Articles Published in: September 2016

September 22, 2016

FHA UFMIP: A Reader Question

A reader asks, “I want to purchase at home for 141,000 and I am paying the 3.5 down payment which totals it 136,065. How much will I pay in Up Front mortgage and annually MIP. If I pay the UFMIP in closing will it still be added into to total amount loan?” Let’s begin with a few basics. UFMIP stands for Up Front Mortgage Insurance Premium, which is required as one of the closing costs of an FHA mortgage loan. According to HUD 4000.1, “Most FHA mortgage insurance programs require the payment of UFMIP, which may be financed into the Mortgage. The UFMIP is not considered when calculating the area-based Nationwide Mortgage Limits and LTV limits.” That last sentence means that your loan limit is unaffected by the amount of | more...

September 21, 2016

FHA Loan Questions: FHA Lenders

By Joe Wallace

A reader asks, “Do you have a local list of approved FHA lenders for first time home owners in the amount of $50,000.00 and lower?” This is a common type of question; we get asked this sort of thing quite frequently in the comments section. There are a variety of reasons why a borrower might wish to apply for a comparatively low-dollar amount FHA loan. One is that some housing markets simply don’t have the higher prices; another is that a borrower wishes to purchase a mobile or manufactured home rather than what’s known as “stick-built” housing which is built on-site. What’s important to know is that lender standards vary from place to place. What’s offered by one lender may not be offered by another. With that in mind, it’ | more...

September 21, 2016

Interest Rate Trends: Higher Ahead Of Fed

By Joe Wallace

Mortgage loan interest rates moved a bit higher on Tuesday ahead of Wednesday’s scheduled Fed announcement, which can and has influenced mortgage rates (depending on investor reaction to the contents of such announcements). Most likely borrowers affected by today’s increase will notice the changes in the form of closing costs, and today’s move is essentially a trend we’ve been watching in the short term. 30-year fixed rate conventional mortgages are reported at the time of this writing at or near a best-execution 3.5%. FHA mortgage loan rates are holding, best execution, at 3.25%, having given up a previous range between 3.0% and 3.25% earlier. As always, the rates you see listed here are best execution rates, which means an ideal borrower is assumed (with outstanding FICO scores, credit history, and | more...

September 20, 2016

FHA Loan and Monthly Debt

By Joe Wallace

In order to insure an FHA loan applicant is a good credit risk, the lender must review the potential borrower’s FICO scores, employment, and debt-to-income ratio. The debt ratio is an important part of the overall determination for lenders to approve or deny an FHA loan application. That’s one reason we often point out that FICO scores alone don’t make or break a home loan application, but instead a variety of factors are used to approve the loan; FHA requirements include your loan repayment history, FICO scores, debt to income ratio, and employment history. HUD 4000.1 instructs the lender to review a borrower’s monthly financial obligations on page 177, stating: “The Mortgagee must determine the Borrowers monthly liabilities by reviewing all debts listed on the credit report, Uniform Residential Loan | more...

September 20, 2016

Down Payment Rules For FHA Loans

By Joe Wallace

FHA home loans differ from conventional mortgages in many ways, and one of those ways is that a lower down payment is required with FHA mortgages than for many conventional loans. A conventional mortgage may require a down payment of ten percent or more, depending on the borrower’s financial qualifications and other factors. But the FHA loan minimum down payment is (in most cases) 3.5% of the adjusted value of the property. But there are specific rules governing the down payment for mortgage loans, and FHA mortgages are no exception. The borrower’s “minimum required investment” or MRI (as HUD 4000.1 describes the down payment) must come from approved sources. Those sources can include a borrower’s own funds, gift funds that meet FHA requirements, cashed-out investments, proceeds from retirement accounts that | more...

September 19, 2016

FHA Mortgage Loan Rules: Business Debt

By Joe Wallace

When your loan officer reviews your financial details in order to make sure you are a good credit risk for a mortgage loan, there are many factors to consider. Some borrowers have less debt than others, and some debts are not necessarily personal loans, personal credit cards, etc. Sometimes business debt can factor into the equation. FHA loan rules for calculating certain types of business debt into a borrower’s debt to income ratio are found in HUD 4000.1, which begins on page 185 with a definition: “Business Debt in Borrowers Name refers to liabilities reported on the Borrowers personal credit report, but payment for the debt is attributed to the Borrowers business.” The basic instructions to the lender here are fairly simple: “When business debt is reported on the Borrowers | more...

September 19, 2016

Interest Rate Trends: Unchanged To Slightly Higher

By Joe Wallace

Mortgage rates closed out unchanged for some, higher for others, depending on the lender. After some steady upward pressure on rates, we’ve seen both conventional and FHA mortgage loan interest rates affected ahead of an important week for rates with the Fed about to make another policy announcement, plus the release of housing data. The Fed meeting comes Wednesday and has had the power to influence loan rates in the past depending on investor reaction. There is strong potential for higher rates depending on what happens on Wednesday, so it’s best to assume that can and will happen and plan accordingly. On Friday, 30-year fixed rate conventional mortgages were reported at or near 3.5% best execution, with FHA mortgage loan rates reported at or near a best execution 3.25%. That | more...

September 16, 2016

HUD Announces Fair Housing Protections For Borrowers With Limited English Proficiency

By Joe Wallace

It’s known as “LEP” or “limited English proficiency, and has been an issue that directly affects legally binding agreements including home loans for as long as there have been such arrangements made in the United States. But now, LEP is being addressed directly through guidance from the Department of Housing and Urban Development, as described in a recent press release on the HUD official site. “The U.S. Department of Housing and Urban Development (HUD) today issued ‘Limited English Proficiency’ (LEP) guidance that addresses how the Fair Housing Act would apply to claims of housing discrimination brought by people because they do not speak, read, or write English proficiently. More than 25 million people in the United States do not communicate proficiently in English.” The Fair Housing Act makes it illegal | more...

September 15, 2016

More On The FHA Limited 203(k) Rehab Loan

By Joe Wallace

Recently we wrote about the FHA 203(k) rehab loan and the FHA 203(k) limited rehab loan. With the “standard” rehab loan, borrowers can make major improvements to a property with a minimum of $5,000 required. The limited version of the FHA 203(k) rehab loan differs in several ways, but to start with there is no minimum dollar amount for the loan. HUD 4000.1 has rules that apply to the FHA requirements for 203(k) limited rehab loan. Those include a list of ineligible projects for the limited version of this type of mortgage loan: “The Limited 203(k) mortgage proceeds may not be used to finance major rehabilitation or major remodeling. FHA considers a repair to be major when any of the following are applicable: -the repair or improvements are expected to | more...

September 15, 2016

Mortgage Rate Trends: Higher

By Joe Wallace

Since our last report on mortgage loan interest rate trends, we’ve seen upward pressure on home loan rates. This week is full of scheduled economic data releases that have potential to add to this depending on investor reaction to the contents of those releases. So far we’re seeing a short-term upward trend consistently through the week. What happens from here remains to be seen, but market watchers are using the word “volatility” quite a bit in recent days. 30-year fixed rate conventional mortgage loan interest rates have moved out of their previous range between 3.375% and 3.5% and are now, best execution, solidly at or near 3.5%. FHA mortgage loan interest rates are still, best execution, in a range between 3.0% and 3.25%. This has been the “comfort zone” for | more...