Timely news, information and advice concentrating on FHA, VA and USDA residential mortgage lending.

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Articles Published in: 2016

Happy Holidays 2018

FHA Loans and Social Security Income

A reader asks, “I don’t understand if I have a 1099 and I have a benefits letter, and the letter that states at the end of the year what I am getting for the following year, why I am being asked or can be asked for something that states I will get social security for 3 years? There is nothing that says social security will give this to me or a name for it.” FHA loan rules governing Social Security income are found in HUD 4000.1, page 195 under “Other Sources Of Effective Income”. The rules require the lender to make a distinction between “effective income” which would continue for at least three years of the new loan, and “compensating factors” in the case where the lender cannot establish that | more...

 
Happy Columbus Day 2019

FHA Loans and Cash Back

FHA home loans have specific rules about when a borrower can get cash back on an FHA transaction and how. In general, FHA mortgage loans for new purchases don’t permit cash back except in the form of legitimate refunds, but HUD 4000.1 outlines certain circumstances where a small amount of cash back is permitted. However, that cash back cannot be “excessive”. A lender is required to estimate the costs of the loan before the actual expenses are tallied. These estimates could result in the borrower budgeting more than is required. When money is due back to the borrower, HUD 4000.1 states: “When the estimated costs utilized in calculating the maximum mortgage amount result in greater than $500 cash back to the Borrower at mortgage Disbursement, Mortgagees may reduce the Borrowers | more...

 

FHA Loan Questions: Appraisal Issues

A reader asks, “We just purchased our first home using an FHA loan. After 2 months in the house we had a typical Arizona monsoon storm come through. Our home flooded due to poor drainage on 3 sides of the house. The grading slopes towards the structure and not away. There are no gutters on the home nor a drainage system to move the pooling water away from our home. What recourse do we have when the FHA approved appraiser reported that there are no problems with the grading and drainage? Our home is damaged and our insurance does not cover flood damages.” The FHA official site is clear on the subject of FHA appraisals in that the appraisal process is not meant to be a home inspection. The appraisal | more...

 
HUD

HUD Announces Settlement In Housing Discrimination Case Against Richmond, Virginia

The Department of Housing and Urban Development has announced a settlement in a housing discrimination case brought against the city of Richmond, Virginia. According to a August 4, 2016 press release on the HUD official site, “The U.S. Department of Housing and Urban Development (HUD) announced today that it has approved an agreement with the City of Richmond, Virginia, settling 14 complaints of housing discrimination filed against the City by Hispanic residents. The complaints alleged that the City of Richmond selectively enforced its code requirements against residents of the Citys mobile home parks, who are predominantly Hispanic.” The Fair Housing Act makes it illegal to discriminate against people on the basis of their national origin. That includes discriminatory or selective enforcement of housing regulations or other issues related to enforcement. | more...

 
Mortgage Loan Rate Trends

Mortgage Rate Trends: Higher After Jobs Report

Mortgage loan interest rates pushed higher on Friday after a stronger-than-expected jobs report. The Employment Situation Report came out on Friday with good news for the economy-approximately a quarter million new jobs reported as opposed to the approximately 180 million expected to be reported. This resulted in what can be confusing for some who are new to market watching; good news for the economy equalling bad news for mortgage loan rates. It’s something that often happens, and it’s something you come to expect after some experience watching mortgage loan interest rates and the factors that can affect them. 30-year fixed rate conventional mortgages closed out Friday reported at a range between 3.375 and 3.5% best execution. Friday’s move higher could reflect in a borrower’s closing costs rather than the actual | more...

 
FHA Home loan appraisal rules

FHA Loan Questions: Personal Data

A reader asks, “Must income verification documents include sensitive information, such as account numbers, full SS# and bank account number(s). Can verification be made with sensitive information being Blacked-Out or omitted, as to not expose ones self to possible criminality?” FHA loan rules require the lender to verify personal information including Social Security Numbers, bank account numbers, credit reports, etc. So the lender will definitely be required to have that information at the bank’s disposal to verify not only the identity of the borrower, but also the sources of down payment funds and other money as governed by HUD 4000.1. HUD 4000.1, page 111 instructs the lender, “The Mortgagee must obtain the Borrowers authorization to verify the information needed to process the mortgage application. The Mortgagee must obtain a non-borrowing | more...

 

FHA Loan Rules: Special Forbearance For Unemployed Home Owners

When a borrower applies for an FHA mortgage, experiencing financial trouble isn’t top-of-mind; qualifying for the loan, making the down payment, and moving in are likely the big issues most think about when applying. But financial difficulties can and sometimes do come, so what can a borrower do if he or she finds themselves unemployed after purchasing a home with an FHA mortgage? FHA loan rules in HUD 4000.1 do permit the lender to offer something known as “special forbearance” or SFB for unemployed borrowers who are in danger of missing payments, going into loan default, etc. “The SFB-Unemployment Agreement is a written agreement between a Mortgagee and the Borrowers, one or more of whom has become unemployed, allowing for reduced and/or suspended Mortgage Payments.” This is an arrangement negotiated | more...

 
Will FHA Loans Let Me Rent Out My Home?

Facts About FHA Adjustable Rate Mortgages

If you are considering your FHA loan options, at some point you’ll likely consider your choices between mortgage loan interest rate options. Qualified borrowers can choose between a fixed-rate FHA mortgage or an adjustable rate loan. Fixed rate loans seem simple and straightforward enough. The borrower applies for a home loan at an interest rate negotiated between borrower and lender. But what about adjustable rate mortgages? These loans, often called ARM or FHA ARM loans, feature an introductory rate, and a higher rate that begins at a specified point in the course of the mortgage. According to the FHA loan rulebook, HUD 4000.1, “The Mortgagee must establish the initial interest rate and the margin. The margin must be constant for the entire term of the Mortgage.” How long does your | more...

 

FHA Loan Questions: Divorce, Refinancing

A reader asks, “My husband is a co-borrower on a 2nd mortgage or loan with his ex-wife. In the divorce decree, it stated that she was to have the loan refinanced so his name would no longer be on the loan. Its almost been a year, and she has been late several times.” Three weeks ago she moved out of county and allowed their ex-daughter-in-law to move it and make the payments. What steps should my husband take at this time?” FHA loan rules in HUD 4000.1 don’t specifically factor into a question like this, except where specific requirements of the new loan are concerned. The real issues here are legal ones, and for that, the reader will need to discuss the situation with a lawyer with expertise in divorce | more...

 
Mortgage Loan Rate Trends

Mortgage Loan Interest Rate Trends: Higher On Tuesday

Mortgage loan rates pushed slightly higher on Tuesday, thanks in part to bond market activity. There are also scheduled economic data releases this week that have the power to move mortgage loan rates depending on investor reaction to the data in those reports. Market watchers aren’t optimistic that lower rates are coming in the short term, while pointing out that we are still in a range of low rates. 30-year fixed rate conventional mortgages are, at the time of this writing, in a best execution range between 3.375% and 3.5%. That’s up slightly from the a previous range that had 3.625% at the bottom end. FHA mortgage loan rates hold steady at a best execution 3.25%. FHA rates tend to vary more among participating lenders so your experience here may | more...