Articles in Category: Mortgage Insurance

FHA Loan Rules: Using Rental Income to Qualify for a Mortgage Loan

June 15, 2017

Can You Refinance An FHA Loan To Get Rid Of PMI?

We’ve been discussing home loans, mortgage insurance, and the differences between FHA home loans and conventional mortgages. One common question that comes up when comparing FHA loans to non-FHA options? “Can you refinance an FHA loan to get rid of PMI?” The proper answer to this question is that FHA loans do not require PMI, also known as Private Mortgage Insurance. That does not mean the borrower won’t be required to pay for mortgage insurance, but for FHA loans this is an expense factored into the mortgage payment as part of the loan transaction. The borrower is required to make an FHA Up Front Mortgage Insurance Premium payment as part of closing costs (it can be financed into the loan if the borrower chooses) and make a monthly mortgage insurance | more...

June 13, 2017

What Is Mortgage Insurance And How Does It Work?

By Bruce Reichstein

“What is mortgage insurance?” is a common question for those new to the home loan process. Do you understand how it works? It helps to define the two things referred to by industry professionals as mortgage insurance. There is mortgage insurance which the borrower pays for as a requirement of the FHA loan, then there is the “mortgage insurance” referred to in FHA loan rules which is something else entirely. Note: What we are discussing here is not hazard insurance, which may be a requirement on some, but not all FHA loans. FHA Mortgage Insurance For The Lender The FHA single family home loan handbook, HUD 4000.1, refers to “mortgage insurance” when discussing the FHA’s role in insuring the loan to reduce the risk for the participating lender. On page | more...

Can I get an FHA home loan if I owe back taxes?

March 30, 2017

Hazard Insurance For FHA Loans

By Joe Wallace

A reader got in touch recently with a question about hazard insurance and FHA mortgages. “We’re fixing to close on a home and they’re telling us that we have to have a shed that is on the lot covered with flood insurance. Is this correct and how much coverage do you have to have on a shed if you’re in a flood zone?” We get a large number of “Is this correct?” type questions. Some ask because they don’t realize that FHA loan rules aren’t the only ones that must be followed in a mortgage loan transaction. If the requirement is made by the lender, that lender’s standards would apply as long as the standards are in accordance with FHA loan guidelines, state law, and federal law. So the “Is | more...

FHA Loans And Natural Disasters: What You Should Know

February 10, 2017

FHA UFMIP Refunds: A Reader Question

By Joe Wallace

Is the FHA Up Front Mortgage Insurance Premium or UFMIP refundable? A reader got in touch with us in the comments section this week to ask us a question in that area: “Is there any return of the UFMIP when refinancing out of an FHA loan to conventional? If so, what is the proration amount or percentage of fees refunded? over 6 months, 12 months, 18 months, 24 months?” This insurance premium on FHA mortgages is refundable under a specific set of refinance loan circumstances, but not for all loans. FHA loan rules in HUD 4000.1 address the issue directly; on page 156 we learn the following: “The UFMIP is not refundable, except in connection with the refinancing to a new FHA-insured Mortgage.” HUD 4000.1 states that Up Front Mortgage | more...

January 11, 2017

FHA MIP Rates For 2017: Revised

By Joe Wallace

The FHA/HUD official site has announced changes to the FHA MIP fee structure for 2017. According to the latest FHA mortgagee letter, “FHA continuously strives to achieve the appropriate balance between meeting the housing needs of the borrowers that FHA’s mortgage insurance programs were created to serve, and also the requirement of minimizing the level of risk to the Mutual Mortgage Insurance Fund undertaken relative to the insurance of those mortgages.” “FHA has determined that the appropriate balance of its statutory operational goals now requires a reduction of the rate of annual MIP charged pursuant to Section 203(c)(2)(B) of the National Housing Act (NHA). As provided in this ML, the total annual MIP charged pursuant to NHA sections 203(c)(2)(B) and (C) for most Title II Single Family forward mortgages has | more...

