Articles Published in: 2016

August 2, 2016

FHA Loan Questions About Seller Contributions

A reader asks, “What extra expenses does a seller pay for a FHA offer compared to a conventional offer when selling their home?” Seller contributions and their limits are covered in HUD 4000.1. It’s impossible to speculate what the differences might be between an FHA mortgage and a conventional mortgage as loan terms may vary from lender to lender. However, FHA loan rules are clear on this subject in terms of what is permitted and what is not. Seller contributions are known as “interested party contributions” in HUD 4000.1. These must be negotiated between borrower and seller, but the agreed-upon contributions must meet FHA standards. FHA loan rules are quite clear-there is a cap on the value of seller concessions. Page 220 of HUD 4000.1 states: “Interested Parties may contribute | more...

August 2, 2016

FHA Home Loan Questions: Mobile Home/Manufactured Home Foundations

By Joe Wallace

We have not one, but two questions in our comments section recently about mobile homes/manufactured homes. Here’s the first: “We had our modular home purged when we ref in 1997. It was required to have tie downs installed when it was refinanced. We are now selling our property and now the lender is requiring that different tie downs need to be done. Is there a clause grandfathered in any tie downs prior to 2001 excludes this update to the old tie downs?” The problem with answering this question is that lender standards, plus state/local building code would definitely apply. It’s not clear what the reader is asking when discussing the “grandfather clause”. Is that in reference to HUD 4000.1 rules governing FHA loans for manufactured homes? Or is that in | more...

August 1, 2016

HUD Announces Settlement In Pennsylvania Housing Discrimination Case

By Joe Wallace

The Department of Housing and Urban Development has announced a settlement in a Pennsylvania housing discrimination case involving a loan applicant on maternity leave. According to the press release on the HUD official site, “…a Conciliation Agreement with Philadelphia-based Citizens Bank of Pennsylvania and Providence, Rhode Island-based Citizens Bank, collectively known as Citizens Bank, settling allegations that the bank violated the Fair Housing Act when it told a female applicant that she would need to return to work before her application for a home equity line of credit could be approved.” Fair Housing Act laws state that it is illegal to discriminate against borrowers, “in the terms, conditions, or privileges associated with the sale or rental of a dwelling on the basis of familial status”, which includes denying a mortgage | more...

August 1, 2016

Mortgage Rate Trends: Lower On Friday

By Joe Wallace

Mortgage loan interest rates fell on Friday, bringing them back down to territory closer to what we saw post-Brexit vote. Friday saw the scheduled release of Gross Domestic Product data, and investor reaction to that report sent rates back down, making three days in a row of recovery. 30-year fixed rate conventional mortgages hit a range of best execution rates on Friday, between 3.375% and 3.5%. FHA mortgage loan interest rates are holding at a best execution 3.25% at the time of this writing. FHA rates tend to vary more among participating lenders, so it’s a good idea to shop around. FHA rates sometimes take longer to catch up with changes in mortgage loan rates, but continued upward or downward trends (or a single day of major change) is enough | more...

July 29, 2016

FHA Loan Questions: Appraisal Concerns

By Joe Wallace

A reader asks, “I am about to put my house on the market. But now I’m starting to worry about a crack on the basement floor that has been there since I bought the house, I never worried about the crack, its due to the house settling to one side years ago. Other than that the house is structurally sound and basement is very dry. I think the house dips about 3/4 inch. Is this something that would cause an inspection to fail?” There are several issues that can make questions like these difficult to answer. The first is to remind borrowers and sellers alike that an FHA appraisal is NOT an inspection, nor does passing the FHA appraisal process equal an FHA stamp of approval on a property that | more...

July 28, 2016

Mortgage Rate Trends: Slightly Lower After Fed

By Joe Wallace

All eyes were on the Fed on Wednesday, with investors looking for any sign of a Fed move to hike interest rates. Some market watchers thought the Fed might drop a hint or make specific statements about what it might do in the next meeting; the Fed made no such statements. The reaction to this was mixed, some lenders repriced for the better, but not all. You may see changes in the next business day but as it stands at the time of this writing, things are (best execution) more or less where they were yesterday, with some lenders offering slightly lower rates or closing costs. 30-year fixed rate best execution interest rate numbers are at or near 3.5% at the time of this writing, with FHA mortgage rates still | more...

July 27, 2016

FHA Loan Questions: Income Verification

By Joe Wallace

A reader asks, “I threw out my pay stubs not knowing that I would be purchasing a home this soon. Is there anything else that can be used in place of pay stubs to get approved for an FHA loan?” “I provided copies of my last four pay checks, a statement from my employer showing my cumulative earnings so far this year, my original W2s from 2014 and 2015, my federal and state taxes from 2014 and 2015, and three months worth of bank statements that show the direct deposit from my employer every two weeks for those three months.” In general, you may find that tax documentation, current pay stubs, and bank statements COULD provide an acceptable substitute, depending on the lender. However, this is a situation that requires | more...

July 27, 2016

Mortgage Loan Interest Rate Trends: Highest In Four Weeks

By Joe Wallace

There have been many influences on lower mortgage rates as of late, and as the trend has shifted to a move higher, we’re seeing stateside economic data returning to a greater place of influence over rates than Brexit headlines. One good example? All eyes are turning to the Fed this week-nobody expects the Fed to make any earth-shattering pronouncements, but investor reaction to this week’s activity could well pressure rates higher depending on circumstances. In the shadow of a Fed policy announcement on Wednesday, mortgage rates pushed higher on Tuesday, putting 30-year conventional fixed rate loans more solidly in 3.5% best execution territory. FHA mortgage loan rates, at the time of this writing, are at a best execution 3.25%. As always, best execution rates assume ideal conditions. A borrowers FICO | more...

July 26, 2016

FHA Loan Questions: Unpaid Tax Liens

By Joe Wallace

A reader asks, “I entered into an electronic direct withdrawal from my checking account repayment plan with with IRS for tax underpayment…after meeting with IRS, payment agreement request was approved. After the agreement was approved IRS filed a lien on the owed amount. I am not currently not a property owner, but I would like to buy a home in the next year.” “However the tax lien caused my credit score to drop to 649. I currently earn $92,000.00 from retirement income, and $40,000.00 from employment income. debt ration is where it should be. My question is can I ever qualify for FHA home loan, if the lien is not paid? Or (does) the lien (have) to be paid in full, along with a paid document submitted to all credit | more...

July 26, 2016

FHA Loan Questions About Occupancy Rules

By Bruce Reichstein

What are the FHA home loan rules for occupancy? A reader got in touch with us recently with a question that pertains to this important issue, asking, “I live in California, but I want to purchase a home in Virginia Beach, Va. Can I still use FHA loan to purchase a home in Virginia. My son will be living at the house that Im planning to purchase. He lives and works in Virginia.” FHA loan rules that govern this issue can be found on page 135 of HUD 4000.1. FHA home loans are intended for borrowers purchasing principal residences, but what does that term mean? HUD 4000.1 has a specific definition of a “principal residence” on page 135, which states: “A Principal Residence refers to a dwelling where the Borrower | more...