Articles in Category: FHA Guidelines

July 26, 2017

What Is An FHA Loan Modification?

What Is An FHA Loan Modification? According to the FHA loan handbook, HUD 4000.1, such modifications are part of a loss-mitigation program from the FHA and HUD designed to help FHA borrowers avoid foreclosure and keep their homes. HUD 4000.1 states that FHA loan modification is available through a program called FHA-HAMP, or the FHA Home Affordable Modification Program. “The use of an FHA-HAMP Option is to both alleviate the Borrower’s burden of immediate repayment of arrears and to adjust monthly payments to a level sustainable by the household’s current income. The FHA-HAMP Option may or may not include a Partial Claim.” A “partial claim” is defined in the FHA loan rules as follows: “The total amount available is the lesser of: (1) the unpaid principal balance as of the | more...

July 26, 2017

What Am I Allowed To Rehab With An FHA 203(k) Mortgage?

By Bruce Reichstein

In our last blog post, we discussed what is permitted under the FHA 203(k) rehab mortgage loan. Borrowers are allowed to apply for a new purchase loan or an FHA refinance loan under the 203(k) program, which the FHA loan handbook describes as being used to do the following: – rehabilitate an existing one- to four-unit Structure, which will be used primarily for residential purposes; – rehabilitate such a Structure and refinance outstanding indebtedness on the Structure and the Real Property on which the Structure is located; or – purchase and rehabilitate a Structure and purchase the Real Property on which the Structure is located. According to HUD 4000.1, “Structure” is defined as, “a building that has a roof and walls, and stands permanently in one place that contains single | more...

July 25, 2017

What Can I Improve With An FHA 203(k) Mortgage?

By Bruce Reichstein

An FHA 203(k) mortgage is basically a rehab loan, which can be used as a new purchase loan or a refinance loan for the purpose of repairing/rehabbing an eligible property. The FHA single family home loan handbook, HUD 4000.1, has a list of requirements and guidelines for FHA 203(k) loans, which includes a set of allowable improvements as well as a list of things FHA loan money cannot be used for. Let’s examine what is permitted with an FHA 203(k) loan first. Borrowers who are approved for an FHA rehab loan may use the loan for any of the following projects acceptable to the lender: – costs of construction, repairs and rehabilitation; – architectural/engineering professional fees; – the 203(k) Consultant fee subject to the limits in the 203(k) Consultant Fee | more...

July 19, 2017

Who Can Refinance An FHA Loan?

By Bruce Reichstein

Who can refinance an FHA loan? There are rules and requirements for refinancing an FHA mortgage loan that include prohibitions to ensure fair lending, but also restrictions on who may refinance depending on the status of the applicant as a borrower or co-borrower on the original loan. The rules that govern who can refinance an FHA loan, and how it may be done, are found in the FHA handbook, HUD 4000.1. There, we learn: “A party who has a financial interest in the mortgage transaction, such as the seller, builder or real estate agent, may not be a co-Borrower or a Cosigner. Exceptions may be granted when the party with the financial interest is a Family Member.” Furthermore: “To be eligible, all occupying and non-occupying Borrowers and co-Borrowers must take | more...

July 18, 2017

How Do You Refinance An FHA Loan?

By Bruce Reichstein

How do you refinance an FHA loan? There are some important questions to answer before getting to the actual application process-questions that can help you narrow down the right kind of FHA mortgage refinance loan for you. Examining Your Financial Goals and Needs FHA refinance loans come in a variety of types designed to fit different financial needs. Are you looking for a refinance loan that will lower your monthly mortgage payments? Do you need to take cash back on the refinance loan transaction? Depending on circumstances, those two issues may or may not be mutually exclusive. FHA refinance loans do offer the ability to get into a lower payment or interest rate, but getting cash back likely involves a different kind of FHA refinance loan. Deciding what result you | more...

July 17, 2017

Is There A One-Time Close FHA Construction Loan?

By Bruce Reichstein

Is there an FHA construction loan? Let’s look at what the FHA single family home loan handbook (HUD 4000.1) says about these transactions: “FHA offers various mortgage insurance programs which insure approved Mortgagees against losses on Mortgages. FHA-insured Mortgages may be used to purchase housing, improve housing, or refinance existing Mortgages. Purchase/Construction to Permanent The Borrower may finance the purchase of an existing one- to four-unit residence, and may also finance construction of a one- to four-unit residence through a Construction to Permanent Mortgage. Properties to be acquired through an unrecorded land contract must be treated as a purchase.” That information is found on page 130 of HUD 4000.1. But some borrowers may be confused by this, having approached a lender only to be told “we don’t do FHA construction loans” | more...

July 14, 2017

What Is An FHA Loan And How Does It Work?

By Bruce Reichstein

What is an FHA loan and how does it work? There are many differences between conventional and FHA mortgages, and those differences could mean significant savings depending on your home buying needs and goals. What An FHA Loan Is Not An FHA loan is a mortgage loan, first and foremost. It is intended to buy or refinance a property. An FHA “forward mortgage” or new home loan not intended to act as a personal loan, with cash back to the borrower at closing time. FHA loan rules don’t permit the borrower to apply for a loan greater than the adjusted value of the property plus additional costs that may be rolled into the loan. While your FHA mortgage may be greater than the total adjusted value of the property, you | more...

Get A Free Credit Report Before Applying For An FHA Loan

June 28, 2017

What Are My Restrictions On FHA Loan Assumptions?

By Joe Wallace

Restrictions on FHA loan assumptions aren’t terribly complicated, but if you are interested in assuming an FHA loan there are some things to keep in mind, starting with a requirement that the lender participates in the process. Most FHA mortgage loans closed in recent years will require the lender’s approval and participation in order to successfully assume an FHA loan. But there are other considerations, too. For example, a home purchased with an FHA mortgage on what the FHA handbook describes as “Indian Land” requires the approval of the local tribal authority. According to HUD 4000.1: “The Mortgagee cannot approve an assumption of a Mortgage secured by a Property located on an Indian Land/reservation unless the Indian Tribe has approved the assumption or sale of the rights to the Property | more...

June 15, 2017

Do I Need FHA Mortgage Insurance?

By Joe Wallace

In a recent blog post we discussed the differences between FHA mortgage loans and conventional home loans. One of the most important differences between FHA mortgages and conventional loans is the mortgage insurance requirement. Conventional loans may, depending on the size of your down payment and other factors, require the borrower to put as much as 20% down. Those who do not put a certain percentage down on a conventional mortgage may be required to carry private mortgage insurance (also known as PMI). FHA home loans, on the other hand, require a minimum 3.5% down payment and have no private mortgage insurance requirement. However, FHA mortgages do require the borrower to pay for mortgage insurance. This requirement includes an Up Front Mortgage Insurance Premium (UFMIP) and a monthly payment (MIP). | more...

June 13, 2017

The Down Payment Requirement For FHA Loans

By Joe Wallace

FHA home loans, much like their conventional counterparts, have a down payment requirement. However, unlike conventional loans, the minimum down payment requirement for FHA mortgages is 3.5% of the adjusted value of the home. This lower down payment requirement is one of the main advantages of the FHA mortgage. The basic amount of the down payment varies with each FHA mortgage since the payment is based on the value of that particular home. Additionally, FHA mortgages require a specific FICO score range (580 or better) for maximum financing. Borrowers with FICO scores between 500 and 579 will be required to put down 10% instead of 3.5%. Additional lender standards may also apply. Calculating the amount of your down payment is only part of the process. FHA borrowers must provide down | more...