Articles Published in: 2016

December 20, 2016

Deferred Obligations and FHA Loans

A reader asks, “How do you calculate monthly payments for estimated payment to begin when schooling is complete?” With student loans, there are two types of payments, one of which may apply in this case. Ongoing payments and deferred payments have different requirements. It’s likely safe to assume that this reader question refers to how a lender is to process student loan information as part of the applicant’s debt-to-income ratio. FHA loan rules in HUD 4000.1 include instructions to the lender for processing student loan debt information both as a “deferred obligation” that has not come due yet, and as an ongoing payment where applicable. HUD 4000.1 instructs the lender to use the actual amount of the student loan payment wherever possible, but in cases where the loan is deferred | more...

December 20, 2016

Fair Housing Case Settlement In Nevada

By Joe Wallace

As the FHA/HUD official site says, “Disability is the most common basis of complaint filed with HUD and its partner agencies. Last year alone, HUD considered more than 4,500 disability-related complaints or nearly 55 percent of all fair housing complaints.” That is one reason why we report Fair Housing cases here-these complaints are not limited to rental markets, and even if they were, such discrimination affects a potential borrower’s house hunting prospects. If you are forced to relocate because of job or family issues and need to purchase a home while renting in the meantime, your entire experience may be affected negatively by housing discrimination. And sometimes the only way to stop continued illegal practices is for the injured party to file a report and have the matter investigated by | more...

December 19, 2016

FICO Scores And FHA Loans

By Joe Wallace

Your credit report and FICO scores are very important factors when it comes to getting an FHA loan approved. Do you know what your FICO score is and how it affects your home loan? The U.S. government’s consumer watchdog agency, the Consumer Financial Protection Bureau, has a definition of FICO scores on its’ official site, which includes the following: “A FICO score is a particular brand of credit score. A credit score is a number that is used to predict how likely you are to pay back a loan on time. Credit scores are used by companies to make decisions such as whether to offer you a mortgage or a credit card. They are also used to determine the interest rate you receive on a loan or credit card, and | more...

December 19, 2016

Mortgage Rate Trends: Approaching Mid Four Percent Range

By Joe Wallace

Since our last report on mortgage rate trends, we’ve seen the upward trend continue into highs not seen for quite some time. Market watchers note that some seasonal market trends that affect rates are at work here, but those forces are not the only ones with the power to alter mortgage rates (based on investor reaction to things like breaking economic or political news, etc.) 30-year fixed rate conventional mortgage rates have, best execution, moved into a range of rates that are at or near the mid four percent zone. At the time of this writing, don’t be surprised to find best execution conventional rates ranging between 4.25% and 4.625%. The upper and lower ends of this range are more rare, but according to our sources certain lenders may offer | more...

December 16, 2016

HUD Adds New Housing Counseling Requirements

By Joe Wallace

Housing counseling is an important resource for those who want to apply for a mortgage loan. When borrowers decide to start on the journey to home ownership, there can be many areas they are unsure about. That’s one reason why it can be helpful to contact the FHA directly at their toll-free number (1-800 CALL FHA) to request a referral to a local, HUD-approved housing counselor to get expert advice and help in areas related to budgeting for a mortgage payment, credit issues, the home loan process and more. In some cases, certain types of counseling are actually required as a condition of FHA loan approval; this is true for FHA Home Equity Conversion Mortgages (HECM), where all borrowers must attend counseling to insure they understand the nature of HECM | more...

How much can I borrow with an FHA refinance loan?

December 15, 2016

FHA Mortgages: Five Simple Things To Know

By Joe Wallace

If you are considering an FHA home loan, there are a few simple basics to keep in mind about your loan application that will help you in both the planning stages and the application stage of the loan. Did you know? 1. FHA mortgages require a down payment, but that down payment is lower than many conventional mortgages. FHA home loans require a down payment of 3.5%, but you may encounter conventional mortgage loan requirements as high as 20%. This is an important factor when trying to plan a budget for your new monthly mortgage payment. FHA mortgages have down payments calculated as a percentage of the adjusted price of the home. 2. FHA mortgages require an appraisal to calculate the fair market value of the property and to insure | more...

December 15, 2016

FHA Loan Basics: A Reader Question

By Joe Wallace

A reader asks, “I really don’t understand why i have to pay PMI and MIP. I had credit problems a bankruptcy in 2013 , it was recorded and its been almost 4 years and my score is 709 that the middle score i have hardly no debts, 6% of income. I was told I have to pay the MIP up front of 1.75% and also 240 PMI monthly with mortgage. That’s a little too much, is there a way out of this? I also did not want taxes and insurance added, I’m putting 3.5 percent down. My loan officer said I had to pay the insurance and add taxes to my loan.” It’s not entirely clear from this reader question whether the loan is an FHA mortgage or not, but | more...

December 14, 2016

Mortgage Insurance Premiums, Down Payments, And FHA Loans

By Joe Wallace

Some borrowers get confused about the FHA’s required mortgage insurance premium (MIP), the Up Front Mortgage Insurance Premium (UFMIP) required to be paid at closing or to be financed into the loan, and private mortgage insurance (PMI). The FHA loan rulebook says of UFMIP, “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.” UFMIP is considered a standard cost of an FHA mortgage loan and is a separate expense entirely from the down payment, also known as the minimum required investment. FHA loan rules, as stated above, do permit the financing of the UFMIP, but the amount must either be financed entirely into the loan or paid | more...

December 14, 2016

Family Leave And FHA Loans

By Joe Wallace

Family leave is an important issue for lenders trying to determine a borrower’s verifiable income, debt-to-income ratio, etc. We get many questions on this topic in the comments section, including this most recent query: “How does FHA treat income after family leave? Is an 8 month maternity leave considered a job gap?” The rules that govern gaps in employment, temporary leave, and related issues can be found in HUD 4000.1. Temporary leave such as maternity leave or disability leave is addressed, but first the FHA loan rule book defines what it considers to be “gaps in employment”: “For Borrowers with gaps in employment of six months or more (an extended absence), the Mortgagee may consider the Borrowers current income as Effective Income if it can verify and document that: -the | more...

December 13, 2016

FHA Loan Rules On Property Acceptability

By Joe Wallace

If you want to purchase a home with an FHA loan in 2017, the property you decide to buy must pass an FHA appraisal process designed to insure the property physically meets certain minimum standards. The foundation, the roof, the sewage and electrical systems must all meet FHA requirements, plus state/local building code, etc. But the FHA loan rulebook, HUD 4000.1, also spells out some basic property acceptability criteria. For example, the rule book begins by stating that FHA loans are only for properties located within the continental U.S. or its territories. “The Property must be located within the U.S., Puerto Rico, Guam, the Virgin Islands, the Commonwealth of the Northern Mariana Islands, or American Samoa”. HUD 4000.1 has restrictions on properties located in certain types of flood zones, coastal | more...