Articles Published in: 2019

November 12, 2019

FHA Home Loan Assumptions

Sometimes a homeowner decides they don’t want a particular home any longer. Some choose to sell, others choose to have their home loan assumed by another person, which is not quite the same as selling the home but has the same intended result–the new owner becomes financially responsible for the mortgage and the property. When you want to have your FHA home loan assumed, you’re required to get the participation of the lender in most cases. There are rules in HUD 4000.1 that govern loan assumptions, they begin with the agency’s definition of the term: “Assumption refers to the transfer of an existing mortgage obligation from an existing Borrower to the assuming Borrower.” Because of certain rule changes that affected the FHA loan assumption rules, HUD 4000.1 has a different | more...

November 11, 2019

Happy Veterans Day 2019

By Joe Wallace

Happy Veterans Day! Many banks will be closed to observe this federal holiday, bond markets are closed, and we pause in our usual routine of answering questions about FHA home loans to honor our veterans. Thank a veteran for her service, and remember the sacrifices all our troops have made no matter where in the world they may be stationed. To all current and former members of the U.S. military, THANK YOU for your service! Our regular posting schedule resumes tomorrow.

Home Loans For Building On Your Own Land

November 8, 2019

FHA Loan Appraisal Requirements: Repairs

By Bruce Reichstein

FHA loan rules require an appraisal of the property secured by the mortgage regardless of whether it’s an existing construction home or if you choose to build on your own land using a One-Time Close loan. Do you know what the home loan rules say about any required repairs or corrections? You may not expect an appraisal-directed repair from a new construction home. But if the FHA appraiser finds something that does not meet local building code, or if there was some kind of damage uncovered during the appraisal (these are just two examples of what could happen at appraisal time on a new construction home) those issues must be corrected. HUD 4000.1, the FHA Single-Family Home Loan Handbook, instructs the lender that in cases where the appraisal uncovers things | more...

November 7, 2019

FHA Loan Rules For Appraisals: Appliances, Mechanical Systems In The Home

By Joe Wallace

HUD 4000.1, the FHA Single-Family Loan Handbook, has a detailed section about FHA loan appraisal requirements. First-time home buyers may not realize that certain details of the home must meet FHA requirements such as the condition of appliances and the efficiency of the mechanical systems in the home such as central air conditioning or hot water heaters. HUD 4000.1 lists FHA requirements for appliances in the appraisal, stating that the FHA appraiser is required to review the home’s stove, fridge, washing machine, etc. if those appliances are being left in the home for the new owner. “Appliances that are to remain and that contribute to the market value opinion must be operational. ” This section is discussing appraisals for existing construction homes, but the intent is clear; the condition of | more...

November 6, 2019

HUD Announces Million Dollar Settlement With Bridgeport Housing Authority Over Disability Discrimination Claims

By Bruce Reichstein

No matter what stage you are at in the house-hunting process, discrimination has a chilling effect on your efforts to find a home. It does not matter if you are renting or buying, discrimination corrupts every stage of the housing process. That is one reason we report on Fair Housing cases here; borrowers sometimes don’t fully understand their rights or the fact that in order to prevent future discrimination tomorrow, the victims of today’s Fair Housing Act violations have to report the illegal activity to call it to the attention of HUD. This is vital in any case; in today’s action, HUD did not get the initial complaint from an outside source (which seems rare for this type of Fair Housing Act issue) but rather from a HUD compliance review | more...

November 5, 2019

FHA Loan Closing Cost Rules

By Joe Wallace

FHA home loan closing cost rules affect your home loan no matter if you are buying a mobile home with an FHA loan or having a house built on your own land using an FHA One-Time Close construction loan. Closing cost rules for FHA home loans have two “lanes” (our term, not a bit of industry jargon) where the rules are applied–one is the rules from the FHA Single-Family Lender’s Handbook (HUD 4000.1) and the other are the lender’s own standards and requirements. FHA loan rules and lender standards will both apply. FHA loan closing cost rules begin with the understanding that your down payment and your closing costs are two separate expenses. Your closing costs cannot be used as part of your down payment. FHA loan rules in HUD | more...

November 4, 2019

FHA Loan Down Payment Rules

By Joe Wallace

Do you know what the rules are for down payments according to the FHA Lender’s Handbook? HUD 4000.1 states that the minimum required down payment allowed for FHA mortgages is 3.5% of the adjusted value of the home. The borrower must pay this independently of any other closing costs associated with the loan. The seller, lender, or any other party with a stake in the outcome of the transaction cannot provide down payment funds to the borrower. Sellers are permitted to contribute toward closing costs, but not the down payment. The down payment is part of the borrower’s cash requirement to close the loan. The lender is required to verify the sourcing of all down payment funds (including gift funds from other people) to insure the money does not come | more...

November 1, 2019

FHA Loan Down Payment Help For Borrowers

By Bruce Reichstein

Even with the FHA loan program’s low 3.5% down payment requirement, some borrowers struggle to come up with the minimum required investment for the purchase of an existing home or construction of a new home. Fortunately, there is home loan down payment assistance available for borrowers from local agencies (the FHA itself does not provide down payment funds) and there are resources you can search to find the down payment help you need in your local area. But there are rules for down payment grants, home buyer grants, and other forms of down payment help. FHA loan rules say any down payment help must meet FHA requirements and must not be used in ways that are against the rules. For example, some well-intentioned groups may offer down payment funds to | more...

October 31, 2019

Does The Fed Interest Rate Cut Also Cut Mortgage Loan Rates?

By Joe Wallace

On Wednesday, October 30 2019, the Fed voted to cut interest rates for the third time. The specifics, reported by many news outlets including CNBC.com, include a 25 basis points cut to the benchmark funds rate. According to a CNBC report, ” The rate sets what banks charge each other for overnight lending but is also tied to most forms of revolving consumer debt.” Some want to know if the Fed rate cut directly equals a cut to mortgage loan insurance rates for FHA loans, VA mortgages, USDA loans, or conventional mortgages. The short answer is no, it does not. But that does NOT mean an interest rate cut won’t affect your mortgage rate if you are not currently in a rate lock commitment with your lender. The rates cut | more...

October 30, 2019

HUD Announces New Partnership To Enforce FHA Guidelines

By Bruce Reichstein

The Department of Housing and Urban Development has announced the signing of a Memorandum of Understanding (MOU) between the agency and the Department of Justice designed to provide guidance on pursuing disciplinary actions in cases brought against participating FHA lenders who may be in violation under the False Claims Act (FCA). “This agreement clearly outlines our FHA mortgage program requirements, so they do not impede or discourage lenders from offering affordable FHA-insured loans to credit-worthy borrowers,” according to one HUD official quoted in the agency’s press release. The United States Attorney General is also quoted in the press release adding, “”This MOU sets forth a robust and collaborative process for deciding when to pursue False Claims Act cases to remedy material and knowing FHA violations,” The agreement means HUD and | more...