Articles Published in: April 2017

April 20, 2017

FHA Appraisal Rules: Basements

A reader asked us an appraisal question in our comments section recently about unfinished basements. “We were conditionally approved for FHA. There were two items in to be completed in the FHA appraisal before closing. Finish flooring in bedroom (completed).” “The room was being completely redone And, 2. Finish bathroom in basement. This is an unfinished basement with framing and partial drywall. The rough bathroom has the toilet and sink installed. My question is: Does a basement need to be finished for FHA approval? From what I have read, the basement is not calculated as living space.” While it is true that FHA loan rules in HUD 4000.1 mention not counting the basement as part of the Gross Living Area, FHA appraisal rules are not the only ones which may | more...

April 20, 2017

HUD Announcement On California Fair Housing Case

By Joe Wallace

The Department of Housing and Urban Development announced an agreement in a fair housing case involving a group of mortgage lenders operating in California. According to a press release on HUD.gov, ” The U.S. Department of Housing and Urban Development (HUD) today announced an agreement with a group of California mortgage lenders to resolve allegations they discriminated against a mortgage applicant based on his national origin.” The press release states that allegations of Fair Housing Act violations were brought against “American Financial Network of Brea, California; Benchmark Communities of Fresno; Brigantino Enterprise of Hollister; and an employee of Benchmark Communities failed to prequalify him to purchase a home in Hollister because he is Hispanic”. Federal Fair Housing laws prohibit “discrimination in rental, sales or home lending transactions based on a | more...

April 19, 2017

Multiple FHA Loans? The Rules

By Joe Wallace

Based on some of our reader questions lately, there seems to be some confusion over the rules for FHA loans where the borrower is interested in applying for an additional FHA mortgage. What are the rules in HUD 4000.1 on this issue? There are two general areas of confusion related to those rules. Some borrowers have purchased a primary residence with non FHA loans and want to know if the FHA loan rules governing additional mortgages apply to them. According to a literal interpretation of the requirements in HUD 4000.1, borrowers who have a non-FHA mortgage are free to apply for an FHA mortgage without worrying about being in violation of the rules. FHA loans have rules for additional mortgages apply which specifically to those who already have an existing | more...

April 19, 2017

Mortgage Rate Trends: Lower Still

By Joe Wallace

We have devoted more column space to mortgage rate trends than usual this week, due in part because the short-term trend is definitely about moving lower, and we’re finally watching mortgage rate numbers dip into pre-election territory. There is absolutely no way to predict how long this trend will persist, but those who were holding out hope that we might see a move back to pre-November levels are being rewarded this week. Industry professionals and market watchers are quick to point out that this move lower has a lot to do with a combination of overseas economic news and a less-than-enthusiastic reaction from investors from the first 100 days of the new administration where fiscal policy is concerned. The first 100 days ends soon, are there more surprises coming? That | more...

April 18, 2017

FHA Loans And The 100 Mile Rule: A Reader Question

By Bruce Reichstein

A reader asked us a question about FHA loans and “the 100 mile rule”. “I am currently looking to purchase a home with FHA financing 5 miles from my current home in California. The current home I own is secured with a conventional loan. I would like to rent this home out and buy a larger home and finance it FHA because I dont have very much saved up for a larger down payment. Does the 100 mile rule apply to me?” The reader is asking in response to a post we made earlier this year about military FHA borrowers and occupancy rules for FHA loans. This quote from that original post, referencing FHA loan rules in HUD 4000.1, seems to be the issue of most concern for the reader: | more...

April 18, 2017

Mortgage Rate Trends: Lower

By Joe Wallace

Mortgage rate trends have generally been moving in favor or lower rates over the short term, and since our last report we’ve seen those rates move into territory not firmly held for quite some time. What is good for the economy is often bad for mortgage rates, and vice-versa, so the uncertain news you see related to some economic issues at home can be viewed as a contributing factor for lower rate activity in recent days. What we’re seeing as of late includes the influence of global economic headlines, domestic questions about the value of the U.S. dollar following statements out of Washington, and stock market activity. All this contributing toward the downward trend in mortgage rates. Investors hate uncertainty, and often run to the safety of bonds when times | more...

April 17, 2017

April Is National Fair Housing Month

By Joe Wallace

National Fair Housing Month is a bit more than half over, but it’s an important time to raise awareness of Fair Housing laws, how they affect mortgage loan applicants, and how such laws affect renters as well as borrowers. Do you know about your Fair Housing Act rights under the law? The FHA/HUD official site reminds its’ readers, “The Fair Housing Act protects people from discrimination when they are renting, buying, or securing financing for any housing. The prohibitions specifically cover discrimination because of race, color, national origin, religion, sex, disability and the presence of children”. You read that correctly-as a renter, a buyer, or an applicant, your rights include equal consideration regardless of the presence or absence of any of the factors listed above. Fair Housing laws do have | more...

April 17, 2017

FICO Scores And FHA Loan Approval

By Joe Wallace

How do FICO scores affect your FHA home loan application? A reader got in touch this week to ask a question in this area: “Hello, my credit score is between high 500s, low 600s. I make $8,000 a month. My mother in law said she would co-sign for my wife and I, her score is near perfect. Is this situation possible to get a loan for a home? She manages an apartment complex and pays no rent. Thanks for your time.” FHA loan rules in HUD 4000.1 state that a borrower is technically qualified for maximum financing (with a required minimum 3.5% down payment) with FICO scores at 580 or higher. Borrowers with FICO scores between 500 and 579 are technically eligible for FHA loans with a 10% minimum required | more...

When Is An FHA Loan Better Than A Conventional Loan?

April 14, 2017

Identity of Interest Issues And FHA Loans

By Joe Wallace

A reader got in touch to ask about FHA loans and identity of interest rules this week. “I have a loan that I am working on right now and the underwriter is saying that we have an “identity of interest” issue.” “The situation is this my borrower is not related to the seller but has been renting the house she is buying for five months. Because there is no family relationship between the seller & buyer, does she has to live in the house for six months?” The FHA loan rule book, HUD 4000.1, describes identity of interest transactions as a house sale “between parties with an existing Business Relationship or between Family Members.” The word “interest” in this case refers not to interest rates, but rather to the interest | more...

What You Need To Know About Your FHA Home Loan

April 13, 2017

FHA Loan Limits: Low-Cost Areas, High-Cost Areas

By Joe Wallace

FHA loan limits can be puzzling to those unfamiliar with how the program works. FHA loans are calculated based upon the appraised value of the property or the sale price, whichever is lower. There are other factors that will help determine the final amount of the home loan including whether approved closing costs have been rolled into the loan, approved energy efficient upgrades, etc. But housing markets vary across the nation. What is an affordable, modest price for a house in one area won’t be enough to purchase property in a high-cost area. So how does the FHA determine what the proper loan amount should be with this factor in mind? HUD 4000.1 has the answers, listing FHA loan limits, and their requirements and loan guaranty limits for low-cost areas | more...