Articles Tagged With: Discount Points

July 9, 2015

FHA Home Loan Closing Policies

In a recent blog post, we discussed some of the rules for closing the deal on an FHA home loan. Did you know that FHA loan rules found in HUD 4155.2 cover specific aspects of the loan closing procedure including taxes, closing costs, and title issues? Chapter Six of HUD 4155.2 explains these policies. For example, in Chapter Six we learn that the lender is permitted to calculate–and collect–property tax payments under the right circumstances: “…The lender may project real estate tax payments, and collect those funds as a portion of the monthly escrow account payment without violating the Real Estate Settlement Procedures Act (RESPA). RESPA requires that a borrower receive an initial escrow account statement at settlement or within 45 days of settlement. In conducting this analysis, RESPA permits | more...

July 6, 2015

FHA Loan Interest Rates: The Rules For Lock-Ins

By Joe Wallace

Since we got a recent reader question about the rules and regulations about FHA loan interest rate locks, it seemed like a good time to review the FHA mortgage loan rules that govern them. At the time of this writing, the FHA and HUD are getting ready to transition to a new volume of rules covering FHA Single Family mortgage loan transactions, HUD 4001.1. Until the effective date in September 2015, the previously used references are valid. In general many of the single family loan rules may be the same, but there have been plenty of changes and updates to certain policies. The information below is still valid at the time of this writing. FHA loan rules state, “Under all currently active FHA single family mortgage insurance programs, the borrower | more...

May 6, 2015

FHA Loans And Interest Rate Trends: The Interest Rate Lock

By Joe Wallace

FHA home loans, like their conventional mortgage counterparts, feature interest rates that must be negotiated between the borrower and the lender. HUD 4155.1 Chapter One verifies this, stating: “Under all currently active FHA single family mortgage insurance programs, the borrower and the lender negotiate the interest rate and any discount points”. In recent days at the time of this writing, FHA and conventional mortgage rates have been in a state of flux, moving higher due to upward pressure from overseas economic developments and other factors. FHA borrowers may wonder how they might be protected from further increases in mortgage loan rates, should they occur, once they have committed to an FHA home loan. That is where something called the interest rate lock comes into play. The lender and borrower can | more...

April 9, 2015

FHA Loan Interest Rates

By Joe Wallace

Many potential FHA borrowers want to know more about the ins and outs of mortgage loan interest rates. When it comes to FHA mortgages, it’s easy to misunderstand the relationship between a participating FHA lender and the FHA itself. For example, some assume that the FHA sets and/or regulates mortgage loan rates (it does not). So if the FHA does not set or regulate the interest rates on an FHA mortgage or refinance loan, who does? The short answer is that the lender sets the rates. The FHA loan rule book only requires that lenders set rates that are “reasonable and customary” based on similar loans. But market forces that affect other types of mortgage interest rates also affect FHA rates. The borrower and lender negotiate the FHA loan rate | more...

February 25, 2015

FHA Loan Rules: Income Limits, Loan Limits

By Joe Wallace

A reader asks, “Can a 68 year old retired person qualify for an fha loan and what is the dollar limit?” FHA loan rules do not specify an age limit or an income limit. FHA home loans are for any qualified borrower who meets the FHA loan program minimum FICO score standards as well as (possibly higher) lender FICO score standards. There’s no minimum or maximum income requirement–instead, the borrower’s debt-to-income ratio is examined to see if she or he can afford the new loan. This means that a borrower who seems to have a low income but can afford both existing monthly payments and the proposed new FHA home loan may be eligible for loan approval as long as they otherwise qualify with FICO scores, good loan repayment history, | more...

January 8, 2015

FHA Mortgage Loan Closing Costs: Prepaid Items, Per Diem Interest

By Joe Wallace

In our last post, we answered a reader question about FHA loan closing costs. This type of question is important for borrowers to ask as the answers can help you save and prepare for the costs of getting a home loan. There are several items a borrower may be required to pay at or before the loan closes in order to finalize the transaction. Some of these items include pre-paid expenses such as per diem interest, and discount points (when the borrower chooses to pay these points). Pre-paid expenses are defined in HUD 4155.1 Chapter Five as follows: “Prepaid items are collected at closing to cover  accrued and unaccrued hazard insurance premiums  mortgage insurance premiums  taxes  per diem interest, and  other similar fees and charges.” | more...

October 31, 2014

FHA Loans: What Can Affect Your Loan Amount?

By Joe Wallace

One of the first questions on the minds of many borrowers is a logical one: “How much can I borrow?” There’s no single answer for this as county loan guaranty limits apply, and in general the amount of the FHA home loan is based on the sale price of the home or the appraised value, whichever is lower. When it comes to home loan refinancing, the appraised value of the property is very important. There are factors that can affect the amount of the FHA home loan for new purchases or refinance loans beyond those factors. For example, if you choose to finance allowable fees and expenses (including some discount points depending on the transaction and lender policies) your loan amount will increase. If you make a larger down payment, | more...

October 23, 2014

FHA Loan Interest Rates: The Rate Lock

By Joe Wallace

We write weekly, sometimes more frequently, about the state of FHA loan interest rates. We discuss trends, terminology, and the possible future of those rates. But some potential FHA borrowers are confused by terms like “locking” and “floating”. What does it mean to get an interest rate lock on an FHA mortgage loan? Let’s start by examining the basic rules of negotiating FHA rates on the loan. According to the FHA loan rulebook, HUD 4155.1, the lender and borrower are expected to come to an agreement on interest rates on the loan–the FHA does not set the rates. “Under all currently active FHA single family mortgage insurance programs, the borrower and the lender negotiate the interest rate and any discount points.” That’s found in the opening chapter of HUD 4155.1. | more...

August 15, 2014

FHA Loans: Can The Seller Pay Closing Costs?

By Joe Wallace

There are plenty of expenses related to buying a home that house hunters need to save up and/or budget for–loan fees, appraisal expenses, certain types of insurance, even moving expenses should be factored into the equation. But can the seller pay some of these costs on an FHA loan to make the sale more attractive to the borrower? This is a common question among many first-time home buyers and sellers. The answer is yes–but on a limited basis as defined in the FHA loan rulebook. FHA loan rules don’t allow sellers to contribute more than a total of six percent of the sales price of the home without there being a dollar-for-dollar reduction in the loan amount based on the contribution above that six percent. What’s more, FHA loan rules | more...

February 14, 2014

FHA Loan Interest Rates

By Joe Wallace

Some who are new to the FHA loan application process might believe that the FHA sets or regulates interest rates on the mortgage loans it guarantees. But the truth is, the lender and the borrower negotiate the interest rate as part of the application process. All FHA loans are processed on an individual basis, and the borrower’s credit history and other factors can play a role in what kind of rate is offered. What does this mean? The interest rates available to an FHA loan applicant may depend on the borrowers FICO scores and other financial qualifying data–some borrowers are entitled to the “best execution” rate because of outstanding credit scores and repayment histories. Others may have to negotiate the rate based on the results of their credit reports–a borrower | more...