Articles Published in: 2016

November 2, 2016

HUD Brings Charges Against Ohio Housing Authority

The Department of Housing and Urban Development is bringing charges against the Ohio Housing Authority for what it says are violations of the Fair Housing Act. At first glance, a Fair Housing Act case against a state or local housing authority might not seem to have much to do with FHA mortgage loans, but the fact is that fair housing issues affect people at all levels of the home loan process, whether planning or actually purchasing. The family or individual that needs to rent, utilize public housing, or take other steps to find or use housing before purchasing a home is entitled to the same rights as those currently purchasing. Violations of those rights can negatively affect a potential borrower’s ability to find an purchase a home, which is why | more...

November 2, 2016

Down Payment Rules: An FHA Loan Question

By Joe Wallace

A reader asks, “I’m buying a home for 160,000 and the seller is paying up to 4000 in closing costs and pre-paids (which the closing cost ended up only being 3,525 because the lender required me to pay for the appraisal outside of closing POC) I also put 500 earnest money down.” “They are telling me that I have to bring 5,100 to closing instead of 4,625 because they said that I have to bring a total of 3.5% (5600) and the 475 that I already prepaid can not go towards my total 3.5% down. I thought that because I put 500 earnest money deposit and paid for the appraisal outside of closing and the seller is paying for all my closing costs, that I would be able to use | more...

November 1, 2016

FHA Condo Loans: New Requirements

By Joe Wallace

The FHA official site has updated owner/occupier requirements for FHA condo loans. In a press release issued in late October, the agency announced changes effective immediately; “The Federal Housing Administration (FHA) today announced that, under certain circumstances, it will lower its required owner-occupancy standard for approved condominium developments…FHA currently requires that approved condominium developments have a minimum of 50 percent of the units occupied by owners.” The press release adds that “this requirement can be lowered to 35 percent for existing condo developments provided the project meets certain conditions.” The press release states that The Housing Opportunity through Modernization Act of 2016 (HOTMA) included instructions to the FHA, “to issue guidance regarding the percentage of units within an approved condominium development that must be owner-occupied. While having too few owner-occupants | more...

November 1, 2016

Employment: FHA Loan Rules

By Joe Wallace

A reader asks, “I am planning to apply for a home loan, in the next couple months. I am a recent college graduate that has been employed at my current job since May 2016 (just about 6 months). I am planning to buy a house for no more than $110,000, with a $8000 down payment. Will my lack of experience stop me from getting a home loan?” It’s true that in addition to FICO scores and credit history, there are also FHA guidelines for employment and income. In general, FHA loan rules require the lender to either verify two years of employment history or provide alternate documentation of either school enrollment or military service. According to HUD 4000.1, “The Mortgagee must obtain the most recent pay stub and one of | more...

October 31, 2016

FHA Loan Rules: Commuting Distance

By Joe Wallace

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...