Articles Published in: October 2016

October 31, 2016

FHA Loan Rules: Commuting Distance

A reader asks, “We are trying to get a loan and the lender is claiming that the requirements say she cant commute for two hours one way to work..My wife is the qualifying buyer and I have never heard of such a thing.. Is this discrimination cause she is a woman? They want verification from transfer store that wife will get same pay when transferred too. This would cause grief at current employment because they would not want to see her go. We do not want to do anything like that, transfer, until loan is finalized.. this all came up the day we were supposed to close…seems like discrimination, time to call a lawyer?” Let’s work backwards on this reader question from the last issue to the first; FHA loan | more...

October 31, 2016

Mortgage Rates: Friday Recovery

By Joe Wallace

Since our last report, rates have remained in an upward trend, but Friday saw a bit of relief after a spike on Thursday. Mortgage rates have been moving upward, hitting their highest levels in many months, but they are still below four percent even with the current trend. Some market watchers blame bond market weakness for at least part of this upward trend, but there have been important economic developments abroad (Many have been keeping watch on European Central Bank news) and at home (scheduled economic data releases and news from the Fed) that have also contributed to the current rate environment. Friday rates recovered a bit, reflected in closing costs for many rather than an actual change in the best-execution rates reported here. 30-year fixed rate conventional mortgages are | more...

October 28, 2016

Commission Income and FHA Loans

By Joe Wallace

A reader asks, “Can I apply for an FHA loan after just one year of commission based pay with a cosigner?” FHA loan rules require all borrowers to be obligated on the loan to financially qualify, which would include verification of both employment and income. A co-signer or co-borrower may not be able to make up for financial shortcomings of the other borrower(s) on the mortgage loan, but lender standards would apply in this area and it’s best to have a conversation with a loan officer about those standards and what may be possible. FHA loan rules for commission income, found in HUD 4000.1, state the following: “Commission Income refers to income that is paid contingent upon the conducting of a business transaction or the performance of a service…The Mortgagee | more...

October 27, 2016

FHA Appraisal Rules: The Roof

By Joe Wallace

FHA appraisal rules cover a variety of aspects of the home. FHA appraisal requirements are found in HUD 40001., and include guidelines for electrical systems, plumbing, paint, and also requirements for the roof. FHA appraisers perform a review of the property to make sure it meets minimum standards, but the appraisal is NOT a home inspection, a guarantee that a home is defect-free, etc. Borrowers should never rely on the FHA appraisal as a stamp of approval or anything similar to a home inspection. Your appraisal fee does not cover this inspection, but the inspection is an investment that could save you thousands of dollars later on. When it comes to FHA appraisal rules for the roof, HUD 4000.1 begins on page 488, stating, “The Appraiser must notify the Mortgagee | more...

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

October 26, 2016

FHA Appraisal Guidelines: Heating and Plumbing

By Joe Wallace

FHA appraisal rules are found in HUD 4000.1, which is the rule book for all FHA single family mortgage loans, refinancing, and reverse mortgages. There are some specific instructions where aspects of the appraisal are concerned, including systems found in the home such as heating, cooling, and plumbing. For example, where heating the home is concerned, FHA loan rules begin by stating, “The Appraiser must examine the heating system to determine if it is adequate for healthful and comfortable living conditions, regardless of design, fuel or heat source.” There may be situations where the heating system installed is not quite up to the task of managing the entire residence. Rules for the FHA appraisal address this directly: “The Appraiser must notify the Mortgagee of the deficiency of MPR or MPS | more...

October 26, 2016

FHA Mortgage Maximum Loan Amounts

By Joe Wallace

FHA home loans feature a maximum loan amount that varies depending on the housing market and other factors. There’s no single set dollar amount that establishes a limit for how much loan the FHA will guarantee, though many housing markets do feature the same general FHA loan limit based on calculations made on a yearly basis. The reason a specific loan limit dollar amount cannot be given is because FHA loan limits are also affected by the loan-to-value (LTV) ratio which may vary in each transaction. This ratio is basically a calculation of the percentage of the loan satisfied by the down payment. With a typical FHA single family forward mortgage, the LTV is 96.5% based on a minimum down payment of 3.5%. HUD 4000.1 discusses maximum mortgage loan amounts | more...

October 25, 2016

FHA Loan Assumptions: A Reader Question

By Joe Wallace

A reader got in touch with us recently via our comments section, with a question about FHA loan assumptions. She asked, “Are FHA refinance mortgages assumable?” This is an interesting take on the loan assumption question, since many of our prior questions in the comments section are asking if FHA loan assumptions are possible in a general sense. The specific query about refinanced loans is one we haven’t seen in recent months, but FHA loan rules in HUD 4000.1 are quite specific: “All FHA-insured Mortgages are assumable.” That is found on page 691 of HUD 4000.1, which also adds, “The Mortgagee must not impose, agree to, or enforce legal restrictions on conveyances or assumptions after closing except when: -specifically permitted by HUD regulations; or -the restriction had been specified in | more...

October 25, 2016

Interest Rate Trends: Higher

By Joe Wallace

We’ve watched an overall upward trend in interest rate behavior for mortgages in recent weeks, and while there have been some days of recovery, it seems that at present there are a variety of factors putting upward pressure on rates. Market watchers have been using the phrase “the trend is not your friend” for a while now, and Monday’s rate movement showed no signs of proving that phrase wrong in the short term. Rates moved higher on Monday, not enough to push actual numbers up, but enough so that affected borrowers may notice a difference in closing costs. 30-year fixed rate conventional mortgages are still being reported at or near 3.625% (best execution), and the FHA mortgage loan interest rate range between 3.25% and 3.5% is still there (again, best | more...

FHA Loans And Natural Disasters: What You Should Know

October 24, 2016

Mold Standards: An FHA Loan Question

By Joe Wallace

A reader asks, “Does the EPA or the FHA have the responsibility for setting the TLVs for mold spores in the air? What if the mold count is higher outside than inside?” The FHA does not set or regulate such health issues, deferring instead to federal, state, or local authority where applicable. According to the Environmental Protection Agency’s official site, we learn the following about mold as it relates to exposure in buildings (in general): “Is sampling for mold needed? In most cases, if visible mold growth is present, sampling is unnecessary. Since no EPA or other federal limits have been set for mold or mold spores, sampling cannot be used to check a building’s compliance with federal mold standards. Surface sampling may be useful to determine if an area | more...

October 24, 2016

Appraisal Rules For FHA Mortgages, Reverse Mortgages

By Joe Wallace

FHA home loans require an appraisal, which is designed to determine the fair market value of the home, but also to insure the property meets FHA minimum standards. While the appraisal must not be considered an inspection (and passing the appraisal is not a stamp of FHA approval or a guarantee that a home is free of problems), the FHA appraiser is required to report problem conditions may be spotted during the process. What does this mean? HUD 4000.1 states, “The Appraiser must report known environmental and safety hazards and adverse conditions that may affect the health and safety of the occupants, the ability of the property to serve as collateral, and the structural soundness of the improvements.” This is found on page 491, which also adds the following description/definition | more...