January 13, 2012
The FHA has rules which must be followed in order for participating lenders to legally take part in the FHA loan guaranty program. There are also federal laws which apply to all lenders above and beyond FHA regulations. With this in mind, we reviewed a reader comment/question which came in recently: “A friend of ours just told us she is closing on an FHA loan tomorrow.
January 12, 2012
The FHA provides many helpful resources for homebuyers on its official site at FHA.gov. One of those resources is an online version of a HUD/RESPA booklet called “Buying Your Home” which includes a section on settlement costs. One of the first portions of this booklet a prospective FHA mortgage loan applicant will read includes the following: “The real estate broker probably will give you a preprinted form of agreement of sale. You may make changes or additions to the form agreement, but the seller must agree to every change you make. You should also agree with the seller on when you will move in and what appliances and personal property will be sold with the home.” The second sentence contains a revelation for some borrowers–some loan applicants simply assume that | more...
January 11, 2012
Recently we posted about FHA loan limits and something called “identity of interest” transactions, which the FHA official site describes as “a sale between parties with family or business relationships.” For example, if a business partner wanted to sell property to a fellow partner, that could constitute an “identity of interest” transaction. The same would be true of family members selling to other family members. According to FHA loan rules, the “maximum loan-to-value (LTV) factor for identity-of-interest transactions on principal residences is restricted to 85%.” That means the borrower would be approved for the FHA home loan, but only for 85% of the value of the property. Fortunately for many borrowers, the FHA has exceptions to this 85% rule. “Financing above the 85% maximum for identity-of-interest transactions is permitted under | more...
January 10, 2012
Filling out the FHA loan application is the first official step on the road to an FHA guaranteed mortgage. All the preparation a borrower should be doing prior to the loan application including the review of your own personal credit data, making a budget, closing unneeded lines of credit, and other steps are just the preliminaries. The application is what sets you on the path to home ownership. But what does your lender do with the application data once you’ve handed it over? FHA loans are issued by private banks and mortgage companies, not the government. Participating FHA lenders must insure the credit they issue is not a risky investment, and the details on your credit application are not just reviewed, they are also verified to make sure they give | more...
December 16, 2011
One of the most commonly asked questions about FHA loans concerns appraisals and inspections. What’s the difference between the two? An appraisal is a mandatory part of the FHA loan process. Without an appraisal, there can be no FHA home loan because there’s no way to establish the fair market value of the property in the eyes of the FHA. In some rare cases an appraisal may not be required because a previous FHA appraisal has not expired yet, but borrowers should expect and budget for an appraisal in most cases. The FHA appraisal is not a comprehensive, top-to-bottom review of a home to discover any/all defects or issues with the home. The FHA appraisal does not guarantee the home is free from defects or other problems. An FHA appraiser | more...
December 14, 2011
Borrowers new to the FHA insured loan program should know about the FHA loan option called an Energy-Efficient Mortgage or EEM. An FHA EEM is intended to add a set amount to the FHA home loan in order to finance upgrades or improvements to the home that result in a more energy efficient property, which saves money over the long term. According to FHA loan rules, eligible properties for an EEM loan include, “New and existing one to four unit properties, including one unit condominiums and manufactured housing properties”. EEM loans are for new purchase transactions or refinancing, including the FHA 203(k) Rehabilitation Loan, FHA 203(h) loans for victims of natural disasters and standard FHA 203(b) loans. Borrowers who are purchasing multi-unit property should know an FHA EEM is calculated | more...
December 13, 2011
There are many reasons why a military member could choose to apply for an FHA insured home loan instead of applying for a VA mortgage. Those reasons may include occupancy issues, personal choice when considering FHA loan fee structures versus VA insured mortgage fees, etc. The decision to purchase a home with an FHA mortgage instead of a VA loan could be influenced in part by language in the HUD document 4155.1, Mortgage Credit Analysis for Mortgage Insurance, which addresses occupancy issues. According to the VA official site Frequently Asked Questions list, occupancy rules for a VA Home Loan include a requirement that the veteran or spouse occupy the property bought with a VA insured loan as the primary residence: “Q: I am a single veteran stationed overseas and want | more...
December 12, 2011
In July 2011, the Obama administration announced changes to the FHA loan program which requires lenders to extend FHA loan forbearance to unemployed borrowers. This change affects those who already have FHA mortgages rather than those applying for them; the new rules “require servicers to extend the forbearance period for unemployed homeowners to 12 months. The Administration also intends to require servicers participating in the Making Home Affordable Program (MHA) to extend the minimum forbearance period to 12 months wherever possible under regulator and investor guidelines.” According to the FHA press release announcing these changes, “These adjustments will provide much needed assistance for unemployed homeowners trying to stay in their homes while seeking re-employment. These changes are intended to set a standard for the mortgage industry to provide more robust | more...
December 9, 2011
Did you know that the FHA and HUD offer by-state listings of FHA-related news, programs, home loan resources and other information? While FHA home loans are available nationwide, there are many state and local programs designed to help home owners, FHA borrowers, veterans and others affected by such programs. For example, on the Alabama page at http://portal.hud.gov/hudportal/HUD?src=/states/alabama there is a press release detailing a Department of Housing and Urban Development grant to the State of Alabama to the tune of $120 thousand to fight housing discrimination and uphold fair housing initiatives. On the North Dakota page there are stories of the latest initiatives on the state and local level to assist low-income families. These state page on the FHA official site also contain valuable links to information for foreclosure avoidance, | more...
December 8, 2011
According to HUD.gov, there are a variety of options for borrowers to consider when trying to avoid FHA loan default or foreclosure. The options are not guaranteed for all borrowers–you may be required to qualify for each program depending on your circumstances, whether or not you are current on the FHA home loan and other factors. It’s very important to consider these options before you have missed any payments or are in ongoing financial trouble on the loan–doing so keeps you eligible for the most advantageous terms and options. FHA Borrowers who want to modify or refinance their loans for lower payments should consider one or more of the following options: Home Affordable Modification Program: This program, also known as HAMP, lowers the borrower’s monthly mortgage payment to 31 percent | more...