Articles in Category: HUD Regulations

September 12, 2014

FHA Down Payment Rules: When More Is Required

We get frequent questions about FHA loan rules concerning down payments. Borrowers want to know how much money down the FHA requires for a single family home loan transaction, and unfortunately some borrowers mistakenly believe there is a single dollar amount that must be paid. The reality is that the required FHA down payment amount is a percentage of the loan rather than fixed dollar amount. That means every FHA loan down payment can be different depending on the transaction. Typically the FHA down payment requirement is 3.5%. That down payment requirement can be higher if the borrower has marginal credit qualifications that might force the lender to seek “compensating factors” in order to justify the loan. A bigger down payment can be one of those compensating factors. Another reason | more...

September 10, 2014

FHA Loan Reader Questions: Bank Statements

By Joe Wallace

A reader asks, “Is a bank statement, showing the amount needed at closing, required with my application? What is a lender required to ask me for?” In some cases the FHA gives the lender the option of collecting a bank statement, and in others the bank statement is FHA-required. Lender standards may insist on bank statements, so what the FHA allows and what the lender requires may differ; the FHA may not require a bank statement in some cases, but the lender is free to. We can find evidence of this in HUD 4155.1 Chapter Five Section B under the heading, “Cash and Savings/Checking Accounts as Acceptable Sources of Funds” states: The lender must verify and document the deposit amount and source of funds, if the amount of the earnest | more...

What you should know about FHA 203(h) Loans For Disaster Victims

September 5, 2014

FHA Mortgage Rate Trends For The Week of September 2, 2014

By Joe Wallace

FHA mortgage rates can move higher or lower in any give day or week for many reasons. Those reasons can include overseas headlines (financial or political in many cases) that affect investor behavior in the USA. That was one of the factors this week when it came to rising FHA rates–there was market volatility based on the Russia/Ukraine situation, and we also saw domestic economic data that some market watchers predicted would end up competing with Russia/Ukraine developments as an influence on mortgage rates. Monday was a day off for the markets, so when the three day holiday weekend ended, Tuesday’s rate activity included upward movement in small increments that didn’t change average “best execution” rates for FHA home loans. If you were investigating rates this week, it’s true you | more...

September 4, 2014

FHA Loan Rules: Verification Of Employment

By Joe Wallace

When you apply for an FHA mortgage, your lender will need a variety of documentation from you about your income, assets, debts and employment. In fact, employment verification is one of the major steps in the FHA loan approval process. But how does your lender verify you are working with a current employer? According to the rules printed in HUD 4155.1, the lender will require a current pay statement and a written Verification of Employment (VOE). Not all FHA loan applicants may be able to furnish a written VOE, so the FHA loan rule book lists some acceptable alternatives. Chapter One, Section B states: “As an alternative to obtaining a written VOE, the lender may obtain the borrower’s • original pay stub(s) covering the most recent 30-day period, and • | more...

September 1, 2014

Happy Labor Day!

By Joe Wallace

Happy Labor Day! Banks and the markets that affect FHA mortgage rates are closed today. We pause from our usual posts about FHA home loans and answering reader questions to enjoy the holiday. Our regular post schedule resumes tomorrow, Tuesday September 2, 2014. Thanks for reading!

August 27, 2014

FHA Eliminates Post-Payment Interest Charges

By Joe Wallace

The FHA has announced the elimination of certain interest payments previously owed beyond the date the FHA mortgage was paid in full. According to the press release HUDNo.14-104, titled, “FHA To Eliminate “Post Payment” Interest Charges, “borrowers who prepay their FHA-insured mortgages will not have to make interest payments beyond the date their mortgage is paid in full.” A new FHA rule known as “Handling Prepayments: Eliminating Post-Payment Interest Charges”, will apply for FHA mortgages closed on or after January 21, 2015. According to the press release, the new rule, “explicitly prohibits lenders from charging borrowers post settlement interest, which is broadly defined as a ‘prepayment penalty’ by the Consumer Financial Protection Bureau (CFPB), for all FHA Single Family mortgage products and programs.” This is an important development for borrowers | more...

August 22, 2014

FHA Mortgage Rate News For Friday August 22 2014

By Joe Wallace

If you are looking for an FHA home loan, chances are good you are paying attention to the rise and fall of FHA mortgage rates. There are many reason why these rates can change day to day or week to week. One factor—economic data releases that suggests weakness in the economy. This data can influence rates and push them lower, or, conversely, when economic/jobs data indicates improvement, rates can and sometimes do move higher as a result. But other factors can push rates higher or lower, too. We found a good example of that recently–mortgage rates moving lower based on investor reaction to world headlines. Last Friday, mortgage rates hit their lowest levels in the last eight weeks or so. That drop in rates was attributed to how investors reacted | more...

August 15, 2014

HUD Announces Settlement In New Jersey Lending Discrimination Case

By Joe Wallace

The FHA and HUD have announced a settlement in a case involving a New Jersey mortgage corporation that allegedly discriminated against home loan applicants based on disability. According to the press release HUDNo.14-098, ” The U.S. Department of Housing and Urban Development (HUD) announced today that Freedom Mortgage Corporation, a national residential mortgage lender based in Mt. Laurel, New Jersey, will pay $104,000 to settle allegations that it discriminated against loan applicants with disabilities by requiring them to provide medical or other documentation regarding their disability.” The Fair Housing act makes it illegal to discrminated against those who seek housing (buying OR renting) based on such criteria. “This includes requiring persons with disabilities to provide medical or other documentation not required of mortgage applicants who are not disabled.” according to | more...

August 12, 2014

FHA Loan Approval, FHA Loan Denial: The Process

By Joe Wallace

When you apply for an FHA loan, sometimes the hardest part is waiting to hear back from the lender that the loan has been approved and all can move forward. Did you know that FHA loan rules have a process for the lender to follow when the loan has been approved or denied? HUD 4155.1 has the guidelines and instructions to the lender for loan approval or rejection. Chapter One of this document has a section called Borrower Approval Or Rejection and tells the lender that, when the loan has been approved, there are a set of steps to be followed. The lender: • records the results of the credit analysis on the HUD-92900-LT, FHA Loan Underwriting and Transmittal Summary • enters any modification of the mortgage amount or approval | more...

July 31, 2014

FHA Loan Rules For Cosigners: A Reader Question

By Joe Wallace

A reader asks, “How can a person sign a mortgage note but not have liability to repay the obligation?” FHA loan rules mention cosigners as a non-occupying parties who must sign the mortgage note but are not obligated when it comes to financial liability. According to HUD 4155.1, the lender must perform due diligence with the cosigner the same as with the borrower: “When determining the creditworthiness of borrowers, coborrowers, or cosigners, the underwriter considers their • income • assets • liabilities, and • credit histories.” How does the FHA define the cosigner? Let’s start by looking at the FHA definition of the borrower and co-borrower: “Both occupying and non-occupying borrowers and coborrowers • take title to the property at settlement • are obligated on the mortgage note, and • | more...