Articles Published in: February 2017

February 21, 2017

FHA Appraisal Timing: A Reader Question

A reader asks us a question about FHA appraisal rules this week in our comments section. “Buyers want my house but dont want to process the sale until the end of April. It is now Feb. 19th 2017. I dont have a problem with that but do want some kind of guarantee that they are going to buy it.” “They are going FHA. Should I ask them to have and pay for an appraisal & inspection now as a good faith issue? If I do hold the house for 2 months I am the only one to suffer if they dont buy. Also who does the appraisal and inspection if the loan is FHA?” As for the timing of the appraisal and home inspection, that would be up to the | more...

February 20, 2017

Happy Presidents Day 2017!

By Joe Wallace

Happy Presidents Day! Markets and banks are closed in observance of the holiday, and we pause our usual posts on FHA loan issues and reader questions about FHA mortgages as well. Our regular posting schedule returns on Tuesday. Have a safe and happy holiday and thank you for reading!

February 17, 2017

Gaps In Employment, Reductions of Income: FHA Loan Rules

By Joe Wallace

FHA loan rules in HUD 4000.1 for single family home loans and refinance loans include instructions for the lender on how to verify a borrower’s income and employment. There are several reasons why this verification must be made, but one important one is to insure the income used to qualify for an FHA loan is stable, reliable, and likely to continue. The lender is basically looking for indications that this is so, but how does the loan officer interpret financial setbacks such as gaps in employment or reductions of income? What are the FHA requirements in this area? HUD 4000.1 addresses these issues. For example, when it comes to certain gaps in a borrower’s employment history, the following may apply: “For Borrowers with gaps in employment of six months or | more...

February 16, 2017

Credit Score Rules For FHA Mortgages

By Joe Wallace

There’s a common reader question about credit score rules for FHA mortgage loans that we get from time to time that goes something like this: “Is it possible to have a low credit score (500-600) and still get an FHA mortgage?” FHA loan rules state that borrowers with credit scores at 580 or higher are eligible for maximum financing for FHA home loans, which requires a 3.5% down payment from the borrower. For those with credit scores between 579 and 500, 10% down is required. However, these FICO score numbers are FHA loan minimum standards and lender requirements can be and often are higher. Credit score rules for FHA loans include the following instructions (see below) to the lender found in HUD 4000.1, the FHA single-family mortgage loan rule book. | more...

February 16, 2017

Mortgage Rates: Five Days Of Moving Higher

By Joe Wallace

Mortgage rates have been moving steadily higher for the last five business days; the most recent move higher on Wednesday was motivated in part by investor reaction to stronger economic data including a stronger Retail Sales report and better news associated with inflation stats. This data was part of scheduled economic data releases due out this week, and mortgage rates moved higher as they are often wont to do when there is good economic news. The move higher puts fixed rate conventional mortgage loan rates in a range with 4.375% best execution at the upper end-our sources indicate that more lenders are offering rates at or near the higher end. But the real news involves a change in FHA mortgage loan best execution rates-these numbers have been slower to change | more...

FHA One-Time Close Construction Loans In 2019

February 15, 2017

Switching Lenders: The FHA Loan Rules in 2017

By Joe Wallace

Home loans sometimes feature complications. A borrower may decide to cancel the transaction altogether, have a change of mind on certain details of the mortgage, or in some cases switching lenders may be required. What are the FHA loan rules for switching lenders? Borrowers should know that the FHA loan rule book, HUD 4000.1, has some specific instructions in this area. Borrowers can expect the loan rules to function in some very specific ways should this be needed. According to HUD 4000.1: “The original Mortgagee must assign the case number to the new Mortgagee using the Case Transfer function in FHAC immediately upon the Borrowers request” (emphasis ours). The case number mentioned here refers to the FHA-assigned number required to move forward with the mortgage. Having an FHA case number | more...

February 15, 2017

Mortgage Rates: Four Days Of Moving Higher

By Joe Wallace

In the short-term, mortgage rates have been on an upward swing. Tuesday’s rate activity had early higher moves, but with recovering later in the day, resulting in a continuation of the recent range of conventional rates but with more lenders reporting the higher part of that range. 30-year fixed rate conventional mortgages are, at the time of this writing, being reported at a best-execution range between 4.125% and 4.25%, but as mentioned above the more common rates are found at or near the upper end. FHA mortgage rates are holding at 3.75% but with the current short term upward trend, it’s not clear how long that best execution rate may persist. FHA mortgage rates tend to vary more among participating lenders than their conventional counterparts. It’s best to shop around | more...

February 14, 2017

FHA Loans And Work Permits: A Reader Question

By Joe Wallace

Are work permits required for FHA loans when the applicant is a legal permanent resident alien or non-permanent resident alien? A reader asks, “So if a person had a work permit but never renewed it, but has been doing taxes with his/her ss# and is currently working does that mean there not qualify for FHA? Or does the legal status have to be current?” FHA loan rules in HUD 4000.1 are clear that a borrower is not required to be a U.S. citizen in order to qualify for an FHA mortgage loan. However, legal status is required-those in the United States illegally cannot qualify for an FHA loan. For permanent resident aliens, HUD 4000.1 states: “A Borrower with lawful permanent resident alien status may be eligible for FHA-insured financing provided | more...

February 14, 2017

HUD Announces Relief For Louisiana Tornado Victims

By Joe Wallace

Federal relief is available for those affected by tornadoes in Louisiana. On Monday, February 13th 2017, the U.S. Department of Housing and Urban Development (HUD) announced it will “speed federal disaster assistance to the State of Louisiana and provide support to homeowners and low-income renters forced from their homes due to severe storms, tornadoes, and straight-line winds” according to a press release on the FHA/HUD official site. There has been a federal disaster declaration for Livingston and Orleans parishes. “The President’s declaration allows HUD to offer foreclosure relief and other assistance to certain families living in this county” according to HUD.gov. What types of assistance are available? Foreclosure relief, rehab loans, rehab refinance loans, and other options. There may also be assistance from FEMA available to affected home owners. According | more...

February 13, 2017

FHA Appraisal Basics You Should Know

By Joe Wallace

The FHA appraisal process can be mysterious to some. It’s not as complete as a home inspection, the results of the appraisal should not be mistaken for a home inspection, nor should the FHA appraisal be considered as a stamp of approval on a home. So what IS an appraisal? And what do FHA appraisal rules require from this process? There’s an old notion borrowers should know about when it comes to inspections versus appraisals. The appraisal is basically a tool for the lender, the inspection is for the borrower. As long as you keep that in mind when ordering your home inspection, you’ll be able to keep these two separate processes in the right perspective. HUD 4000.1 has rules and instructions for how an FHA appraisal is to be | more...