Articles Published in: January 2017

Can I get an FHA home loan if I owe back taxes?

January 31, 2017

Eligibility Rules For FHA Loans

Eligibility rules for FHA loans are found in HUD 4000.1, which addresses who is permitted to apply for an FHA single-family home loans. Who can apply for an FHA loan and what do the rules say about these applicants? The most basic eligibility rules for FHA loans include the requirement that the borrower be an owner-occupier of the property to be purchased. FHA loan rules do not permit FHA single family home loans to be used for investment properties, so the borrower who wishes to buy a multi-unit property and rent out all of those units to other people would not be approved for the mortgage. The same is true of those who wish to purchase time shares, condo hotels, or other “transient occupancy” or short-duration occupancy properties. That said, | more...

January 31, 2017

Mortgage Rate Trends: Opening Lower

By Joe Wallace

Mortgage rates ended last week nearly exactly where they started after some ups and downs, and on Monday rates opened the week a bit lower. However, the lower rate just pushes things back closer to the bottom part of what market watchers have labeled the new, higher range. We started seeing that higher range come into plat at or near election time-markets hate uncertainty and investor behavior between November 2016 and January 2917 has demonstrated that rather well. At first it wasn’t clear what was going to happen with short-term mortgage rate trends in general, but now we see that new and higher range at work in the short term. There are always influences (world news and events, economic data, unexpected changes in regulations or new legislation) that can alter | more...

January 30, 2017

HUD Announces Agreement In Fair Housing Cases

By Joe Wallace

HUD has announced agreements with insurance companies in Ohio and Florida following an investigation into violations of Fair Housing Act regulations. We occasionally devote space to these issues because even in situations where the violations involve rental housing or other non-FHA loan transactions, they can affect borrowers seeking to apply for FHA loans. Some borrowers need rental housing to use in the planning stages of a mortgage before they can purchase a home, others may find themselves forced to house hunt due to job relocations, etc. Fair Housing laws protect Americans at all stages of the process of finding a home regardless of renting or buying. This most recent announcement of Fair Housing action from HUD states, “The U.S. Department of Housing and Urban Development (HUD) announced agreements with two | more...

January 30, 2017

FHA Appraisals and Inspections: A Reader Question

By Joe Wallace

FHA appraisals are NOT the same as home inspections. This week we received a question about the appraisal process that serves as a reminder of this. A reader asks: “I purchased a home that was funded by FHA but the foundation is in significant disrepair it. There are whole sections where the beams are not being supported by anything therefore the beams will eventually not be able to sustain the floor. Approximately 30 Jacks or posts need to be added, addition to a few beams, most significantly in one 8 X 31-foot section of the house where there is nothing supporting it other than the outside foundation wall on one side.” “Basically it needs $35.000+ of work. The FHA guideline says that a structure has to be in good repair | more...

Will My Home Loan Application Be Approved?

January 27, 2017

Identity of Interest Transactions: An FHA Loan Question

By Joe Wallace

Do you know how FHA loan rules affect the sale of a home deemed an “identity of interest” transaction? A reader asks, “My husband and I have a contract to purchase his parents home that they currently live in. This is their principal residence.” “My loan officer is telling me that even though it is their principal residence and we are purchasing as our principal residence that the 85% LTV cannot be exceeded and we have to put 15% down. Is this correct?? If not, then what can I do to get them to make the exception? We were already pre-approved for 3.5% down.” FHA loan rules governing identity-of-interest transactions do feature a higher down payment requirement in many cases. HUD 4000.1 defines such transactions as follows: “An Identity-of-Interest Transaction | more...

January 26, 2017

FHA Loan Rules For Gift Funds

By Joe Wallace

FHA loan rules in HUD 4000.1 have specific guidelines where gift funds to the borrower are concerned. Gift funds are commonly used for home loan expenses including down payments, but when the borrower accepts gift funds for the purpose of making that down payment, the funds must meet FHA acceptability standards. What does this mean? FHA loan rules are very precise when it comes to the source of money used for a down payment. A borrower cannot use proceeds from a non-collateralized loan such as a payday loan or credit card cash advance to make a down payment, and if gift funds are used the money must come to the borrower with no obligations. HUD 4000.1 has the guidelines for these gifts, which includes the following definition: “Gifts refer to | more...

January 26, 2017

FHA Loans and Credit Report Issues

By Joe Wallace

FHA home loans offer an alternative to the more strict requirements of conventional mortgages. FHA loans typically feature a lower down payment requirement than many conventional loans, and have more forgiving credit standards (though lender standards will still apply). Some apply for an FHA mortgage unsure of how their past credit activity or even their current FICO score might affect their chances at loan approval. If you are one of those people, there are some things you can do for greater peace of mind going into the loan process. The catch is that advance planning is required-it’s best to start preparing for a major financial commitment like a mortgage a full year or more before applying. The planning time is crucial since you will need to save up money for | more...

January 25, 2017

Cash Back To The Borrower and FHA Loans

By Joe Wallace

Do FHA loans permit cash back to the borrower? We get many reader questions in our comments section about this subject. Some want to know if they can borrow more than the cost of the home and use the excess funds for personal use. Others want to know if cash-back refinance options are available on FHA mortgages. The rules that govern cash back to the borrower can be found in HUD 4000.1. As a general rule, FHA loans for “forward mortgages”, which means typical house purchases, do not allow cash back to the borrower. There’s an exception for money that was paid up front for something that was later permitted to be included into the loan amount. That would be considered a refund and is not forbidden by FHA loan | more...

January 25, 2017

Appraisal Questions: Bricks

By Joe Wallace

A reader asked a question about the FHA appraisal process in our comments section recently; “I am currently selling my house. The buyer is getting a FHA loan.” “The appraiser asked us to repair any broken brick on the outside of the house. My husband scraped off the parts of the bricks falling apart and filled each hole with mortar and painted it as close to the brick as he could. Will this be an acceptable fix according to the appraiser?” When an FHA appraiser requires corrections as a condition of loan approval, borrowers will likely have to pay for an additional compliance inspection, which allows the appraiser to verify that the corrections were made to the satisfaction of FHA minimum standards. Whether or not a certain correction or repair | more...

When Is An FHA Loan Better Than A Conventional Loan?

January 24, 2017

Reverse Mortgage Issues: A Reader Question

By Joe Wallace

A reader asks, “I am an inheritor of a reverse mortgage home. I have declared to the bank that I am paying off the loan in cash at 95% of the appraised value. The appraisal came in to my benefit.” “The appraisal is less than two weeks old and the bank has already stated they may not be able to close before the expiration date because of their workload and may require another appraisal. There is over 100 days left before the expiration date.I told them this was unethical. Should I call HUD? Hire a lawyer?” The only legal advice comments we can give out in cases like these is that it’s never a bad idea to consult legal counsel with specific experience in these issues. There are a number | more...