Articles Tagged With: FHA Loan Regulations

November 4, 2015

Mortgage Rate Trends: Moving Higher For A Second Day In A Row

Last week, mortgage rates moved higher on Thursday, then leveled out and didn’t lose any more ground on Friday. But Monday and Tuesday we’ve seen the rates move to their highest numbers in four weeks or so, pushing best execution rates for 30-year fixed rate conventional mortgages farther away from that 3.75% zone we saw last month. 30-year fixed rate conventional mortgages have moved recently into a range between 3.875% and 4.0%; if upward pressure continues we could see 4.0% (best execution) become far more prevalent. At the time of this writing, FHA mortgage rates are still at their 3.5% best execution comfort zone but this time around that might not last as long as the previous FHA mortgage loan rate comfort zone–we’re likely to see rates break out into | more...

November 3, 2015

FHA EEM “Stretch Ratios” For Existing Construction Loans

By Joe Wallace

In our last blog post we discussed a new partnership between the FHA/HUD and the Department of Energy which is allowing eligible borrowers to get access to increased “stretch ratios’ under FHA energy efficient mortgages in 2016. According to an FHA press release, “FHAs existing EEH policy allows stretch ratios for homes that are built or retrofitted to the 2000 International Energy Conservation Code (IECC). For standard FHA loans, debt-to-income (DTI) ratios are limited to 31 percent (front-end) and 43 percent (back-end).” How do these ratios “stretch”? According to the press release, “Under FHA policy for the EEH mortgage, these DTI ratios can be increased to 33 percent and 45 percentrespectively. To increase opportunities for homeowners to achieve and benefit from an energy efficient home, FHA is adding a new | more...

What if my home was damaged in a natural disaster?

October 30, 2015

HUD 4000.1 On FHA New Construction Loans

By Joe Wallace

When you review your options for an FHA home loan, you’ll run across loan information about FHA mortgages for “existing construction” loans and “new construction” or “under construction” loans. The requirements for new construction versus existing construction may differ due to a variety of reasons including the fact that the borrower can’t always take possession of a new or under construction home right away once the loan has closed. FHA loan rules for existing construction include appraisal requirements that may differ (procedurally) from new construction loans. For these reasons, the FHA has specifically defined what constitutes a new, proposed, or under construction property versus one that is “existing construction”. Existing construction is more or less a home that has already had an owner and has been in existence for a | more...

When Is An FHA Loan Better Than A Conventional Loan?

October 27, 2015

FHA HECM Loans And Mandatory Counseling

By Joe Wallace

FHA HECM loans–home equity conversion mortgages, sometimes known as “reverse mortgages”–come with a requirement for all borrowers to be obligated on the FHA HECM to go through HECM loan counseling. This is not a requirement for other types of FHA mortgages, which leads some to wonder why FHA HECMs have this feature. Why do the borrowers have to complete FHA required counseling sessions as a condition of the loan? There are many reasons. Since HECM loans feature no monthly payments, cash back to the borrower, and specific requirements for that cash back, counseling is necessary for the applicants to know exactly what they can and cannot get with their HECM loans. This FHA loan program has changed a great deal in the last two years, and the terms and | more...

October 26, 2015

FHA Loan Rules For Appraisals Under HUD 4000.1

By Joe Wallace

When the FHA and HUD published the new single family home loan rules found in HUD 4000.1, the agencies did not provide a list of every single rule or portion of the rules affected by changes in HUD 4000.1. HUD specifically stated at publication time that it’s the lender’s responsibility to be familiar with the rules as they are today. We’ve been discussing the new rules with that notion in mind. One important area of the new rulebook that’s important to be familiar with? FHA appraisal requirements, which go beyond minimum property standards and other rules. FHA loan rules spell out what is expected of the lender during the appraisal process, starting with this statement found in Section II Part A under “Loan Origination and Processing”: “The Mortgagee must order | more...