January 4, 2017

FHA Loan Co-Signers & Co-Borrowers

By Joe Wallace

A reader asked us a question this week in the comments section about FHA loan co-signer and/or co-borrower rules. “If there is more than one person on the loan application, does it matter what percentage each person owns?” There are a number of variables that need to be addressed to properly answer this question. For example, does the reader refer to a co-signer, or a co-borrower? Are the applicants legally married? If so, do they reside in a community property state? FHA loan co-signer rules in HUD 4000.1 don’t specify a percentage of ownership for co-signers. The rules simply state the co-signer is “liable for the debt”. FHA loan rules for eligibility of co-borrowers (occupying and non-occupying) don’t mention a percentage of ownership, either: “To be eligible, all occupying and | more...

FHA One-Time Close Construction Loans In 2019

October 13, 2016

Second Appraisal Rules For FHA Mortgages

By Joe Wallace

There are some circumstances where a borrower may wonder about requesting a second appraisal on a property to be purchased with an FHA mortgage. For example, if the loan applicant decides to switch lenders, is a new appraisal required? What about cases where there’s a disagreement over the results of the appraisal? Many of the answers to these questions are circumstantial-it all depends on the nature of the request. Sometimes a second appraisal may be permitted IF conditions described in HUD 4000.1 exist. But in other cases a second appraisal is simply not permitted. One good example of that-a borrower or seller cannot request a second appraisal to increase the fair market value of the property. However, if “material deficiencies” are suspected in the original appraisal, the market value of | more...

September 28, 2016

FHA Loan Mortgage Insurance Premiums

By Joe Wallace

Here’s a version of a common question we’ve been asked recently about FHA mortgage insurance premiums: “I closed an FHA mortgage on a house I purchased in December 2014. The following month FHA reduced the mortgage insurance premium (MIP). Can I get the lower mortgage insurance rate and a reduced monthly payment without totally refinancing my mortgage?” The FHA/HUD official site published a .pdf file that addresses this question directly. Back in 2015 the FHA lowered it’s mortgage insurance premium. The pdf states, “The reduction is effective as of January 26, 2015. Borrowers with case numbers assigned on and after January 26, 2015 will be eligible for reduced annual mortgage insurance premiums.” Note the specific date when the lower premiums become effective-borrowers who have loans prior to these dates will | more...

September 22, 2016

FHA UFMIP: A Reader Question

By Joe Wallace

A reader asks, “I want to purchase at home for 141,000 and I am paying the 3.5 down payment which totals it 136,065. How much will I pay in Up Front mortgage and annually MIP. If I pay the UFMIP in closing will it still be added into to total amount loan?” Let’s begin with a few basics. UFMIP stands for Up Front Mortgage Insurance Premium, which is required as one of the closing costs of an FHA mortgage loan. According to HUD 4000.1, “Most FHA mortgage insurance programs require the payment of UFMIP, which may be financed into the Mortgage. The UFMIP is not considered when calculating the area-based Nationwide Mortgage Limits and LTV limits.” That last sentence means that your loan limit is unaffected by the amount of | more...

January 7, 2016

FHA Loan Rules For Up Front Mortgage Insurance Premiums (UFMIP)

By Joe Wallace

When you buy a home with an FHA mortgage, there’s a requirement to pay an Up Front Mortgage Insurance Premium or UFMIP. This is not to be confused with Private Mortgage Insurance (PMI), and according to the FHA loan rules published in HUD 4000.1 most FHA loans require UFMIP. “Most FHA mortgage insurance programs require the payment of UFMIP, which may be financed into the Mortgage. The UFMIP is not considered when calculating the area-based Nationwide Mortgage Limits and LTV limits.” There are exceptions as found in HUD 4000.1: –Streamline Refinance and Simple Refinance Mortgages used to refinance a previous FHA-endorsed Mortgage on or before May 31, 2009 –Hawaiian Home Lands (Section 247) –Indian Lands (Section 248) How is the UFMIP calculated? “The UFMIP charged for all amortization terms is | more...