Articles in Category: FHA Guidelines

June 27, 2022

FHA Home Loans And Seller Inspections: What You Need To Know

What is a seller inspection and why should you know what it is before you start looking for a home to buy with an FHA mortgage? The National Association of Certified Home Inspectors official site says that a seller inspection, sometimes referred to as a pre-listing inspection, is popular in some areas, “…because they virtually eliminate all the pitfalls and hassles associated with waiting to do the home inspection until a buyer is found.” A seller inspection can tell you (as a buyer) a lot about a home before you decide to make an offer. But why would a seller have an inspection if there’s a risk that a defect or problem might be uncovered that can hurt the seller’s chances to sell the property? Generally speaking, it’s common sense | more...

June 17, 2022

Who Sets FHA Loan Interest Rates?

By Joe Wallace

Who sets FHA loan interest rates? The answer to that question involves several factors-many potential FHA borrowers asking this question really want to know more than who the regulatory body is for FHA loan interest rates-they also want to know how rates are affected by other factors such as FICO scores and credit history. So who DOES set FHA mortgage loan interest rates? The Fed sets monetary policy for the United States including the current interest rate. But when the Fed sets this rate, it is NOT directly changing mortgage rates. Investor reaction to the Fed’s rate adjustments DOES affect home loan interest rates. Fed action doesn’t directly change interest rates and consumers should know that the Department of Housing and Urban Development doesn’t try to control these rates, either. | more...

May 20, 2022

What You Need To Know About FHA Home Loan Interest Rates

By Joe Wallace

What should you know about home loan interest rates? As the home loan market begins to see higher rates than in the last few years, you’ll want to understand some of the aspects of interest rates and how they affect the cost of your mortgage long-term. There are many home loan blogs that discuss the fluctuations of mortgage rates and talk about mortgage rates as they move higher and lower. Some lenders and bloggers discuss mortgage rates as though the ones mentioned apply to anyone who wants a home loan. But is this true? The rates you see advertised on the internet are usually posted as “best execution” interest rates which means that “ideal conditions” are assumed, or that the rates are applied assuming certain conditions including certain FICO score | more...

May 4, 2022

FHA Appraisals: Facts You Should Know

By Joe Wallace

Some FHA borrowers wonder about how the appraisal works. It’s a process that can seem a bit mysterious until you understand the hows and whys. What do you need to know about FHA appraisals to help you make the most informed choices about a particular home? FHA Appraisal Facts: The Appraisal Is A Tool For Your Lender, Not For You Appraisals help the lender make sure the home meets the bare minimum standard for safety and habitability. It also helps the participating FHA lender establish the fair market value of the home. It is not a tool for the borrower in any way except to provide the dollar amount for the market value. FHA Appraisal Facts: Standards Vary What applies in one housing market may not apply in another. By | more...

February 22, 2022

FHA Home Loan Rules And Airbnb

By Bruce Reichstein

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 7, 2022

What You Should Know About FHA Mortgage Loan Rate Lock Agreements

By Joe Wallace

What should FHA home loan applicants know about the practice of mortgage interest rate lock commitments? This is an important detail of your home loan and it’s best to know how the interest rate lock agreement works ahead of time so you know how and why this part of the mortgage loan process works. What Is An FHA Mortgage Loan Interest Rate Lock Agreement? An interest rate lock protects a borrower from the daily mortgage rate fluctuations that happen naturally due to investor behavior, or other market forces that can change rates. An interest rate lock commitment is not automatic; it must be formally agreed to in writing between the borrower and the lender. An interest rate lock commitment does exactly what it sounds like it does-the lender and borrower | 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 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...

December 21, 2021

FHA Home Loan Approval Issues You Should Know

By Joe Wallace

If you are planning to buy a home with an FHA mortgage but aren’t sure whether you will be approved for the loan, you might find some help with our list if important FHA loan issues to consider as you plan and save for your mortgage. How Much Time You’ve Spent Working Your participating lender will review your employment history. Basically, they want to see how much time you have in your current capacity as a full-time employee earning salary, commission, or a combination of those. If you are self-employed, how long have you been working in that capacity? That will be an important factor for the lender. Your loan officer must review the last two years of your work history. Does that require you to have two years of | more...

December 17, 2021

When Is An FHA Loan Assumable?

By Bruce Reichstein

When is an FHA loan assumable? Let’s start by examining what the FHA single-family home loan handbook, HUD 4000.1, defines as a loan assumption. “Assumption refers to the transfer of an existing mortgage obligation from an existing Borrower to the assuming Borrower.” An FHA loan assumption is generally possible-for most FHA loans closed today, the lender’s participation and approval will be required in order to carry out a loan assumption transaction. There are also occupancy requirements which may apply depending on what year the original mortgage was closed in. From HUD 4000.1: “If the original Mortgage was closed on or after December 15, 1989, the assuming Borrower must intend to occupy the Property as a Principal Residence or HUD-approved Secondary Residence. If the original Mortgage was closed prior to December | more...