Articles Tagged With: FHA Handbook

June 13, 2023

FHA Loan Expenses That Can Be Paid By The Seller

One common question about FHA loans involves whether the seller can pay some of the expenses of the borrower’s FHA loan as a motivation to purchase. Can the seller pay closing costs, offer to supply appliances, or add other incentives to the sales agreement? According to FHA loan rules in the FHA Lender’s Handbook, the answer is yes–but with limitations. According to HUD, “Certain expenses” paid by the seller (or other “interested third parties”) on behalf of the borrower are considered “inducements to purchase” and result in a dollar-for-dollar reduction to the lesser of the sales price or appraised value of the property before applying the appropriate loan-to-value (LTV) factor. That said, sellers can contribute up to six percent of the sales price without a penalty. They can also offer | more...

May 9, 2018

One-Time Close Mortgages: Choices To Consider

By Bruce Reichstein

There are many options to consider when planning a One-Time Close (OTC) / Single-Close construction loan. Borrowers who want a home built for them from the ground up can choose between FHA One-Time Close, USDA One-Time Close, and VA One-Time Close construction loans. These are also known as Single-Close loans. These three programs have some basic differences. VA OTC mortgages allow qualified borrowers to apply with no money down. USDA construction loans may also permit the borrower to apply without the expectation of a down payment, but these construction loans are only for rural areas with populations of up to 35,000 according to a 2017 USDA fact sheet about the program. One-Time Close / Single- Close Construction Loans: Occupancy Required Choices between the VA, USDA, and FHA construction loan program | more...

FHA One-Time Close Construction Mortgage Basics

November 22, 2017

How Do You Get A One-Time Close FHA Construction Loan?

By Bruce Reichstein

How do you get an FHA construction loan? If you want to have a new home built from the ground up (as opposed to buying an “existing construction” home that already exists), an FHA new construction loan is possible. The FHA One-Time Close / Single-Close construction loan makes it much easier with a single application and closing for the entire project. Other types of construction loans feature TWO closing dates and a more complex process. FHA One-Time Close mortgages simplify the construction loan by wrapping the entire loan process up with a single application and loan approval. Not all FHA lenders offer construction loans, so you’ll need to shop around to find the right lender for your needs. There are two basic types of FHA construction loans-a “traditional” construction loan, | more...

November 13, 2017

Does FHA Have A Disaster Loan Program?

By Bruce Reichstein

Does FHA have a disaster loan program? The short answer is yes, and it is quite different than a standard FHA forward mortgage. The FHA 203(h) loan is available as a new purchase mortgage or a refinance loan. In this case “new purchase” may lead some to believe you are only allowed to buy a new home with an FHA 203(h), but the reality is that you can use the 203(h) to rehab an existing damaged home, or purchase a replacement home. FHA 203(h) Disaster Loans: Unique Requirements FHA 203(h) disaster loans are only approved for those who are in federally-declared disaster areas. You cannot be approved for an FHA 203K(h) mortgage if you are not in a one of the official presidentially-declared federal disaster areas. You can check the | more...

Refinancing a Second Home With An FHA Mortgage Loan

August 8, 2017

How Soon Can I Sell My Home After My FHA Loan Closes?

By Joe Wallace

How soon can a borrower sell the home purchased with an FHA mortgage loan? The answer depends greatly on circumstances, but there are a few things to keep in mind. FHA home loans are intended for owner-occupiers, not investment property, so borrowers will need to keep that in mind when learning about the requirements and restrictions on an FHA mortgage in this area. In general, the FHA loan rules in this area are directed at the buyer’s side of the transaction. Owners are not prevented from offering property for sale, and FHA loan rules generally favor a home owner’s ability to freely sell property without restriction. But if you want to sell your property to someone looking to buy with certain types of mortgage loans backed by the government (like | more...

July 25, 2017

What Can I Improve With An FHA 203(k) Mortgage?

By Bruce Reichstein

An FHA 203(k) mortgage is basically a rehab loan, which can be used as a new purchase loan or a refinance loan for the purpose of repairing/rehabbing an eligible property. The FHA single family home loan handbook, HUD 4000.1, has a list of requirements and guidelines for FHA 203(k) loans, which includes a set of allowable improvements as well as a list of things FHA loan money cannot be used for. Let’s examine what is permitted with an FHA 203(k) loan first. Borrowers who are approved for an FHA rehab loan may use the loan for any of the following projects acceptable to the lender: – costs of construction, repairs and rehabilitation; – architectural/engineering professional fees; – the 203(k) Consultant fee subject to the limits in the 203(k) Consultant Fee | more...

How much can I borrow with an FHA refinance loan?

June 12, 2017

How To Apply For An FHA Loan: The Paperwork You Need

By Joe Wallace

In our last blog post we discussed how to apply for an FHA loan including issues related to credit and getting pre-approved for the loan. Getting ready for your mortgage loan application takes time-you need to have 12 months of on-time payments for your financial obligations leading up to the application, and you need to check your credit report to make sure you know what the lender will see at application time. But what is required when you actually start to fill out the paperwork for the mortgage? Credit, Employment, and Tax Data The lender needs a variety of information to approve your mortgage loan. That includes tax paperwork-anticipate the lender asking for at least two years of tax documents and have them ready at application time. Your lender will | more...

May 31, 2017

FHA Adjustable Rate Mortgage Rules: Rates, Term, and Adjustments

By Joe Wallace

Some potential FHA borrowers might be surprised to learn that an FHA adjustable rate mortgage (FHA ARM) is an option to consider, but for those with specific financial needs and goals, an FHA ARM loan might be a very good idea. FHA adjustable rate mortgages have specific controls over how much and when an interest rate change may occur, but there are other rules that also affect this type of FHA mortgage. All the rules for FHA ARM loans are found in HUD 4000.1, the FHA Single Family Loan Handbook. It says that the initial rate and margin are established by the lender, and that the margin must be constant over the entire term of the mortgage. Furthermore, “The interest rate must remain constant for an initial period of 1, | more...

May 30, 2017

FHA Adjustable Rate Mortgages in 2017

By Joe Wallace

Are you looking for an FHA adjustable rate mortgage in 2017? FHA single family home loans come in a variety of types including fixed-rate loans and FHA adjustable rate mortgages. The rules for these loans, commonly referred to as FHA ARM loans, are spelled out in HUD 4000.1, the FHA loan handbook. FHA adjustable rate loans can be different than their conventional counterparts, starting with certain restrictions on how often the interest rate may change. Before we dive into that issue, let’s examine how HUD 4000.1 defines the FHA ARM loan: “An Adjustable Rate Mortgage (ARM) refers to a Mortgage in which the interest rate can change annually based on an index plus a margin.” Your loan officer is required to provide a disclosure form, which must be signed, that | more...

May 18, 2017

FHA Appraisal Problems: A Reader Question

By Bruce Reichstein

We’ve gotten a variety of questions in our comments section this week about issues connected to the FHA appraisal process. Here’s the latest: “I have an FHA loan. It started raining on the day of the appraisal and we noticed a leak in the basement. The sellers agreed to fix the drainage issue that was causing it. During the walk-through we noticed that instead of busting out concrete and installing drainage pipes that they patched it up with more concrete. As ugly as it was I was okay with it as long as it kept the basement dry.” “Fast Forward to the first rainy day after closing on the home and I have an all out flood in my basement! My realtor said that there is nothing that can be | more...