Articles Tagged With: FHA Loan Requirements

February 1, 2016

FHA Mortgage Loan Rules In HUD 4000.1: Inducements To Purchase

There are many rules for FHA home loans that govern what buyers and sellers can and cannot do. For example, the borrower must make a minimum down payment, and the source funds from that down payment cannot come from credit card cash advances or payday loans. But there are rules for the seller (and interested third parties) as well. Did you know FHA loan rules govern what a seller can and cannot contribute towards the purchase of the property? In some cases there are contributions that are permitted but only within certain limits. From HUD 4000.1, we learn the following: “Interested Parties may contribute up to 6 percent of the sales price toward the Borrowers origination fees, other closing costs and discount points. The 6 percent limit also includes: –Interested | 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 20, 2016

Proper Use Of The FHA Logo–Why You Need To Know

By Joe Wallace

The FHA and HUD have specific rules about how the FHA logo may be used by lenders and advertisers. To the typical loan applicant, this may seem to be completely irrelevant. The initial reaction to this information is likely to be, “So what?”. But if you receive third-party advertising, or see ads with the FHA logo used improperly, it may be an indication that there’s a potential scam in progress. Not all improper use of the FHA logo is evidence of fraudulent activity–sometimes ignorance of the FHA regulations that cover use of the government’s logos is a factor. But other times there may be a deliberate attempt to mislead a potential customer into thinking that the advertisement or offer is government-approved, government-sponsored, or government initiated. What do FHA loan rules | more...

January 19, 2016

FHA Loan Questions: Tax Service Fees

By Joe Wallace

A reader got in touch with us recently to ask a question about the allowable fees and expenses associated with FHA new purchase home loans (also known as “forward mortgages”). The gist of the question–can an FHA loan applicant be charged a tax service fee as part of closing costs or other loan-related fees and expenses? The answer to this question and others like it can be found in HUD 4000.1, in the portion of the rule book titled Part III Servicing And Loss Mitigation. This section includes a list of prohibited fees and expenses–costs that cannot be charged to the borrower. That list includes the following information: “The Mortgagee must not charge the Borrower for the following services: –costs of telephone calls, telegrams, personal visits with the Borrower, certified | 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 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 6, 2016

HUD 4000.1 On Self Employment Income For FHA Home Loans

By Joe Wallace

HUD 4000.1 has rules that govern the procedures a participating FHA lender must use to verify the income of a self employed borrower or owner of a family business. The fact that an FHA mortgage loan applicant is self-employed is not a barrier to loan approval, but there are different requirements for those who own a family business or who are considered self employed. HUD 4000.1 has instructions for the lender in these cases, beginning with a definition of who is affected by these rules: “Self-Employment Income refers to income generated by a business in which the Borrower has a 25 percent or greater ownership interest. There are four basic types of business structures. They include: –sole proprietorships; –corporations; –limited liability or S corporations; and –partnerships.” How does a lender | more...

January 6, 2016

FHA Home Loan Rules For Employment: Seasonal Work, Family Businesses

By Joe Wallace

In our last blog post we discussed FHA loan rules for employment/income verification for salary, hourly, and part time work. FHA loan rules published in HUD 4000.1 also cover other aspects of income from sources such as family businesses and seasonal work. It might be easy to assume that because a borrower does work that does not last the entire year due to its seasonal nature that a lender might dismiss it–but FHA loan rules anticipate this type of income too, and have specific requirements for lenders to use when considering it for the purposes of a debt-to-income ratio calculation for an FHA mortgage. For seasonal work, FHA loan rules in HUD 4000.1 define the income as follows: “Seasonal Employment refers to employment that is not year round, regardless of | more...

January 5, 2016

Mortgage Rate Trends: 14-Day Lows

By Joe Wallace

On Monday we reported that mortgage loan interest rates had moved slightly higher to close out 2015–rates for 30-year fixed rate conventional mortgages ended the year in a range between 4.125% and 4.25% (best execution) and 2015 rates for FHA mortgages closed out at a best execution 3.75%. On the first day back from the New Year’s holiday, mortgage rates lost no time regaining some of that lost ground. Mortgage rates for 30-year fixed rate conventional home loans are now in a range between 4.0% and 4.25% (best execution). FHA mortgage loan rates did not move out of their best execution comfort zone of 3.75%, though if there is sustained improvement we could see rates for FHA mortgages shift into a range rates with the current best execution rate at | more...

December 28, 2015

HUD Announces Settlement With Real Estate Agency Charged With Fair Housing Act Violations

By Joe Wallace

Often when a violation of the Fair Housing Act occurs, it’s up to the victim to report the incident in order for the situation to be fixed. Those who fail to report such violations may not only cheat themselves out of a fair deal, but also allow such violations to continue to occur. Consider a recent settlement by HUD, which recently approved a pair of “Conciliation Agreements” with Delap Realty, LLC, of Northampton, Massachusetts, resolving allegations mentioned in an FHA/HUD press release that, “…the company and its agents violated the Fair Housing Act by discouraging families with children from renting over concerns the units might contain lead-based paint hazards.” Under the Fair Housing Act, it is illegal to deny or limit housing because a family has children. It’s also not | more...