Articles by: Bruce Reichstein

February 22, 2022

FHA Home Loan Rules And Airbnb

Is it possible to buy a home with an FHA loan to use as an Airbnb-type venture? Borrowers are eligible to apply for FHA home loans for up to four-unit residences; what do FHA loan rules say about using the home as a rental space? FHA loan rules governing these situations are found in HUD 4000.1. Borrowers may feel encouraged by the notion that owner-occupied properties with up to four units can by purchased with an FHA mortgage, and even more encouraged that the rules actually do address (and permit) borrowers to rent out the unused living potions. However, renting these units out is also subject to FHA loan rules (in addition to lender requirements and state law). What does HUD 4000.1 say about using spaces in your home purchased | more...

February 16, 2022

The FHA Borrower’s “Secret Weapon” For Closing Costs

By Bruce Reichstein

Do you know about one of the secrets of managing your closing costs for an FHA home loan? We’re talking specifically about seller contributions to your closing costs for your FHA purchase loan–what the seller is permitted to contribute under the rules for your FHA mortgage. Buying a home requires more cash than some borrowers expect–at first. There are appraisals and home inspections to pay for, sometimes a pest inspection may be needed, and you may also have to pay or anticipate paying some taxes, compliance inspection fees, and more. Negotiating with the seller to pay a portion of your closing costs is (believe it or not) fairly common in the mortgage industry. Individual sellers and individual house hunters alike may need some time to get used to this idea | more...

February 10, 2022

HUD Announces Fair Housing Settlement In Las Vegas Discrimination Complaint

By Bruce Reichstein

Fair housing laws are sadly necessary, even in the 21st century. While some may labor under the misguided notion that American society has evolved away from the need for the Fair Housing Act, the Department of Housing and Urban Development continue to investigate Fair Housing Act violations. One of the most recent? HUD announced in February 2022 that a conciliation agreement had been reached the agency and Las Vegas landlords accused of housing discrimination against people with disabilities. According to a HUD press release, the agreement was reached between “Las Vegas landlord, Anwar Malik, and Malik’s property manager, Ahmad Sharif-Yazdi, to resolve allegations of discrimination brought by a prospective tenant with a disability”. The alleged discrimination in this case was a refusal to rent property based on the applicant having | more...

February 2, 2022

HUD Announces More Funding For Areas Hit By Natural Disasters

By Bruce Reichstein

The Department of Housing and Urban Development has been very busy in 2021 and 2022 responding to natural disasters and announcing the latest federal disaster assistance in areas hardest hit by storms, fires, flooding, and more. Homeowners in federally-declared disaster areas soon learn about the FHA’s foreclosure moratoriums and options for recovering damaged or destroyed homes using FHA 203(h) and FHA 203(k) Rehabilitation Loans (amongst multiple options). Now, HUD has announced further assistance for current and future disaster areas in the form of “Allocations for Community Development Block Grant Disaster Recovery” plus the start of something called CDBG-DR Consolidated Waivers and Alternative Requirements Notice.” That notice is described by the HUD press release as being “ a critical step taken by the department to open access to more than $2 | more...

January 31, 2022

FHA Loan Late Payments And Late Fees

By Bruce Reichstein

What happens if you miss your monthly deadline for FHA mortgage loan payments? Nobody serious about home loan planning goes into the process expecting to have missed or late payments down the line. After all, a missed payment can lead to serious issues with the mortgage if you aren’t proactive enough to deal with them right away. Life can and often does get in the way of our financial obligations. With that in mind, what should you know about missing an FHA home loan payment? To start, there are rules that codify in part how the lender is to proceed. These FHA loan rules for late payments are found in HUD 4000.1 A section in that volume titled “Late Charges” explains what the FHA views as a late payment on | more...

January 25, 2022

FHA Loans: Do Appraisals Transfer When Switching Lenders?

By Bruce Reichstein

Sometimes a home loan goes smoothly from start to finish. Other times, it may not. In some cases, a borrower may choose not to purchase a particular home after all and continue looking. In others, a borrower may be happy with the home, but not so pleased with the lender. In situations where a borrower wants to switch lenders, is it possible to transfer an FHA appraisal to the new lender? This is a not-so-common question, but an important one for those who need to know. What does HUD 4000.1 have to say about appraisal transfers? Quite a bit, it turns out. From HUD 4000.1: “In cases where a Borrower has switched Mortgagees, the first Mortgagee must, at the Borrowers request, transfer the appraisal to the second Mortgagee within five | more...

January 18, 2022

Home Loan Myths: 20 Percent Down Payments

By Bruce Reichstein

Why do people still believe you MUST make a 20% downpayment on a home loan? Like other persistent home loan myths (including the one that holds that FHA mortgages are ONLY for first-time homebuyers), the 20% issue has been passed along to unsuspecting first-time home buyers for decades. What is the reality? FHA mortgages require 3.5% down at a minimum. That’s for borrowers who financially qualify with FHA and lender credit score requirements. FHA loan rules in HUD 4000.1, the FHA Single-Family Lender’s Handbook, says that 580 or better is the FHA standard. You will need to ask the lender you choose whether there are higher FICO score requirements with that financial institution. (There often are.) With conventional mortgages, 20% down is typically required for borrowers who want to avoid | more...

January 14, 2022

Advantages Of An FHA Cash-Out Refinance Loan

By Bruce Reichstein

Do you know the advantages of an FHA cash-out refinance loan? There are several, especially if you are considering an FHA loan to get money to renovate your existing home. FHA Cash-Out Refinancing Loans: Good For FHA and Non-FHA Mortgages FHA cash-out loans are for all mortgages, FHA, or not. You can refinance a USDA, VA, conventional, existing FHA loan, etc. The rules to qualify are the same no matter what kind of home loan you wish to refinance, and the longer you have been making mortgage payments, the better. FHA Cash-Out Refinance Loan Funds Are Not Restricted The uses you put your cash-out refinance money towards is not restricted; you can use your cash-out funds any way you see fit. That includes debt consolidation, vacations, and home repair. FHA Cash-Out | more...

January 7, 2022

FHA Home Loans: The Escape Clause

By Bruce Reichstein

Of course it’s not formally known as the “escape clause” but first-time homebuyers should know about the FHA home loan rules that govern what happens if the appraised value of the home comes in lower than the asking price of the real estate. HUD 4000.1 instructs the lender that a clause must be inserted into any legally binding commitment to purchase the home that guarantees that the borrower does not forfeit earnest money or retain an obligation to purchase the property if the appraisal is lower than the sale price. The wording of such a clause is suggested in HUD 4000.1 (page 117) as something to this effect: “It is expressly agreed that notwithstanding any other provisions of this contract, the purchaser shall not be obligated to complete the purchase | more...

January 6, 2022

Getting A Lower Monthly Payment With An FHA Mortgage

By Bruce Reichstein

If you want a lower mortgage rate, refinancing your home loan can help if the interest rates offered to you at the time are more competitive than what you pay under the original home loan. Lower rates can result in lower monthly payments. There are also options to refinance for the express purpose of getting a lower payment but for some, this issue is complicated by an option known as mortgage recasting. When you refinance, you apply for a new loan to replace the old one. The new loan may be for a shorter term or for the same number of years you committed to originally. If you refinance an FHA mortgage using an FHA Streamline Refinance loan, one of the benefits from doing so can be a lower monthly | more...