Articles in Category: HUD Regulations

September 24, 2015

FHA Loan Income Requirements: A Commission Question

We recently got a question regarding commission income and how it may be reviewed by the lender. More specifically, the question is about whether the nature of the reader’s income is truly “commission income” and how the lender might view that on the FHA loan application. The reader asks: “On my pay stub next to earnings it says commission, but this actually isnt true commission pay. We arent selling anything, we deliver to stores. Its just how my company decided to pay us. So my question is do I fall under this category of commission based salary, where I would need a year of income or would that not matter in my case?” Unfortunately, the answer to this question would come from the lender. The loan officer’s job is to | more...

September 14, 2015

FHA Home Loans and Legal Questions

By Joe Wallace

From time to time we get questions in the comments section about legal issues associated with an FHA home loan transaction. One of the most recent involved a situation where a reader tells us: “…the underwriter denied loan due to not enough in account for closing. The sellers realtor contacted our loan officer and asked if we had enough money to pay the closing costs our loan officer told her no, at that point the sellers realtor stated they did not know if they wanted to deal with us. Is that legal for our loan officer to give the sellers realtor this information…” It cannot be stressed enough that in situations where there is a legal question, a lawyer with experience in real estate law should be consulted. We cannot | more...

September 2, 2015

Some Frequently Asked Questions About The New FHA Loan Rules In HUD 4000.1

By Joe Wallace

On September 14, 2015, a new FHA single-family home loan policy handbook takes effect. It’s known as HUD 4000.1 and has several updates, changes and revisions that will take effect on the 14th. There have been some frequently asked questions about some of the details found in the new handbook–the FHA and HUD have published some answers to those questions in anticipation of the launch date for the new rule book. Here are some of those examples as printed on the FHA/HUD official site–one of the top questions? Whether referral fees will be permitted for the origination of FHA single family mortgage loans. The answer: “The lender, or any of the lenders employees, must not pay or receive, or permit any other party involved in an FHA-insured mortgage transaction to | more...

August 24, 2015

FHA Loans And Non-Purchasing Spouses

By Joe Wallace

There are a lot of questions asked about FHA loans and how spouses can buy together. Can the FICO scores of one spouse make up for the lower scores of the other borrower? Can one spouse’s income offset the lower income of the other? How does state law factor into FHA loan applications when spouses apply? All valid questions. But what about circumstances where one spouse is not borrowing? Does an FHA loan require action on the part of a non-borrowing spouse? The answer can be influenced by state law, lender standards, and FHA loan regulations. At the time of this writing, FHA loan rules that govern non-purchasing spouses can be found in HUD 4155.1 Chapter Four, Section A. There we learn the following: “If required by state law in | more...

August 21, 2015

FHA Mortgage Rate Trends: Lower After Fed Minutes Are Released

By Joe Wallace

Mortgage loan rates have been in a back-and-forth mode this week. One day they rise, altering closing costs for the most part rather than the actual best execution rate, the next day they fall, with the same result. On Wednesday all eyes were on the release of Fed minutes, which detail the meeting held last month. The details of that report sent investors into activity that benefits mortgage rates, and while the best execution numbers we reported in our last blog post haven’t changed, some borrowers may notice the alterations in the form of lower closing costs as previously mentioned. 30-year fixed rate conventional mortgages were reported at 4.0% best execution at mid-week, with some lenders coming in at sub-four percent best execution rates. Best execution rates are not available | more...

What happens to my FHA loan in a natural disaster?

August 14, 2015

FHA Loan Income Rules: Does Alimony/Child Support Count As Income?

By Joe Wallace

For any applicant trying to get an FHA loan to purchase a home, the debt-to-income ratio is very important. How much money you have coming in versus how much you have going out for monthly bills and other financial obligations is a very big part of the lender’s calculations to see whether a borrower can afford the new loan. One area that concerns some is whether alimony/child support is able to be used as part of the borrower’s potential income for those calculations. FHA loan rules currently available in HUD 4155.1 have plenty to say on how and why such income might be used. This type of income can indeed by used, as long as it meets FHA minimum requirements for “effective income” or “verifiable income”: “Alimony, child support, or | more...

August 11, 2015

HUD Mortgage Board Takes Action Against Two Lenders

By Joe Wallace

A press release on the FHA/HUD official site announces HUD action against two Texas-based lenders. HUDNo.15-102, published Monday August 10, 2015, states: “The U.S. Department of Housing and Urban Developments Mortgagee Review Board (MRB) today announced settlement agreements with two Texas mortgage lenders following allegations they engaged in a scheme to charge bogus fees to consumers, which improperly inflated mortgages for borrowers purchasing newly constructed manufactured housing.” 11 violations of FHA lending rules were alleged in the case. According to the press release, the HUD Mortgage Review Board claims, “American Home Free Mortgage, LLC (AHFM) of Prosper, Texas, artificially increased mortgage costs by an average of $12,000 per loan through illegitimate fees paid to a company owned and operated by its sales manager. In addition, HUD alleged that there were | more...

August 10, 2015

What Affects My FHA Home Loan Amount and Down Payment?

By Joe Wallace

FHA home loans offer a potential maximum financing of 96.5%, with a required minimum down payment (also known as a minimum investment) of 3.5%. But not all borrowers are eligible for the maximum financing amount. Some borrowers may be required to put more money down depending on circumstances. What are these circumstances? The most obvious one hinges on a borrower’s credit history and FICO score. Borrowers who have “marginal” FICO scores or who don’t otherwise meet the lender’s minimum standards for the loan may be required to put more down as a “compensating factor”. But credit isn’t the only thing that can affect the FHA loan’s maximum financing amount on a given transaction. HUD 4155.1 Chapter Two Section B has the guidelines for calculating the maximum financing amount permitted in | more...

August 6, 2015

FHA Loans And Derogatory Credit Information

By Joe Wallace

Many borrowers want to know what might be considered a problem when it comes to the lender’s review of credit histories and FICO scores. Lender standards apply in all such situations, so FHA minimums aren’t the only requirements to be concerned with, but in general there are some credit issues that could require the lender to process your loan paperwork “by hand” or take a closer look at your financial qualification data. What are these issues? According to the FHA/HUD official site, delinquency is an important factor: –Bankruptcy, foreclosure, collection account, charge-off, tax lien, or judgment; –Any mortgage trade line including mortgage line-of-credit payments, during the most recent 12 months, consisting of: –3 or more late payments of greater than 30 days, or –1 or more late payments of 60 | more...

August 5, 2015

FHA Mortgage Rate Trends: Higher After Fed Talk Of Rate Hike

By Joe Wallace

Mortgage loan interest rates have been recovering, but on Tuesday the Fed’s discussion of a possible September interest rate hike caused a reaction that brought rates higher. 30-year fixed rate conventional mortgage loan interest rates, best execution, moved back to 4.0% after a brief flirtation with the high three percent range, though some lenders may still be offering sub 4% rates to the most qualified applicants. At the time of this writing, FHA best execution rates are still at 3.75% which is a change from the previously held range of rates with 4.0% at the upper end. Remember, best execution means rates that are offered to borrowers with ideal financial qualifications. Your FICO scores, plus other financial qualifications, will determine your access to rates or rates similar to them. Your | more...