Articles in Category: Closing Costs

August 18, 2015

FHA Mortgage Rate Trends: Higher Ahead Of Fed

Mortgage loan rates have been trading higher days with lower days; Monday say rates move low enough to wipe out the losses seen on Friday, but Tuesday had rates moving higher, erasing Monday’s progress. For Tuesday, rates moved higher partially in anticipation of the Fed minutes release scheduled for Wednesday. Those minutes will have details of the July Fed meeting and we may gain a bit of insight as to the Fed’s posture on the upcoming meeting. There’s been a lot of “Will they or won’t they?” type talk about a Fed interest rate hike, and any discussion of that hike is a potential market mover. So there’s been a bit of advice against floating into the release of those Fed minutes tomorrow, and it’s easy to see why, given | more...

What happens to my FHA loan in a natural disaster?

August 14, 2015

FHA Loan Income Rules: Does Alimony/Child Support Count As Income?

By Joe Wallace

For any applicant trying to get an FHA loan to purchase a home, the debt-to-income ratio is very important. How much money you have coming in versus how much you have going out for monthly bills and other financial obligations is a very big part of the lender’s calculations to see whether a borrower can afford the new loan. One area that concerns some is whether alimony/child support is able to be used as part of the borrower’s potential income for those calculations. FHA loan rules currently available in HUD 4155.1 have plenty to say on how and why such income might be used. This type of income can indeed by used, as long as it meets FHA minimum requirements for “effective income” or “verifiable income”: “Alimony, child support, or | more...

August 7, 2015

FHA Loan Fees Which Are Not Considered Closing Costs

By Joe Wallace

There are a variety of fees and expenses associated with FHA home loans; typical costs that the borrower should be saving up for during the planning stages of a new home loan. The FHA requires a minimum 3.5% down payment, for example, and that down payment is considered separate from the borrower’s closing costs. And then there are expenses which are not considered part of the down payment OR closing costs. The FHA loan rules found in HUD 4155.2 at the time of this writing explain these costs. Discount points (a prepaid amount designed to lower the interest interest rate) are included in such expenses–not a down payment, not a closing cost. Chapter Six of HUD 4155.2 describes discount points as follows: “Discount points charged by the lender on a | more...

July 30, 2015

FHA Loans, Escrow Accounts, And Real Estate Taxes

By Joe Wallace

There are many FHA loan questions regarding the use of escrow accounts, especially when it comes to new purchase loans. Applicants sometimes get confused when the lender requires an escrow account. Since FHA loan rules do not require the use of escrow, some borrowers may wrongfully believe they don’t have to use them, period. But your lender may require the use of escrow and this is fully permitted under the FHA loan program. In fact, FHA loan rules anticipate some lenders requiring escrow for a variety of loan transactions; one use of escrow is to collect and pay property taxes. According to the FHA/HUD official site, “It is the lender’s decision whether the borrower must maintain an escrow account for the purpose of paying taxes and other items. The HUD | more...

July 30, 2015

FHA Loan Settlement Dates, Per Diem Interest At Closing

By Joe Wallace

The rules for FHA home loans regarding closing dates and related details are found in HUD 415.2 (at the time of this writing) in Chapter Six under the heading, General Loan Closing Requirements. There are a few items in this section that should be noted in case FHA borrowers have questions–including the basic definition of a closing date as described in the rulebook: “The date of closing/settlement is generally considered the date on which the note and mortgage are signed by the borrower. This is also the date defined as the settlement date on the HUD-1 Settlement Statement. However, the 60-day endorsement submission clock begins on the date that the lender relinquishes control of the loan proceeds (disburses the mortgage funds), for both purchase money mortgages and refinance transactions.” FHA | more...

July 27, 2015

FHA Loan Closing Costs and Down Payment

By Joe Wallace

A recent reader question in our comments section asked about whether closing costs are including in the FHA minimum 3.5% down payment. Is it true that an FHA loan down payment amount may include closing costs? To fully understand this issue, it’s good to know what can be included in closing costs for your FHA home loan. Closing costs include (but are not limited to) the following: Lender’s origination fee Deposit verification fees Attorney’s fees Appraisal fees and compliance inspection fees The participating lender’s origination fee Any title insurance or title examination Property surveys Credit report fees Certification fees Note that these fees do not have anything to do with the sales price or appraised value of the home. FHA loan rules say that the loan amount for an FHA | more...

July 23, 2015

FHA Loan Down Payments: How Your Lender Verifies Cash Saved At Home

By Joe Wallace

In our previous blog post we discussed some of the rules for down payment funds on an FHA home loan. Did you know the FHA requires its participating lenders to verify the sources of all down payment money? This is to prevent funds coming from unacceptable sources such as credit card cash advances or payday loans. Borrowers are permitted to bring in a down payment with money saved at home, but the FHA loan rulebook has specific instructions to the lender about how this type of down payment money is to be verified and handled. Chapter Five of HUD 4155.1 tells the lender that money saved at home should be verified with help from the borrower who must provide specific information about the funds. “To verify cash saved at home, | more...

July 23, 2015

FHA Loan Down Payment Rules: Acceptable Sources of Down Payment Funds

By Joe Wallace

A recent reader question in our comments section involved the source of down payment funds. The reader wanted to know if cash saved at home could be used to make an FHA loan down payment. The answer is simple, yet can get more complicated depending on circumstances. The FHA loan rules state that down payment funds must be verified. The reason for this includes requiring the lender to insure that down payment money does not come from payday loans, credit card cash advances or any other type of “non-collateralized” loan. FHA loan rules have a list of acceptable sources, which include (but are not limited to) proceeds from the sale of investments, property, bonds, etc. Cash saved at home is acceptable, as are trade equity, rent credit, even gift funds–provided | more...

June 30, 2015

FHA Home Loans and the Appraisal Process

By Joe Wallace

The appraisal portion of the FHA home loan process is often misunderstood. What exactly IS an FHA appraisal and what is it designed to do? The answers are very important, especially for first-time home buyers. The FHA appraisal process is designed to do two basic things–one is to establish the fair market value of the home you want to purchase with an FHA loan. This is accomplished when an FHA appraiser–who is NOT considered a home INSPECTOR–reviews the home to make sure it meets minimum standards for safety and habitability. The review of the home is also designed so that the appraiser can compare the property to others like it on the market. The appraiser does the review, writes an appraisal report, and submits it to the lender. At no | more...

May 6, 2015

FHA Loans And Interest Rate Trends: The Interest Rate Lock

By Joe Wallace

FHA home loans, like their conventional mortgage counterparts, feature interest rates that must be negotiated between the borrower and the lender. HUD 4155.1 Chapter One verifies this, stating: “Under all currently active FHA single family mortgage insurance programs, the borrower and the lender negotiate the interest rate and any discount points”. In recent days at the time of this writing, FHA and conventional mortgage rates have been in a state of flux, moving higher due to upward pressure from overseas economic developments and other factors. FHA borrowers may wonder how they might be protected from further increases in mortgage loan rates, should they occur, once they have committed to an FHA home loan. That is where something called the interest rate lock comes into play. The lender and borrower can | more...