Articles Tagged With: Appraiser

August 21, 2012

FHA Streamline Refinancing: the Net Tangible Benefit Rule

FHA Streamline Refinancing loans have a set of requirements regarding the streamline loan’s benefit to the borrower–requirements that directly affect the borrower’s eligibility for such loans. According to the FHA loan rulebook, there must be a “net tangible benefit” to the borrower as a result of the streamline refinancing loan. The Federal Housing Administration has a specific definition of this term which must be met (with certain exceptions allowed). From HUD 4155.1 Chapter Six, Section C: “The lender must determine that there is a net tangible benefit to the borrower as a result of the streamline refinance transaction, with or without an appraisal. Net tangible benefit is defined as:

July 24, 2012

FHA Appraisal Transfers

By Joe Wallace

In our previous blog post about FHA appraisal portability and transfers, we discussed the fact that FHA appraisals which have not expired can be transferred from one lender to another if the borrower decides to change lenders prior to the FHA loan closing. This transfer is not automatic–the borrower is required to request the transfer, according to the rules issued in FHA Mortgagee Letter 09-29. Those rules also address something known as appraisal shopping, where a lender orders more appraisals, “to assure the highest possible value for the property and/or the least amount of deficiencies and/or repairs are noted and required by the appraiser.” Appraisal shopping is expressly forbidden by FHA loan rules, but there are circumstances where a second appraisal might be warranted. According to the FHA, those situations | more...

July 20, 2012

Closing an FHA Home Loan: Settlement Requirements

By Joe Wallace

FHA loan rules include a list of items–settlement requirements–needed to properly close the FHA mortgage loan. HUD 4155.1, Mortgage Credit Analysis for Mortgage Insurance, lists these requirements. They begin with the “Lender Responsibility for Estimating Settlement Requirements”. According to HUD 4155.1 Chapter Five Section A, “For each transaction, the lender must provide the initial Good Faith Estimate (GFE), all revised Good Faith Estimates and a final HUD-1 Settlement Statement, consistent with the Real Estate Settlement Procedures Act (RESPA), to determine the cash required to close the mortgage transaction.” FHA loan rules say that in addition to the down payment required for FHA home loans (3.5% at a minimum), other borrower expenses are to be included in the amount due at settlement time. “Such additional expenses include, but are not limited | more...

July 12, 2012

FHA Loans: Can My Loan Costs Be Considered Part of the Down Payment?

By Joe Wallace

FHA home loans require a minimum down payment. The amount of an individual borrower’s down payment varies for several reasons. One reason is that the borrower must pay a percentage of the overall loan amount. Rather than requiring X amount of dollars as a standardized down payment, the borrower pays this percentage based on how much financing he or she qualifies for. For “new purchase” FHA home loans, the FHA has set a maximum Loan-To-Value ratio of 96.5%. “Loan-To-Value” simply means the amount of the FHA guaranteed home loan compared to the value of the home. 96.5%, being the maximum FHA loan available for a new purchase, means the FHA requires a 3.5% down payment of the loan amount. From the FHA loan rules found in HUD 4155.1 Chapter Two: | more...

July 11, 2012

FHA Loan Reader Question: Appraisals and “Comparables”

By Joe Wallace

A reader asks, “I am interested in purchasing a log cabin home with 44 acres and I am being told by a lender that FHA requires the comparables must be within a 12 month sale time frame. As you know log cabin homes are not sold that often. Do the comparables have to be within a 12 month time frame like I am being told?” “Comparables” refers to a benchmark FHA appraisers use to help arrive at the fair market value of the appraised property. The appraiser compares the property to be purchased with an FHA home loan to similar homes in the same market to see what current market values might be for those properties. In Issue 30 of the official FHA Appraiser Roster Newsletter, comparables are discussed as | more...

July 4, 2012

FHA Appraisal Expiration Dates: Questions and Answers

By Joe Wallace

When buying a home with an FHA guaranteed mortgage loan, one of the most important steps in the process is the appraisal. An FHA appraiser reviews the home to make sure it lives up to minimum property requirements and assigns a fair market value to the property. There are many common questions about FHA appraisals; here are some of them along with the answers. How Long Is An FHA Appraisal Valid? Buyers who purchased property prior to January 1, 2010 may have experienced a different set of standards, but currently, FHA appraisals are considered valid for 120 days. After that time they expire. According to FHA.gov, “Effective for all case numbers assigned on or after January 1, 2010 the validity period for all appraisals on existing, proposed, and under construction | more...

July 4, 2012

FHA Loan Questions: What are the Rules for a Non-Occupying Co-Borrower?

By Joe Wallace

FHA loans require the primary borrower to certify he or she will live on the property, using it as the “primary residence”. But FHA loans allow the option for a non-occupying co-borrower–someone who will be financially obligated on the loan but does not live on the property. FHA loan rules, as spelled out in HUD 4155.1 Chapter Two Section B, say of these types of FHA loan transactions: “When there are two or more borrowers, but one or more will not occupy the property as his/her principal residence, the maximum mortgage is limited to 75% loan-to-value (LTV). However, maximum financing, as described in HUD 4155.1 2.A.2, is available for

May 2, 2012

FHA Appraisals: Who Is Responsible For Appraisal Quality?

By Joe Wallace

One question about FHA home loans doesn’t usually come up unless someone in the FHA loan process is dissatisfied with the appraisal, but it’s a question asked often enough to be included in the FHA/HUD list of the most frequently asked questions: Who is responsible for the quality of an FHA appraisal? According to the FHA FAQ, “The lender is held responsible, equally with the appraiser, for the integrity, accuracy and thoroughness of an appraisal submitted to FHA for mortgage insurance purposes. FHA may pursue appropriate enforcement actions against both or either party for violations.” In Mortgagee Letter 2009-41, The FHA also says, “FHA requires that all appraisers performing appraisals of properties that will be security for FHA-insured financing be knowledgeable of FHA appraisal reporting requirements…” and, “Appraisals performed for | more...

April 23, 2012

FHA Loan Rules Vs. Lender Rules

By Joe Wallace

There’s a common theme among many of our most frequently asked questions about FHA guaranteed home loans; “Why do the FHA rules say one thing, while my lender says another?” In many cases this question has to do with FHA rules covering appraisals, minimum property requirements, or even the minimum waiting period required after foreclosure before the borrower can try applying for a new FHA home loan. For example, the FHA loan rules about streamline refinancing loans state that an appraisal may not be required under the right circumstances. From the FHA official site: ” Streamline refinances can be insured with or without an appraisal. When an appraisal is completed FHA does not require the repairs (except for lead based paint repairs) to be completed, however the lender may require | more...

April 11, 2012

FHA Loan Reader Question: Septic Systems

By Joe Wallace

A reader asks, “I am looking to buy a home in the middle of a suburban neighborhood that is the only house in the area (that we know of) that is on septic. Everyone else is on city sewer.” “Now if the FHA comes out with an appraiser to inspect the home/property, will they require that the home be hooked up to city? Or will they inspect the septic systems to make sure it’s in proper working condition? And will it pass if it is? And will they allow it to stay on septic?” Questions like this have a two-part answer. Part one is that local building codes and ordinances have much to do with the FHA appraiser’s decision. The home must live up to local code in order to | more...