Articles in Category: HUD Regulations

August 23, 2016

FHA Loan Question: Shared Wells

A reader asks, “Theres a well shared by seven houses producing six gallons per minute for all seven houses. The well went dry and now we were told we have till December to Feb before it goes dry. Will the loan agencies finance homes at the tail end of a wells life?” We won’t presume to speak for financial agencies or their requirements, as standards may vary from lender to lender. However, we can reference FHA home loan rules to see what is permitted. FHA loan approval depends on a variety of factors, not just a borrower’s credit report or other issues. One factor is the condition of the property itself, which is determined by an FHA appraisal. The purpose of an FHA appraisal is to insure properties to be | more...

August 22, 2016

HUD Charges Georgia Landlords With Fair Housing Act Violations

By Joe Wallace

The Fair Housing Act was passed to protect those in search of housing, whether they need to rent or purchase. Discrimination against a renter or potential renter is just as serious as discrimination against those who wish to purchase housing; many who want to buy a home must seek out rental property in the meantime and violations of the Fair Housing Act affect these renters who intend to be owners. The Department of Housing and Urban Development aggressively pursues cases of housing discrimination regardless of renter/buyer status and one of the most recent cases stems from a complaint lodged by a single mother in Georgia. According to a press release on the HUD official site, “The U.S. Department of Housing and Urban Development (HUD) today announced it is charging a | more...

August 18, 2016

FHA Loans and 401K Income

By Joe Wallace

A reader got in touch with us recently in the comments section to ask a question about 401K retirement income as it relates to FHA loan approval. “Does the fact that you have a 401k count as income or does it benefit your chances in any way of getting a home loan?” FHA loan rules in HUD 4000.1 cover a variety of income sources including 401k income. Individual retirement account income from a 401K may be used to qualify a borrower for an FHA mortgage provided the income meets FHA and lender standards. HUD 4000.1 instructs the lender on how to review 401K income, beginning with a definition of it: “Individual Retirement Account (IRA)/401(k) Income refers to income received from an IRA.” With the definition spelled out, the FHA loan | more...

August 18, 2016

HUD Announces Federal Relief For Louisiana Flood Victims

By Joe Wallace

The Department of Housing and Urban Development has announced federal assistance for victims of recent flooding in Louisiana. According to HUDNo.16-122, “HUD will speed federal disaster assistance to the State of Louisiana and provide support to homeowners and low-income renters forced from their homes due to severe storms and flooding.” Earlier, the press release states, the President, “issued a disaster declaration for Acadia, Ascension, Avoyelles, East Feliciana, Evangeline, Iberia, Iberville, Jefferson Davis, Lafayette, Point Coupee, St. Landry, St. Martin, St. Tammany, Vermilion, Washington and West Feliciana” as well as East Baton Rouge, Livingston, St. Helena and Tangipahoaparishes. One of the benefits of this act is that victims of the flooding have access to foreclosure relief and other help. Families who may have been forced from their homes need to know | more...

August 17, 2016

FHA Loan Questions: Income Rules

By Joe Wallace

A reader got in touch with us to ask a question about FHA standards for income. “I am on contract and my lender just told me that I might not be qualify for FHA because of my income. Is that one of the requirements for FHA?” FHA loans require the borrower to financially qualify for the loan, which includes the lender making a determination about the borrower’s employment situation. While this reader question is far too general to answer with regards to the reader’s specific circumstances, we can observe the following about FHA home loans based on a reading of HUD 4000.1: The lender is required to verify a borrower’s income to insure it is stable, reliable, and likely to continue. Income that is deemed “verifiable” is allowed to be | more...

August 16, 2016

FHA Loan Rules: Rental Income

By Joe Wallace

When purchasing a home with an FHA single-family loan, a prospective borrower may want to know whether rental income from the property to be purchased with an FHA mortgage can be counted in the borrower’s debt-to-income ratio. FHA loan rules do permit this under specific circumstances, and borrowers should know that FHA loan occupancy rules apply. Borrowers are required to occupy the home as their primary residence, but for those purchasing property with more than one unit, the rental issue is a factor many consider. The rules for rental income are found in HUD 4000.1 and include the following: “The Mortgagee may consider Rental Income from existing and prospective tenants if documented in accordance with the following requirements. Rental Income from the subject Property may be considered Effective Income when | more...

August 12, 2016

FHA Loans and Social Security Income

By Joe Wallace

A reader asks, “I don’t understand if I have a 1099 and I have a benefits letter, and the letter that states at the end of the year what I am getting for the following year, why I am being asked or can be asked for something that states I will get social security for 3 years? There is nothing that says social security will give this to me or a name for it.” FHA loan rules governing Social Security income are found in HUD 4000.1, page 195 under “Other Sources Of Effective Income”. The rules require the lender to make a distinction between “effective income” which would continue for at least three years of the new loan, and “compensating factors” in the case where the lender cannot establish that | more...

August 10, 2016

FHA Loan Questions: Appraisal Issues

By Joe Wallace

A reader asks, “We just purchased our first home using an FHA loan. After 2 months in the house we had a typical Arizona monsoon storm come through. Our home flooded due to poor drainage on 3 sides of the house. The grading slopes towards the structure and not away. There are no gutters on the home nor a drainage system to move the pooling water away from our home. What recourse do we have when the FHA approved appraiser reported that there are no problems with the grading and drainage? Our home is damaged and our insurance does not cover flood damages.” The FHA official site is clear on the subject of FHA appraisals in that the appraisal process is not meant to be a home inspection. The appraisal | more...

August 9, 2016

HUD Announces Settlement In Housing Discrimination Case Against Richmond, Virginia

By Joe Wallace

The Department of Housing and Urban Development has announced a settlement in a housing discrimination case brought against the city of Richmond, Virginia. According to a August 4, 2016 press release on the HUD official site, “The U.S. Department of Housing and Urban Development (HUD) announced today that it has approved an agreement with the City of Richmond, Virginia, settling 14 complaints of housing discrimination filed against the City by Hispanic residents. The complaints alleged that the City of Richmond selectively enforced its code requirements against residents of the Citys mobile home parks, who are predominantly Hispanic.” The Fair Housing Act makes it illegal to discriminate against people on the basis of their national origin. That includes discriminatory or selective enforcement of housing regulations or other issues related to enforcement. | more...

August 5, 2016

FHA Loan Questions: Personal Data

By Joe Wallace

A reader asks, “Must income verification documents include sensitive information, such as account numbers, full SS# and bank account number(s). Can verification be made with sensitive information being Blacked-Out or omitted, as to not expose ones self to possible criminality?” FHA loan rules require the lender to verify personal information including Social Security Numbers, bank account numbers, credit reports, etc. So the lender will definitely be required to have that information at the bank’s disposal to verify not only the identity of the borrower, but also the sources of down payment funds and other money as governed by HUD 4000.1. HUD 4000.1, page 111 instructs the lender, “The Mortgagee must obtain the Borrowers authorization to verify the information needed to process the mortgage application. The Mortgagee must obtain a non-borrowing | more...