Articles in Category: HUD Regulations

July 29, 2024

FHA Loans And Multi-Unit Properties

FHA home loans are intended for owner-occupiers. The FHA loan occupancy requirement states that the borrower must begin using the home purchased with an FHA loan within a specified time after closing (usually within 60 days.) But FHA loan rules also permit owner-occupiers to buy multi-unit properties. For multi-unit homes, the borrower must occupy at least one unit but is free to rent out the unused spaces in the house to others. FHA loan rules limit the number of units to four in these transactions. If a borrower intends to apply for an FHA loan for a home with multiple units, it may be tempting to try to convince the lender to factor in any potential income from such rental as part of the applicant’s debt-to-income ratio. Is this permitted? | more...

June 18, 2024

FHA Loan Options: What To Ask The Lender

By Joe Wallace

If you have never purchased a home and aren’t sure where to begin, you’ll find plenty of advice about what to do, but some steps are more important in the early stages of the process than others. One common loan planning step is to compare multiple financial institutions to see who offers the most competitive rates and terms. Some borrowers are tempted to skip this step or truncate it. But that’s not a good idea. The home loan process should always include comparing multiple lenders, but if you’ve never tried that before, here are some things you should know that may help you save valuable time in the planning process. Choose The Right Loan For You Decide early what type of home loan is best for your situatiuon. Remember that | more...

March 19, 2024

First-Time Home Buyers May Benefit From Proposed Tax Credit

By Joe Wallace

A new mortgage tax credit proposal from the Biden administration could make buying a home more affordable for first-time home buyers. The President’s proposal includes a credit potentially worth up to $10k per homeowner for qualifying transactions. If the plan is approved, those buying starter homes and/or first-time home buyers could get into a more affordable mortgage. Why Now? According to RedFin, 2023 was the least affordable year to try to purchase a house. In 2023, those making approximately $78,000 “would have spent 41.4% of earnings by purchasing a median-price home at $408,806, up from 38.7% in 2022” according to a report by RedFin. And many American homeowners today pay on loans with mortgage interest rates lower than those currently available for purchase or refinance. That would tend to make | more...

October 19, 2023

HUD Announces Accessory Dwelling Unit Policy

By Joe Wallace

The Federal Housing Administration defines an ADU is “a single habitable living unit with a means of separate ingress and egress that meets the minimum requirements for a living unit.” And now, FHA borrowers can get consideration for ADUs and possible rental income associated with them. Accessory Dwelling Units Some homes come with ADUs, others are purchased without them and they are added later by the new owner. Why are ADUs such a potential factor in home loan approval? Because now, FHA loan rules allow borrowers to apply for a mortgage to buy an owner-occupied single-family home with or without ADUS. But when they are present or scheduled to be added, FHA loan rules now permit the lender to consider possible rental income from these units as qualifying income for | more...

August 31, 2023

FHA Home Loan Rules And Fair Housing Laws

By Bruce Reichstein

We report on Fair Housing cases from time to time, a reminder to those looking for housing that there are federal laws that protect against discrimination in housing. But what are the FHA home loan rules in this area? Did you know that the FHA loan program has specific instructions to the lender regarding Fair Housing laws? Those instructions are found in HUD 4000.1, the FHA Single-Family Home Loan Handbook. Page 120 of that handbook instructs the lender, “The Mortgagee is required to comply with all federal, state and local laws, rules, and requirements applicable to the mortgage transaction, including all applicable disclosure requirements and the requirements of the Consumer Financial Protection Bureau (CFPB), including those related to: The Fair Housing Act protects both renters and home loan applicants looking | more...

August 8, 2023

FHA Minimum Standards Vs. Lender Standards

By Joe Wallace

A frequently asked question about FHA home loan credit score requirements goes like this: “I recently applied for a mortgage loan, and my FICO scores are above 580, which FHA loan rules say is the score you need for the lowest down payment. But my lender wants a higher score for the lowest down payment. What’s going on? Who is right?” The most important thing to remember about the FICO score issue is that FHA minimum standards don’t always match the lender’s requirements. The lender is permitted a higher requirement as long as those requirements are deemed “reasonable and customary” for similar mortgages. FHA minimum standards are just that–minimums. A lender is free to require a higher credit score or look for better debt-to-income ratios, etc., as required by the | more...

June 29, 2023

FHA Mortgage Loans: Second Appraisals

By Joe Wallace

If you or the seller don’t agree with the results of the appraisal, is it possible to get a second appraisal and a reconsideration of value of the home? FHA loan rules specifically prohibit ordering a second appraisal just because one party or the other is hoping for a different result. HUD 4000.1, the FHA Single-Family Lender’s Handbook, states the lender is prohibited from “ordering an additional appraisal to achieve an increase in value for the Property and/or the elimination or reduction of deficiencies and/or repairs required.” FHA loan rules note the lender is permitted to order a second appraisal “for Mortgages that are in accordance with requirements on Property Flipping”. But what circumstances permit a second appraisal? HUD 4000.1 says that the original mortgagee or lender is allowed to | more...

June 5, 2023

HUD Takes Action To End Appraisal Bias

By Joe Wallace

The Department of Housing and Urban Development is acting against bias in the appraisal system. “Owning a home provides a path to the American dream. Yet, that dream has been deferred for Black and Brown people, as we have consistently had our homes under-valued,” according to HUD Secretary Marcia L. Fudge, quoted in the 1 June 2023 HUD press release on these appraisal reforms. Fudge adds, “Having your home undervalued is bigger than just a number on a page. It can be the difference between getting a loan and not – between having enough money for retirement or not.” According to Fudge, the PAVE Task Force is a project meant to focus on “taking bold action to address appraisal bias – and renewing our commitment to doing everything in our | more...

April 21, 2023

The FHA Section 203(k) Rehab Loan

By Joe Wallace

The FHA 203(k) rehab loan is an important FHA mortgage loan option you should know about–this loan is available as a new purchase loan or a refinance loan you can use to buy and rehab a home at the same time. According to the FHA official site, on a page about the 203(k) rehab loan program, we learn that the 203(k) is aimed at borrowers who need to buy and improve or refinance and improve an eligible property. “When buying a house that needs repair or modernization, homebuyers usually have to follow a complicated and costly process. The interim acquisition and improvement loans often have relatively high interest rates, short repayment terms and a balloon payment.” The FHA says its possible to use 203(k) Rehab loans to save time and | more...

January 30, 2023

Before You Start House Hunting: Housing Counseling

By Joe Wallace

Saving money is usually done to prepare for a home loan, but did you know there is a simple trick to saving money on mortgage expenses? It basically involves being a more informed borrower so you don’t mistakenly choose options that cost you more unnecessarily. Getting the right home loan for your needs can help you maximize your real estate dollar, but you’d be surprised at how many people don’t know the options they have where home loans are concerned. A Freddie Mac report indicates that housing counseling and/or good financial education is a key benefit when you start the journey toward buying real estate. Knowing which loans are best for your needs and which ones to avoid is key. A Freddie Mac “Generation Z Study”, concluded, “The dream of | more...