Articles Tagged With: Escrow

July 23, 2015

FHA Loan Down Payment Rules: Acceptable Sources of Down Payment Funds

A recent reader question in our comments section involved the source of down payment funds. The reader wanted to know if cash saved at home could be used to make an FHA loan down payment. The answer is simple, yet can get more complicated depending on circumstances. The FHA loan rules state that down payment funds must be verified. The reason for this includes requiring the lender to insure that down payment money does not come from payday loans, credit card cash advances or any other type of “non-collateralized” loan. FHA loan rules have a list of acceptable sources, which include (but are not limited to) proceeds from the sale of investments, property, bonds, etc. Cash saved at home is acceptable, as are trade equity, rent credit, even gift funds–provided | more...

July 13, 2015

FHA Home Loans: Brokers, Escrow, and Fees

By Joe Wallace

There are many expenses and services associated with an FHA home loan. Some borrowers experience confusion over some of these, not knowing which are optional, which are mandatory, and what to do about the expenses. Mandatory services include appraisal fees, flood zone determinations (where appropriate), and credit report fees. Optional services include home inspections (strongly recommended) and brokers. When it’s time to pay credit report fees, the borrower may not be charged more than the actual cost of these services; appraisal fees are required no matter what the outcome of the appraisal. These are two examples of FHA loan fees for services rendered–the service must be paid for no matter what the results of those services might be. With respect to brokers, some might assume that they need a broker | more...

July 9, 2015

FHA Home Loan Closing Policies

By Joe Wallace

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...

April 18, 2015

FHA Loan Rules For Income: Is There A Maximum Limit?

By Joe Wallace

A reader asks, “I was prequalified for an FHA loan and during escrow, my agent said I made too much money to be eligible for the loan. Does that make sense?” The simple answer to this question is no, the notion that a borrower makes too much money to qualify for an FHA mortgage loan does not make sense. But let’s examiner what official FHA and HUD documents say about the single-family FHA loan program: “If you are buying a home, refinancing a mortgage for a home you already own, or making home improvements, you may qualify for an FHA-insured mortgage. In fact, almost anyone who has a satisfactory credit record, enough cash to close the loan, and sufficient steady income to make monthly mortgage payments can be approved for | more...

October 30, 2014

FHA Loans and Earnest Money: A Reader Question

By Joe Wallace

A reader asks, “I have a property listed and in escrow with an FHA buyer who was so confident that she would get the loan (the lender provided a fully approved letter, contingent on final review and appraisal), that she agreed to unconditionally release the EMD to my seller.” “Long-story-short, the buyer decided that in light of suspicions that she might not be approved in the final review, she would cancel the loan process and kill the deal. Now she wants her released EMD back and her agent claims there are FHA regulations that demand the return. I cannot find them. Do they exist? What do they say?” The reader doesn’t specify, but we assume the acronym “EMD” stands for “earnest money deposit”. With that in mind: This is a | more...

July 22, 2014

FHA Loans And Escrow Requirements: A Reader Question

By Joe Wallace

A reader asks, “I am trying to cancel my escrow acct. with (my lender) due to them selling my Mortgage loan to an undesirable finance company called (name deleted). I was informed that all FHA loans are required to have an Escrow account. Please inform me of my rights.” FHA loan rules do not require an escrow account in every case, but your lender might. According to the FHA/HUD official site, we find the following on the page titled HUD RESPA FAQs. The Real Estate Settlement Procedures Act, also known as RESPA, governs escrow accounts for home loans. Under RESPA there is no requirement for escrow. From the HUD official site: “Does RESPA require borrowers to maintain an escrow account? NO. It is the lender’s decision whether the borrower must | more...

March 4, 2014

FHA Energy Efficient Mortgages

By Joe Wallace

There is an option for FHA new purchase home loans and refinancing loans called the Energy Efficient Mortgage (EEM). According to the FHA loan rules found in HUD 4155.1, “Under the EEM Program, a borrower can finance 100% of the cost of eligible energy efficient improvements into the mortgage, subject to certain dollar limitations, without an appraisal of the energy efficient improvements. For the EEM Program, the mortgage amount includes the cost of the energy efficient improvements, in addition to the usual mortgage amount normally permitted FHA maximum loan limit for the area may be exceeded by the cost of the energy efficient improvements energy efficient improvements must be cost effective in order to be included into the mortgage, and amount of the cost effective energy package is added to | more...

February 27, 2014

FHA Loan Rules: A Reader Question About Earnest Money

By Joe Wallace

A reader asks, “A buyer made an application for a FHA loan to purchase a property. The buyer was not able to obtain FHA loan approval by close of escrow and rather than to cancel the contract and receive the earnest money back the buyer and seller agreed in writing to extend the contract’s close of escrow provided the earnest money become unrefundable if the buyer could not close escrow for any reason.” “The buyer was not approved for FHA financing and cancelled the contract yet is claiming FHA overrides the written contract and FHA states the earnest money must be returned to the buyer when the buyer is denied aFHA loan. Does FHA have some sort of rule or authority over a legal contract between buyers and sellers for | more...

January 13, 2014

The FHA Energy Efficient Mortgage Loan

By Joe Wallace

The FHA loan program includes something called an Energy Efficient Mortgage. This program allows the borrower to apply for additional funds in order to make approved energy efficient upgrades to the property to be purchased with an FHA home loan. According to the FHA loan rules in HUD 4155.1 Chapter Six, Section D, the FHA EEM program allows the borrower to finance “100% of the cost of eligible energy efficient improvements into the mortgage, subject to certain dollar limitations, without an appraisal of the energy efficient improvements.” For the EEM Program, Chapter Six Section D says: mortgage amount includes the cost of the energy efficient improvements, in addition to the usual mortgage amount normally permitted FHA maximum loan limit for the area may be exceeded by the cost of the | more...

May 22, 2013

FHA Loan Reader Questions: Closing Costs

By Joe Wallace

A reader asks, “Can you have the closing costs added to your mortgage loan in California? Or do you have to pay them before escrow closes?” Let’s see what the FHA loan rules, as described in HUD 4155.1, have to say about this. Chapter Five, Section A has a heading titled Settlement Requirements Needed To Close, which states: “Lenders may pay a borrower’s closing costs, and/or prepaid items by ‘premium pricing.’ Closing costs paid in this manner do not need to be included as part of the seller contribution limitation. The funds derived from a premium priced mortgage • may never be used to pay any portion of the borrower’s downpayment • must be disclosed on the GFE and the HUD-1 Settlement Statement • must be used to reduce the | more...