Articles Tagged With: FHA Loan Regulations

August 17, 2015

Qualifying Income For FHA Loans: Required Paperwork

We’ve written in recent weeks about the process of verifying income for an FHA home loan–the nature of your employment, additional income, and other financial factors that might contribute to your debt to income ratio are required to get scrutinized by the lender. The lender’s process for verifying income is spelled out in HUD 4155.1 Chapter One Section B, but there’s one part of the rules we haven’t covered in our other blog posts–the Verification of Deposit requirement. Chapter One Section B states that the lender must get documentation in writing for all “assets to be used in qualifying” for the FHA mortgage. Borrowers should expect to furnish verification in writing for the last three months worth of qualifying at a minimum. The borrower can provide either a written Verification | more...

August 17, 2015

FHA Mortgage Loan Interest Rates

By Joe Wallace

FHA home loans have a set of rules that govern interest rates. HUD 4155.1 explains that lenders must inform the borrower that FHA loan interest rates are negotiable–FHA does not set or regulate the rates, though it does require interest rates on FHA loans to be reasonable and “customary” compared to similar loans of its type. Chapter One of HUD 4155.1 states: “Under all currently active FHA single family mortgage insurance programs, the borrower and the lender negotiate the interest rate and any discount points.” We write regularly about FHA loan interest rate trends, and discuss something called the interest rate lock or interest rate lock-in, which is an agreement between the borrower and lender to commit to a mortgage rate for a specific period of time, to protect the | more...

August 4, 2015

FHA Loan Rules: Prohibited Payments And Loans

By Joe Wallace

There is a group of rules in HUD 4155.2 that describes payments and loans that are not permitted under the FHA single-family home loan program. Chapter Six, Section A has a description of the rules preventing the payment of “unearned fees”, below market-rate loans and other practices. For example, Chapter Six instructs the lender: “A lender is not permitted to pay any fee, compensation, or thing of value other than for services actually performed, including –kick back fees –fees above that actually paid for the service –finders fees or payments to any party referring the loan –payment to a party that has received, or will receive other payment for the service, unless it is a commission for selling a hazard insurance policy at the borrowers request, and –fees prohibited by | more...

August 3, 2015

FHA Reverse Mortgages and the FHA Back To Work Progam

By Joe Wallace

A reader got in touch with us recently about the FHA’s Back To Work program, which was announced in 2013 as a way for lenders to offer FHA mortgage loans to people who have had financial hardship in the past that might otherwise disqualify them from a home loan. Back To Work requires the borrower and lender to work together to document the causes of a pre-foreclosure sale, foreclosure, bankruptcy or other financial hardship to show that the issue was circumstantial and not representative of a borrower’s actual credit worthiness. The following guidance to lenders is from FHA Mortgagee Letter 13-26: “As a result of the recent recession many borrowers who experienced unemployment or other severe reductions in income, were unable to make their monthly mortgage payments, and ultimately lost | more...

When Is An FHA Loan Better Than A Conventional Loan?

July 22, 2015

FHA Streamline Refinance Loans

By Joe Wallace

If you have an existing FHA mortgage loan, you can apply for a refinance loan with no FHA required credit check or appraisal that results in a reduction in your monthly mortgage payment and/or interest rate in most cases. Called the FHA Streamline Refinance loan, these loans are only for existing FHA mortgages and offer no cash back to the borrower. FHA loan rules permit Streamline loans for those who have assumed FHA mortgages. According to the FHA official site (www.fha.gov), the FHA, “does not require an appraisal on a streamline refinance. These transactions can be made with or without an appraisal.” If there is a lender required appraisal, there may be corrections noted. According to FHA loan rules, these corrections may or may not need to be made as | more...

July 21, 2015

FHA Mortgage Loan Myths

By Joe Wallace

From time to time we get asked questions about FHA loans that reflect common misconceptions and myths about the program. Borrowers sometimes assume things about FHA single family home loans that aren’t true and it’s always a good idea to post some basic facts about the program from time to time to remind people what’s true and untrue about FHA mortgages. FHA loans, for example, aren’t limited to people on fixed incomes, or to those who must demonstrate a need for a non-conventional loan. FHA mortgages are open to all qualified applicants. Your FICO scores, job history, debt-to-income ratio and other financial qualifications are what determine your ability to get an FHA loan. There is no such thing as earning “too much income” for an FHA loan. There’s also no | more...

July 6, 2015

FHA Loan Interest Rates: The Rules For Lock-Ins

By Joe Wallace

Since we got a recent reader question about the rules and regulations about FHA loan interest rate locks, it seemed like a good time to review the FHA mortgage loan rules that govern them. At the time of this writing, the FHA and HUD are getting ready to transition to a new volume of rules covering FHA Single Family mortgage loan transactions, HUD 4001.1. Until the effective date in September 2015, the previously used references are valid. In general many of the single family loan rules may be the same, but there have been plenty of changes and updates to certain policies. The information below is still valid at the time of this writing. FHA loan rules state, “Under all currently active FHA single family mortgage insurance programs, the borrower | more...

June 26, 2015

FHA Loan Occupancy Rules

By Bruce Reichstein

Some borrowers get in touch with us with questions about FHA loan occupancy rules. One of the most common questions about FHA loan occupancy requirements involves those who must travel for business, or who find themselves having to relocate to another state because of job issues. Are borrowers who spend less time at home than a typical home owner considered in violation of FHA mortgage loan occupancy rules? For example, the homeowner who now works and lives in another state but commutes home for the weekend? FHA loan rules require a borrower to take ownership of the home at closing time and use the home as the primary residence for at least one year after the closing date. The borrower can’t vacate the home and rent it out during this | more...

What you should know about FHA 203(h) Loans For Disaster Victims

June 19, 2015

FHA Appraisals: Pass Or Fail?

By Joe Wallace

We field many questions about FHA home loans. Some of those questions have to do with a borrower’s appraisal process and whether certain conditions will cause the home to pass or fail an FHA appraisal. One variation on the types of questions we get concerning appraisals goes like this: “We are buying an a home that failed initial appraisal for small repairs. We made repairs to X, Y, and Z, but had to make the repairs to one area as a make-do or temporary fix. Will this pass the re-appraisal?” There are several issues at work here. The first is correcting a misconception about the appraisal process itself. When a home gets appraised for an FHA loan and corrections or repairs are listed which must be made as a condition | more...

June 2, 2015

FHA Occupancy Requirements

By Bruce Reichstein

One common type of question we are often asked about FHA loan occupancy rules involves situations where the borrower wants to purchase the home for his or her primary residence, but may be gone for extended periods of time because of job-related travel. Some borrowers want to know if the FHA loan rules on occupancy specify a number of calendar days per year of occupancy, or if a spouse and children can fulfill the borrower’s occupancy requirement in his/her absence. FHA loan rules found in HUD 4155.1 Chapter Four Section B simply states, “A principal residence is a property that will be occupied by the borrower for the majority of the calendar year.” It may be at the lender’s discretion to determine what the minimum occupancy for the borrower might | more...