Articles Tagged With: Borrower’s Rights

April 3, 2013

New FHA Home Equity Conversion Mortgage Rules Take Effect

In January of 2013, the FHA announced pending rule changes to its Home Equity Conversion Mortgage program (FHA HECM for short). Those changes were scheduled to take effect on 1 April 2013 and are now in full effect. In the FHA Mortgagee Letter HUDNo.13-010, the agency announced, “…the consolidation of the Federal Housing Administration (FHA) Home Equity Conversion Mortgage (HECM) Standard and HECM Saver initial mortgage insurance premium (MIP) and maximum principal limit factors for fixed interest rate mortgages.” The announcement states that the HECM Saver program is, as of 1 April 2013, the “only initial MIP option available to mortgagors who seek the predictability of a fixed interest rate mortgage and lower upfront closing costs.” The announcement adds, “Mortgagees shall designate HECM Saver as the initial MIP and use | more...

March 29, 2013

Can I Apply For An FHA Loan On Good Friday?

By Joe Wallace

Good Friday is a common day off for many people. The Friday before the Easter weekend has many vendors, businesses and even the stock market takes a day off on this day. But if you’re looking for an FHA mortgage, you might be surprised to learn that you can talk to a lender, get prequalified and fill out FHA loan paperwork depending on the company–Good Friday is NOT a federal holiday so many financial institutions are open today. Because the markets which affect FHA loan mortgage rates are closed on Good Friday, the rates published on Thursday are likely the ones you will have access to today unless the lender reprices or issues a revised rate sheet on Friday. Of course, for those who wish to prequalify online, there’s no | more...

March 28, 2013

FHA Streamline Refinance Loans: Rules You Should Know

By Joe Wallace

FHA streamline refinance loans allow a borrower who has an existing FHA mortgage to refinance with no FHA-required credit check or FHA-required appraisal. FHA streamline loans work on the concept that the borrower has already qualified for the original FHA loan, so that qualifying data is used to get the home owner into the streamline refinance loan. These loans have certain rules that apply which don’t necessarily apply to other types of refinancing. For example, the purpose of the loan can come under scrutiny–the borrower must, in most cases, get a reduced mortgage payment or interest rate as a result of the new loan. Additionally, FHA loan rules state: “A transaction for the purpose of reducing the mortgage term must be underwritten and closed as a rate and term | more...

March 27, 2013

FHA Loan Answers: How Long Is An FHA Mortgage?

By Joe Wallace

A common question in any home loan situation is, “How long is my mortgage?” This depends greatly on the type of loan you apply for, the term you agree upon, and how much you pay each month over the lifetime of the loan. In general, FHA mortgages are either 15-year or 30-year loans. The maximum amount of time you can be legally obligated to the original new purchase FHA home loan is 30 years. According to the FHA official site, “The maximum mortgage term may not exceed 30 years from the date that amortization begins. In the case of adjustable rate mortgages (ARMs), the term must be for 30 years. FHA does not require that loan terms be in five year multiples.” Some types of refinancing (certain FHA Streamline Refinances | more...

March 22, 2013

Your FHA Loan Down Payment

By Joe Wallace

One of the most commonly asked questions about FHA loans is “How much will my down payment be?” The answer to that question depends on how much your home loan is and whether you’re paying the minimum 3.5% down payment or a larger amount. Regardless of how much you pay, the FHA has rules about HOW the downpayment is made. Did you know there are “acceptable sources” for down payment funds as well as “unacceptable sources”? For example, a borrower is free to use money saved in a checking, savings, or investment account. But the borrower cannot use cash advance loans or payday loans to make the down payment. In fact, any “non-collateralized” loan is not an acceptable source of down payment funds. The FHA rules in these circumstances extends | more...

March 21, 2013

FHA Loan Answers: Child Support and Debt-To-Income Ratios

By Joe Wallace

A reader asks, “What about Child Support? My mortgage broker said that if it doesn’t come up on credit report it will not count as a deduction. However it does reflect on my paycheck every 2 weeks. My question is this considered a voluntary deduction at that point or was I misinformed?” FHA loan rules require a borrower’s debt-to-income ratio to be within certain limits in order to qualify for an FHA home loan, and while it’s true that FHA rules do take compensating factors into account, the amount the borrower is obligated to pay every month before the mortgage amount is important. What do the rules say about debt such as child support, alimony, etc.? The FHA official site says, “Most recurring obligations, including child support and alimony are | more...

March 12, 2013

FHA Loan Seller Concessions: Have They Changed?

By Joe Wallace

In 2010, the FHA announced it was considering a new rule to cap seller concessions or contributions at a lower rate–reducing those concessions from 6% to 3%. That rule was not implemented, but in 2012 the seller concession cap was revisited once more. According to an FHA mortgagee letter found on the FHA/HUD official site, “In a separate Federal Register notice to be published soon, the FHA will propose to reduce the maximum allowable seller concession from its current level to one more in line with industry norms. The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. The revised proposal reflects public comments received on an earlier proposal published in a Federal Register notice on July, 15, 2010. The revised proposal calls for a | more...

March 12, 2013

FHA Loan Answers: Credit Evaluations

By Joe Wallace

A reader asks, “If my husband has a judgement against him from an old credit card debt, can we put the house in my name and use my credit only and still get approved? Or will they check him at some point anyway and reject me because of his judgement?” The answer to this reader question can be complicated. A married FHA loan applicant who is not affected by community property laws in his or her state may be able apply for an FHA loan without the participation or financial obligation of the spouse. As long as state laws don’t state otherwise, a married FHA loan applicant should be able to apply for an FHA guaranteed mortgage without obligating anyone else on the loan. In cases where more than one | more...

March 11, 2013

FHA Loan Reader Questions: Closing The Deal

By Joe Wallace

A reader asks, “My mom applied for a FHA loan, went through the loan application and was approved. She signed with a builder and they built the house on her property. Two days before closing, the mortgage lending company informs her that she cannot close on her finished house, due to her not having a credit score when they re-ran her credit file.” “When she was approved she had a credit score. What can be done, her house is built on her property and yet to move in, meanwhile the builder has chose another lending company, and she to repeat whole process over, can the first lending company do this?” There’s no way to judge what has happened in a situation like this–there isn’t enough information AND there may be | more...

March 8, 2013

FHA Loan Answers: Using A Power of Attorney on FHA Mortgages

By Joe Wallace

Some borrowers are confused or have conflicting information about the ability to use a power of attorney on someone else’s behalf to initiate or continue the FHA mortgage loan application process. What are the FHA loan rules for this procedure? The FHA loan rulebook, HUD 4155.1, Chapter One, states the following: “The initial mortgage loan application may not be executed by using a power of attorney”. That would SEEM to be the FHA’s last word on the matter, but there are exceptions to this rule, which is where some of the confusion may occur. Please note that the rule states the INITIAL application may not be executed via power or attorney but does not necessarily prohibit one from being continued in such a manner. FHA loans do permit military members | more...