Articles Tagged With: FHA Home Loan

January 28, 2016

FHA Loan Questions: Maximum FHA Loan Amounts For Building A Home

A reader asked us a question recently in the comments section about FHA new construction loans: “My husband and I will be building a home, we have land that we are interested in, what is the max for a construction loan and build that FHA gives?” To be clear, the FHA itself does not issue loans–the borrower must find a participating FHA lender willing to offer a new construction loan. When it comes time to determine the maximum loan amount for new construction mortgages, the FHA loan rulebook has specific instructions for the loan officer. How does the FHA instruct lenders to determine the maximum mortgage amount in these cases? According to HUD 4000.1: “The maximum mortgage amount is calculated using the appropriate purchase Loan-to- Value (LTV) percentage of the | more...

What if my home was damaged in a natural disaster?

January 27, 2016

FHA 203(k) Rehab Loans: A Reader Question

By Joe Wallace

Recently a reader asked us a question in the comments section about using FHA loans to purchase property to be converted into a residence. “There is an old church for sale near us that we would love to buy and make into a home. Can this be done using an FHA loan? We plan on only using it for residential use. Its been hard to find a home that we love and that falls into FHA standards.” The answer to this question depends greatly on whether or not the property to be purchased is, in the eyes of the FHA, a one-to-four unit property. FHA loans include something known as a 203(k) Rehabilitation loan, which can be used to rehab, refurbish or repair an existing property. According to HUD 4000.1, | more...

January 25, 2016

FHA Loan Income Questions: Pay Stubs and W-2s

By Joe Wallace

A reader got in touch with us recently to ask a question about FHA loan income requirements. We got the following question in the comments section: “My husband works as a mechanic and gets paid cash so he doesnt really have a proof of income or the last 2 yrs or w2 and has an OK credit score and we are trying to get a FHA loan to buy a house..what do we need to do to be able to qualify?” This is an important issue, especially for self-employed people. The bottom line is that the participating FHA lender is required by FHA loan regulations to obtain proof of income in some way. This proof is needed so the lender can verify the income and insure that it is likely | more...

January 21, 2016

Qualifying For An FHA Reverse Mortgage

By Joe Wallace

One commonly asked question about the FHA home loan program is whether or not FHA insures or guarantees reverse mortgages. The FHA does have a reverse mortgage loan program, called the Home Equity Conversion Mortgage or HECM for short. Who qualifies for an FHA HECM loan and what are the basic ground rules? To start, it’s very important to understand the difference between an FHA HECM loan and traditional refinancing. According to the FHA official site, “A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can be paid to you.” FHA HECM loans are not like standard home equity loan or second mortgage | more...

January 19, 2016

Mortgage Loan Interest Rate Trends: 180-Day Lows

By Joe Wallace

Ahead of the three-day weekend, Friday saw mortgage rates break some new ground–rates that, best execution, we havent’ seen in quite some time. Rates broke the four percent zone and began moving lower for both conventional and FHA mortgages. How long this trend may last remains to be seen, but some sources report oil prices and stock market woes as being responsible for at least a chunk of the improvement in mortgage rates we are seeing at the time of this writing. 30-year fixed rate conventional mortgages left the four percent range altogether and headed into best execution territory at a range between 3.75% and 3.875%. On many days where there is improvement, FHA mortgage rates tend to lag behind and remain in a comfort zone (3.75% has been the | more...

January 13, 2016

FHA Home Loan Questions: FICO Scores

By Joe Wallace

A reader got in touch recently in the comments section to ask a question about FICO scores and FHA home loan applications. “My new wife’s credit score is 749 and mine is 620 due to an ugly divorce and transfer several years ago. We make over 287K per year with very little debt. Would we qualify for a loan together with a favorable rate? All debt paid except car loans.” This question implies that FICO scores are the deciding factor for an FHA loan approval decision, and while credit scores are very important, they are not the only factor taken into account by the lender. When you apply for an FHA home loan, the lender will examine not just your FICO scores, but your history of payments–especially those made in | more...

January 8, 2016

FHA Loan Rules: When Landlords Sell To Tenants

By Joe Wallace

Sometimes when a borrower wants to buy a property with an FHA mortgage, it’s a situation where the applicant has been renting for some time and has an offer from the landlord to purchase. FHA loans do permit these transactions but there are special rules that govern them. These rules, published in HUD 4000.1, state that in some cases a higher down payment is required. But in others an exception to that requirement is possible depending on the relationship between landlord and tenant. The higher down payment requirement is needed because tenant/landlord sales can fall under something known as the “identity of interest” rule, which requires a 15% down payment in cases where identity of interest applies. According to HUD 4000.1: “The maximum LTV percentage for Identity-of-Interest transactions on Principal | more...

January 7, 2016

FHA Loan Down Payment Requirements

By Joe Wallace

A recent question in our comments section asked if the down payment for an FHA home loan could be financed, or does it need to come “out-of-pocket”. This is an important factor for FHA single family home loans as there is what the FHA describes as a “minimum cash investment” or down payment required that a potential FHA home loan applicant will need to budget for. That down payment is, at the bare minimum, 3.5% of the “adjusted value” of the property. This is stated in HUD 4000.1 which says specifically: “Minimum Required Investment (MRI) refers to the Borrowers contribution in cash or its equivalent required by Section 203(b)(9) of the National Housing Act, which represents at least 3.5 percent of the Adjusted Value of the Property.” This must be | more...

January 7, 2016

FHA Loan Rules For Up Front Mortgage Insurance Premiums (UFMIP)

By Joe Wallace

When you buy a home with an FHA mortgage, there’s a requirement to pay an Up Front Mortgage Insurance Premium or UFMIP. This is not to be confused with Private Mortgage Insurance (PMI), and according to the FHA loan rules published in HUD 4000.1 most FHA loans require UFMIP. “Most FHA mortgage insurance programs require the payment of UFMIP, which may be financed into the Mortgage. The UFMIP is not considered when calculating the area-based Nationwide Mortgage Limits and LTV limits.” There are exceptions as found in HUD 4000.1: –Streamline Refinance and Simple Refinance Mortgages used to refinance a previous FHA-endorsed Mortgage on or before May 31, 2009 –Hawaiian Home Lands (Section 247) –Indian Lands (Section 248) How is the UFMIP calculated? “The UFMIP charged for all amortization terms is | more...

December 29, 2015

FHA Appraisals And The Cost Of Appraiser-Directed Repairs

By Joe Wallace

When it’s time for the FHA appraisal to happen, a borrower may be understandably nervous about the outcome of the appraisal. What happens if the appraiser finds areas that must be corrected or repaired? In many cases those corrections or repairs are directed as a condition of loan approval. In some instances (which would be handled on a case-by-case basis) the repairs may also require a compliance inspection which the borrower would have to pay for. When repairs or corrections are required, can the borrower request that the cost of making those repairs be added to the home loan? According to HUD 4000.1, “A Mortgagee may add repair costs to the sales price before calculating the mortgage amount if: –the repairs are required by the Appraiser to meet HUDs Minimum | more...