Articles Tagged With: Discount Points

August 15, 2023

FHA Loan Policies: Interest Rates

When you apply for an FHA loan, one of the most important questions to ask is about interest rates. You want to know how much, over how long, and what options are open to you in terms of fixed or adjustable-rate mortgages. FHA loan rules printed in the FHA Single-Family Lender’s Handbook include a section about interest rates. While the FHA does not set or regulate the interest rates on FHA mortgages. That’s between the lender and the borrower. FHA rules do require the rates to be customary and reasonable but the rulebook does NOT list numbers. FHA loan interest rate policy is basically a hands-off policy. FHA loan rules say that typically under “all currently active FHA single-family mortgage insurance programs,” the borrower and the lender negotiate the interest | more...

June 27, 2023

FHA Loan Seller Concessions: What’s Allowed?

By Joe Wallace

When it is time to negotiate the price of a home using an FHA home loan, borrowers should know that sellers can, and often do, contribute to the buyer to make the deal more enticing or help the borrower reduce up-front costs. Such contributions are known as seller concessions. The FHA Lender’s Handbook says for FHA mortgages, concessions are permitted within a certain set of boundaries and are limited to six percent of the sales price of the home. Any seller contributions that exceed that six percent limit require a dollar-for-dollar reduction in the loan amount. According to FHA loan rules, “Sales concessions influence the price paid for real estate. For this reason, FHA requires that appraisers identify and report sales concessions and properly address and/or adjust the comparable sale | more...

Conventional Loan Interest Rates Make History, FHA Loan Rates Still Incredibly Low

June 15, 2023

FHA Loans and Interest Rates: The Interest Rate Lock

By Joe Wallace

Under the rules of the FHA loan program, borrowers and lenders negotiate together on interest rates for the FHA loan. Part of those negotiations is the interest rate lock agreement. This can feel intimidating for some who aren’t used to the home-buying process, but it’s a common part of the home loan transaction. What do you need to know about FHA home loan rates and getting a rate lock commitment from your lender? The FHA does not set interest rates, and it’s also not responsible for regulating them aside from a general requirement that the rates be comparable to similar types of loans. Interest rates on mortgages and other high-value transactions are under more scrutiny in 2023 due to continued elevated mortgage rates. At the moment, it’s good to explore | more...

May 8, 2020

FHA Loans, Interest Rate Cuts, And Your Mortgage

By Bruce Reichstein

Home loan interest rates have been on a wild ride. The Fed cut interest rates in March of 2020–two times in response to coronavirus economic issues. But the Fed rate cut did not mean mortgage loan interest rates were directly cut. Home loan rates move up and down based on market forces, investor behavior, etc. The Fed’s rate cut actions are not a specific trim to home loan rates, but the effects of that rate cut did include influencing how investors did business in the wake of those cuts. It’s easy to assume the Fed has some kind of direct control over home loan rates, but what is the reality? How do home loan rates work and what do you need to know moving forward with your loan application? On | more...

December 12, 2019

5 Home Loan Interest Rate Facts You Should Know

By Joe Wallace

The Federal Reserve announced interest rates would not change; the week of December 9 was one investors would pay a great deal of attention to. The interest rate was left untouched on December 11, 2019; there were three adjustments in 2019. FHA Home Loan Interest Rate Facts: The Fed Does Not Directly Set Mortgage Loan Rates The interest rate cut by the Fed this week did not directly adjust mortgage loan rates, but investor reaction to the announcement definitely plays a part in the daily ebb and flow of rates. But what the Fed has done in 2019 does not “fix” home loan rates at their current low levels. What rules the daily rate changes is investor activity based on current events, economic data, and things like the Fed rate | more...

April 10, 2017

Seller Contributions on FHA Loans

By Joe Wallace

A reader asks a question about seller contributions on an FHA mortgage loan. “What is included in seller contributions with a max of 6%?” The question refers to something informally known as the “six percent rule” on FHA mortgages, which limits the contributions of an “interested party” to six percent of the sale price of the home. This rule is found on page 232 of HUD 4000.1, which defines both interested parties and their contributions to the sale as follows: “Interested Parties refer to sellers, real estate agents, builders, developers or other parties with an interest in the transaction. Interested Party Contribution refers to a payment by an Interested Party, or combination of parties, toward the Borrowers origination fees, other closing costs and discount points.” What are the FHA loan | more...

April 3, 2017

FHA Loan Amounts: A Reader Question

By Joe Wallace

What are the minimum FHA loan amounts? A reader asked us a question in the comments section along those lines recently: “Is there a minimum amount for FHA Loans? Someone told me you have to borrow at least $90,000. Does the loan depend on your annual income?” FHA mortgages are not approved or denied based on the dollar amount of your annual income, but rather on your ability to afford the loan based on your financial obligations (including an estimate of your monthly mortgage payment) compared to your monthly income. Your debt-to-income ratio is more important in the loan approval equation. When it comes to FHA loan amounts, the minimum loan is based on the appraised value of the property or the asking price, whichever is lower. The FHA loan | more...

March 3, 2017

Are You Ready For An FHA Mortgage Application?

By Joe Wallace

If you are thinking about filling out an FHA mortgage application, there are a few questions to ask yourself before you do-if you’re ready to apply for an FHA loan, you’ll have the answers ready. How Much Down Payment Money Do You Have? In the planning stages of buying a new home, one of the most important things you can do early is determine how much home you can realistically afford. Using a mortgage calculator can help you estimate how much you need. Since FHA home loans typically require a minimum 3.5% down based on the adjusted price of the home, you can get an estimate of how much will need to be saved up to make that down payment. Know how much you’ll need-at least a rough estimate-early in | more...

August 24, 2016

FHA Loan Basics You Should Know

By Joe Wallace

If you are thinking about buying a home and are weighing your options for an FHA home loan, there are some basics you should know about FHA mortgages that can help you better prepare for an FHA loan application. FHA home loans are for all financially qualified applicants; there are no income minimums OR maximums. Borrowers should know that FHA mortgages are designed to help borrowers at all income levels find an affordable home. Your debt to income ratio (the amount of money coming in each month compared to your monthly expenses and financial obligations) is an important factor in loan approval, but you will not be disqualified because of an income threshold based on your annual income or monthly income alone. FHA mortgages allow you to purchase a home | more...

August 11, 2016

FHA Loans and Cash Back

By Joe Wallace

FHA home loans have specific rules about when a borrower can get cash back on an FHA transaction and how. In general, FHA mortgage loans for new purchases don’t permit cash back except in the form of legitimate refunds, but HUD 4000.1 outlines certain circumstances where a small amount of cash back is permitted. However, that cash back cannot be “excessive”. A lender is required to estimate the costs of the loan before the actual expenses are tallied. These estimates could result in the borrower budgeting more than is required. When money is due back to the borrower, HUD 4000.1 states: “When the estimated costs utilized in calculating the maximum mortgage amount result in greater than $500 cash back to the Borrower at mortgage Disbursement, Mortgagees may reduce the Borrowers | more...