Articles in Category: FHA Guidelines

November 28, 2022

FHA Loan Approval Rules For First-Time Home Buyers

FHA home loans are often misunderstood. Some think they are need-based loans like some offered via the USDA program, while others believe FHA mortgages can only be approved for first-time home buyers. Typically, we write that FHA mortgages do not actually offer extra perks for first-time buyers, but there is a new exception to that notion you should know about. What kind of exception? In 2022, HUD made a policy change and issued a mortgagee letter announcing that in 2022 the FHA would allow participating lenders to consider positive rental history as a factor in home loan approval. Typically, such rental verification is not a part of most credit reports provided for FHA-insured products that require credit approval and “when provided,” rental verification, “generally exists as separate documentation” the lender | more...

November 23, 2022

FHA Loan Program Rule Changes: Flood Insurance Coverage

By Joe Wallace

Some borrowers want to buy homes in the desert, some want to buy homes that are located in areas prone to flooding. But not all flood zones are the same; some feature an elevated risk of flooding and if you buy a home with an FHA loan in certain flood zone hazard areas you are typically required to carry special flood insurance. But new changes to the FHA home loan program make it possible for homeowners to seek private flood insurance instead of the one FHA-approved option previously available. Prior to the new rule the only insurance option possible was through the National Flood Insurance Program. In the final quarter of 2022, the Department of Housing and Urban Development announced that starting in December the FHA loan program allows homeowners | more...

November 9, 2022

FHA Loans In 2023: Changes In The Housing Market

By Joe Wallace

Some market watchers are asking the question–is it possible we will see house prices fall in 2023? Indicators from Federal National Mortgage Association or Fannie Mae point to a cooling-off period for home prices next year. Earlier in 2022, Fannie Mae forecasted home price growth at over four percent in 2023; those numbers have since been revised. The expectations in the last three months of 2022 now tell a different story: Fannie Mae now expects home price declines of as much as 1.5% in the coming year. What created the 2022 seller’s market in the first place? Rising equity, a shortage of housing inventory, and high demand were all contributing factors. And as mortgage rates started approaching 7%, the motivation to buy seems to be tapering but it may take | more...

September 21, 2022

Article Update: FHA Loan Rules For “Identity Of Interest” Transactions

By Joe Wallace

Back in 2016, we published an article about the specific FHA loan rules that apply in situations where the owner of a rental property wants to sell to her renters. In such cases, it may be a situation where the borrower has been renting for some time and has an offer from the landlord to purchase. Back when we first published the article, we noted that FHA loans do permit these transactions but there are special rules that govern them. Have those rules been modified since we reviewed them last? The rules for these transactions are found in HUD 4000.1, the FHA Single-Family Lender’s Handbook. Today, those rules begin by explaining who is affected in these circumstances, which are described by HUD as “identity of interest transactions”. From HUD 4000.1: | more...

September 16, 2022

FHA Home Loans For Houses In Flood Zones

By Joe Wallace

In 2017, we wrote an article about the importance of knowing FHA loan rules for loan approval in certain regions of the country subject to flooding. Is it possible to purchase a home with an FHA mortgage in a flood zone? The FHA Loan Single-Family Lender’s Handbook, HUD 4000.1, says that homes in certain types of flood zones or Special Flood Hazard Areas or SFHA are not eligible for FHA mortgages. These areas include, but may not be limited to SFHA Zone A, a Special Flood Zone Area, or Zone V. We reported that in 2017 and we wanted to follow up to see what the rules say today. Proposed or New Construction Homes HUD 4000.1 says that in cases where “any portion” of a home is in an SFHA, the | more...

September 9, 2022

Article Update: FHA Appraisal Refunds

By Joe Wallace

Back in 2012, we wrote an article discussing the FHA appraisal process, and whether it’s possible to get a refund from an appraiser if a property is not approved for an FHA mortgage or when the home’s appraised value comes back different than expected. When we addressed this question, which we are asked from time to time, the going advice was that in cases where a buyer disagrees with the outcome of the appraisal, the fee must still be paid. What’s the reality in 2022? When you find a house you want to buy with an FHA home loan, there must be an appraisal. This process is non-negotiable; the appraisal helps to determine the FHA loan amount which is based on the fair market value of the home, not necessarily | more...

August 31, 2022

Before You Fill Out FHA Home Loan Forms

By Joe Wallace

Are you ready to apply for an FHA mortgage? You’ll want to make sure you have done a few important preliminary steps before you submit an application. The most basic thing to start with is knowing what type of home loan you need. If you plan to buy a condo unit your FHA loan will be a different variety than if you need to buy a manufactured home, for example. That may sound like some of the most basic home loan advice out there, but what is not so basic is knowing that there are nuances for some of these loans you need to know. A condo unit must typically be part of a project that is on or added to the approved list for FHA loans. But did you | more...

August 17, 2022

FHA Loans And Surplus Land

By Joe Wallace

What do FHA loan rules say about surplus and/or excess land? It’s not an issue for someone who wants to buy a condo unit, but for those looking for homes in rural areas, excess or surplus land could be an important detail at appraisal time. FHA loan rules in HUD 4000.1 discuss appraisals where there may be surplus land or excess land involved, and while the section referencing this issue is short, it does give us an idea of what to expect in these cases; a big question addressed in FHA loan rules here is how the excess or surplus land affects the valuation of the property. What Is The FHA Definition Of Surplus or Excess Land? HUD 4000.1 states, “Excess Land refers to land that is not needed to | more...

August 1, 2022

Article Update: FHA Appraisal Rules On Peeling Paint

By Joe Wallace

In 2019 we wrote an article discussing a common reader question about FHA home loans. Can the presence of peeling paint be enough to cause a problem in the FHA appraisal process? In our original article, we noted that this can be a major issue for homes built before the lead paint ban which took effect in the 1970s. In some situations, borrowers want to know why the appraiser reviewed the home and required a correction of a peeling paint issue as a condition of loan approval. The age of the home plays a big part in that decision to require a correction. If the house was built before 1978, that peeling paint is NOT just a cosmetic issue. FHA home loan rules since our original article in 2019 still | more...

July 29, 2022

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

By Joe Wallace

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...