slightly higher depending on the lender, and all eyes are on Wednesday’s Fed meeting minutes release. This has serious potential to move rates in one direction or the other depending on investor reaction to the contents of those minutes. Most of the current drama in this department has to do with the timing of any proposed Fed interest rate hike or the lack of an indication of same. The potential for another interest rate hike by the Fed creates volatility in the markets that affect mortgage loan rates, so the uncertainty here is a big X factor this week. On Tuesday, 30-year fixed rate mortgages were reported at a best execution 3.5%. | more...

August 16, 2016

FHA Loans and Social Security Income: A Reader Question

By Joe Wallace

A reader asks, “I am halfway though a 15 year mortgage on a 2009 manufactured home. I am disabled, collecting SSD and my wife works as a school teacher.Would I qualify to refinance my home?” FHA loans and refinance loans have rules that do permit the use of Social Security income to qualify for a loan, provided the income meets certain requirements. The lender is required to determine that the income is likely to continue. HUD 4000.1 has guidelines and instructions to the loan officer that include the following about Social Security and other disability benefits: “Disability Benefits are benefits received from the Social Security Administration (SSA), Department of Veterans Affairs (VA), other public agencies, or a private disability insurance provider. The Mortgagee must verify and document the Borrowers receipt | more...