October 23, 2015

FHA Loan Income Verification Rules: Seasonal Employment

By Joe Wallace

We’ve been examining FHA loan rules for income verification including requirements for full-time and part-time employment. But some FHA loan applicants have unique jobs that keep them employed on a seasonal basis. Does the FHA loan rulebook, HUD 4000.1, have provisions for these types of soon-to-be homeowners, too? According to the rules, participating FHA lenders may verify seasonal employment if it meets certain FHA standards. HUD 4000.1, Section II Part A includes the following, starting with a definition of “seasonal employment” as acceptable to the FHA: “Seasonal Employment refers to employment that is not year round, regardless of the number of hours per week the Borrower works on the job.” The FHA instructs the lender, “The Mortgagee may consider Employment Income from Seasonal Employment as Effective Income if the Borrower | more...

October 22, 2015

FHA Loan Rules For Income: Part Time Employment

By Joe Wallace

The new FHA single family home loan program policy handbook, HUD 4000.1, has a section on income verification rules that includes instructions to the lender on how to include part-time income in the FHA loan applicant’s debt-to-income ratio. HUD 4000.1 makes an important distinction between full-time income and part-time earnings, and borrowers need to understand how FHA loan rules make the distinction. When it comes to full-time work, HUD 4000.1 Part II Section A states: “Primary Employment is the Borrowers principal employment, unless the income falls within a specific category identified below. Primary employment is generally full-time employment and may be either salaried or hourly.” For part-time income, the rules say: “Part-Time Employment refers to employment that is not the Borrowers primary employment and is generally performed for less than | more...

October 21, 2015

FHA Loans, HUD 4000.1, and HUD/FHA Mortgagee Letters

By Joe Wallace

We’ve written a great deal lately about the new FHA Single Family Home Loan policy handbook, HUD 4000.1. Since this was launched, it became the comprehensive reference for FHA loan policy for single family mortgages, refinances, etc. The old FHA loan rulebooks including HUD 4155.1 and HUD 4155.2 are still discoverable on the Internet and on the FHA/HUD official site, but they are included there for reference only and should not be taken as current FHA single family loan policy. But even with that in mind, one FHA/HUD practice that was active under the era of the previous policies and handbooks still remains–the FHA and HUD are still updating single family home loan policy (and others as appropriate) with FHA Mortgagee Letters (ML). While the FHA/HUD did publish a list | more...

October 20, 2015

Mortgage Rate Trends: Holding Steady For Now

By Joe Wallace

Monday saw mortgage loan interest rates hold steady after the weekend, keeping things more or less where they’ve been since Thursday. That keeps 30-year fixed rate conventional mortgages, best execution, in the 3.75% to 3.875% range we’ve been talking about for three days now. At the time of this writing, FHA mortgage loan rates are holding steady at 3.5% best execution, and the longer they stay the more it seems this is the new comfort zone (again, best execution) for FHA mortgage loan interest rates. Keep in mind that FHA rates may vary more among participating lenders, so it is a very good idea to shop around for the most competitive rates. And as always, “best execution” refers to situations where the loan applicant is extremely well-qualified, with outstanding FICO | more...

October 15, 2015

FHA Loans, Early Payoff, And Prohibited Fees: HUD 4000.1

By Joe Wallace

With the publication of HUD 4000.1, existing FHA loan rules have been restated, updated, modified, or reprinted. In some cases nothing has changed, in other cases there have been major or minor alterations to the language, terms or conditions of these FHA loan rules. We’re examining many sections of the new rulebook and discussing common issues that may be affected by those changes, even if in some cases the rules haven’t changed. Knowing what’s in HUD 4000.1 as opposed to the old FHA single family home loan rules found in HUD 4155.1 and 4155.2 is important as HUD 4000.1 is THE definitive source for the program now. One big question some borrowers have about FHA loans is what happens if an early payoff is chosen. Can the lender penalize or | more...