Articles Published in: July 2022

July 29, 2022

FHA Home Loans And Occupancy: What You Can And Cannot Do

If you are buying an existing construction home with an FHA mortgage, or having one built for you using an FHA One-Time Close construction loan, you will notice some common requirements for these mortgages; one such requirement involves the borrower’s use of the property once the loan has closed. FHA new purchase mortgages, also known as forward mortgages, are intended for those who wish to occupy the home as their main address, or “primary residence”. Some borrowers may be confused by this requirement because they assume you can buy and rent out a home using an FHA mortgage without intending to occupy it. But the reality is that FHA mortgages actually require occupancy by at least one person obligated on the home loan, so how is it possible to purchase | more...

July 28, 2022

Article Update: Do Townhouses Qualify For FHA Loans?

By Joe Wallace

Back in 2018, we published an article about the FHA home loan rules for townhouses. Do they qualify for FHA home loans? One source defines a townhouse as: “…multi-floor homes that share one- to two walls with adjacent properties” but which feature separate entrances for each property. What do the FHA home loan rules say about purchasing townhomes with an FHA mortgage? FHA Loan Rules For Property Eligibility The FHA Single Family Home Loan rule book, HUD 4000.1, has seen some important changes since we wrote the original article in 2018 but in 2022 it still says the following property types may be purchased with an FHA mortgage: -detached or semi-detached dwellings -Manufactured Housing -townhouses or row houses -individual units within FHA-approved Condominium Projects As you can see from the | more...

July 26, 2022

HUD Announces Results Of New York Fair Housing Case

By Joe Wallace

Any form of discrimination in the housing process whether buying or renting has a chilling effect on the entire housing industry. We write about Fair Housing Act cases frequently to remind house hunters of their rights under the law. One of the latest developments in this area involves the Department of Housing and Urban Development’s involvement in a Fair Housing Act case in Long Island, New York. HUD announced in July 2022 that an Administrative Law Judge delivered a decision finding Long Island landlord Alex Raimos guilty of violating the Fair Housing Act, ordering Raimos to pay some $70 thousand in penalties and damages. This Fair Housing case began because the landlord refused to rent “to a mother and her daughter because of the daughter’s cerebral palsy” according to a | more...

July 25, 2022

Article Update: What Are The FHA Loan Requirements For Wells and Septic Systems?

By Joe Wallace

In 2017, we published an article that asked an important question: what are the FHA requirements for sewer/septic systems? As we discussed back then, there are important issues to consider if the property you want to buy with an FHA mortgage can’t be hooked up to a local utility. Our 2017 article asked an important question: what are the FHA requirements for sewer/septic systems? For example, the placement of the septic tank; back then, we reported FHA loan rules required the tank to be at least 50 feet from any well on the property. In 2022, those rules have not changed. And wells must be a proscribed distance from other features of the property including: Property line: 10 feet Septic tank: 50 feet Drain field: 100 feet Septic tank drain | more...

July 22, 2022

What Is An FHA Loan Limit?

By Bruce Reichstein

What is an FHA loan limit? The answer to this question can be found in HUD 4000.1, the FHA Single-Family Lender’s handbook, which begins by explaining: “A Mortgage that is to be insured by FHA cannot exceed the Nationwide Mortgage Limits, the nationwide area mortgage limit, or the maximum Loan-to-Value (LTV) ratio. The maximum LTV ratios vary depending upon the type of Borrower, type of transaction (purchase or refinance), program type, and stage of construction.” Furthermore, the handbook says that for most FHA loan programs the maximum mortgage is either the Nationwide Mortgage Limit for that area or “a percentage of the Adjusted Value”. The handbook breaks down how a home’s adjusted value is calculated, according to transaction. For new purchases or “forward mortgages”, the FHA Lender’s Handbook states: “For | more...

July 20, 2022

What To Think About When Comparing FHA Lenders

By Joe Wallace

Why do we say it’s so important to choose the right lender for your FHA home loan? Because no two financial institutions are exactly alike, and you may find a lender willing to offer the type of mortgage you need at an affordable interest rate. But until you compare offers how do you know you have set your price point and target interest rate realistically? It’s not just whether the lender offers the type of FHA mortgage you need–such as an FHA condo loan or an FHA One-Time Close Construction mortgage. It’s also whether the lender is offering you a competitive interest rate. When rates trend higher, does your selected loan officer reprice the interest rates or up the closing costs instead? If you don’t know, you won’t know how | more...

July 14, 2022

HUD Announces Appraisal Update

By Joe Wallace

The Department of Housing and Urban Development official site contains an FHA Mortgagee Letter published on July 12, 2022, which announces an important update to FHA appraisal policy. FHA loan rules as published in HUD 4000.1, include a maximum age for an appraisal. If an appraisal is about to expire, FHA rules permit an extension of the appraisal validity period for 30 additional days. In some cases, an appraisal update may be permitted but that update must typically be accomplished before the original appraisal expires. Now, FHA appraisal guidelines have been revised to expand the appraisal validity period, which the FHA and HUD say will reduce “financial burdens” of getting appraisal updates. The changes are also meant to help the agency “more closely align” the FHA loan program’s initial appraisal | more...

July 13, 2022

FHA Home Loans and Help With Down Payments

By Joe Wallace

First-time home buyers looking for real estate to buy with an FHA loan may be intimidated by the notion of saving up for and making any kind of down payment, let alone a percentage of the appraised value of the home. But it’s important to remember that borrowers have options with FHA mortgage loans that can help offset the down payment. Did you know that just over a quarter of all FHA loans at one time featured parental contributions toward the down payment? That information is according to the Wall Street Journal, which reports some 26% of the FHA loan transactions included financial help from parents–WSJ calls it “The Bank Of Mom And Dad” and it can be a powerful factor in buying a first home. But some first-time home | more...

July 12, 2022

FHA Loan Rules For Self-Employed Borrowers

By Joe Wallace

What do self-employed house hunters need to know about the home loan approval rules applicable to self-employment income? If you are not sure how your FHA lender will qualify you based on your income, keep reading–there are some important facts you will need to know before you fill out FHA loan paperwork. The first thing to know is how the FHA defines “self-employment” and why. The lender is required to ensure your income is stable and reliable and that you will continue to earn that income to help pay for your mortgage. The FHA has different qualification rules for self-employment income; you are basically required to show two years of self-employed income in a similar line of work to your salary, commission, or hourly income when you were not self-employed. | more...

July 11, 2022

FHA Adds New Income Flexibility Guidelines For FHA Borrowers Affected By COVID-19

By Joe Wallace

During the global COVID-19 pandemic, many house hunters experienced a loss of income because of coronavirus-related employment gaps, job losses, and similar financial hardship. When you are applying for a mortgage loan, late and missed payments can have a negative effect on your ability to find an affordable home loan. There were many forms of relief for COVID-19-related economic hardship, but as the fallout from COVID continues, it’s clear that some additional measures are needed. That’s one likely reason the FHA has announced updated COVID-19 credit qualifying guidelines for borrowers trying to buy a home with an FHA mortgage. In early July 2022 the FHA announced new guidelines for participating FHA lenders. These new guidelines permit more flexibility for the lender when qualifying a borrower who may have income or | more...