Articles Tagged With: FHA Loan Requirements

August 10, 2015

What Affects My FHA Home Loan Amount and Down Payment?

FHA home loans offer a potential maximum financing of 96.5%, with a required minimum down payment (also known as a minimum investment) of 3.5%. But not all borrowers are eligible for the maximum financing amount. Some borrowers may be required to put more money down depending on circumstances. What are these circumstances? The most obvious one hinges on a borrower’s credit history and FICO score. Borrowers who have “marginal” FICO scores or who don’t otherwise meet the lender’s minimum standards for the loan may be required to put more down as a “compensating factor”. But credit isn’t the only thing that can affect the FHA loan’s maximum financing amount on a given transaction. HUD 4155.1 Chapter Two Section B has the guidelines for calculating the maximum financing amount permitted in | more...

August 8, 2015

FHA Mortgage Loan Interest Rate Trends: Back And Forth

By Joe Wallace

Mortgage loan rates had a tug-of-war this week. On Monday rates pushed back into the high three percent range (best execution) for 30-year fixed rate conventional mortgages, but after that rates moved higher due to comments from the Fed on interest rates, and kept moving higher the next day as scheduled jobs data release time approached. But once that jobs report came out, there was already one day of recovery, and Friday saw reports of a rally by day’s end, not higher numbers–the final count for the week was three days of improvement against two days in a row for some upward movement. But we’re still seeing rates hovering at or near the high three percent zone. 30-year fixed rate conventional mortgage loans are, best execution, sometimes dipping back into | more...

August 7, 2015

FHA Refinance Loan Options

By Joe Wallace

If you are considering a refinance loan, there are many options under the FHA single-family home loan refinance program. You can refinance from a conventional or non-FHA mortgage into an FHA loan, get out of a variable or adjustable rate mortgage into a fixed rate loan, and even refinance with added funds for approved energy-efficient features or upgrades. FHA home loans allow non-FHA borrowers to refinance using cash-out or no-cash-out refinancing. These types of refinance loans require a new appraisal and credit check. Borrowers should know that even if it’s only been a short amount of time since loan closing, any appraisal used on a home where the loan has closed cannot be re-used for the purpose of a new loan. Borrowers who want to refinance early should expect to | more...

August 7, 2015

FHA Loan Fees Which Are Not Considered Closing Costs

By Joe Wallace

There are a variety of fees and expenses associated with FHA home loans; typical costs that the borrower should be saving up for during the planning stages of a new home loan. The FHA requires a minimum 3.5% down payment, for example, and that down payment is considered separate from the borrower’s closing costs. And then there are expenses which are not considered part of the down payment OR closing costs. The FHA loan rules found in HUD 4155.2 at the time of this writing explain these costs. Discount points (a prepaid amount designed to lower the interest interest rate) are included in such expenses–not a down payment, not a closing cost. Chapter Six of HUD 4155.2 describes discount points as follows: “Discount points charged by the lender on a | 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 4, 2015

HUD Announces Multi-Million Dollar Anti-Discrimination Initiative

By Joe Wallace

The Department of Housing and Urban Development have announced a large amount of funding that has become available to fight housing discrimination. According to HUDNo. 15-097, HUD, ” …is making $39.2 million available to fight housing discrimination under HUD’s 2015 Fair Housing Initiatives Program(FHIP) Notice of Funding Availability (NOFA). This year’s funding notice also creates six new types of grants that support fair housing capacity building, education and outreach activities, and testing in rental and sales transactions.” Fair Housing laws affect all types of housing transactions including FHA mortgages. The $39 million is being made available to “support organizations interested in the enforcement of fair housing laws and policies as well as educating the public, housing providers, and local governments about their rights and responsibilities under the Fair Housing Act” | 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...

August 3, 2015

Applying For An FHA Loan

By Joe Wallace

When you apply for an FHA home loan, what is your lender going to require of you besides the information you put on the application itself? Some requirements may vary from lender to lender, but in general you will need to be prepared to furnish bank statements, tax data, and information on any additional sources of income you want to be counted along with your primary earnings. The lender will ask for tax data for a variety of reasons, but the tax data is especially important if you are an independent contractor, freelancer, or small business owner. Your bank statements can also be important–the lender may require two months or more in order to get a more complete picture of your spending habits. Your income needs to be verifiable–any part | more...

July 31, 2015

FHA Loans and “Pre-Payment”

By Joe Wallace

One of the important selling points of an FHA mortgage loan is the basic differences FHA mortgages have from conventional loans; the lower down payment, more forgiving credit requirements, and a rule that a borrower is able to freely dispose of the property in any way he or she sees fit once the deal is closed and the borrower has taken up residence in the home. But there’s another important difference between some conventional mortgages and FHA loans. Did you know that under the FHA loan program you cannot be penalized or charged for early payoff of the loan? HUD 4155.2 Chapter Three has a section that governs what the FHA terms, “pre-payment”. It says that a borrower may pre-pay an FHA mortgage “in whole or in part”. It also | more...

July 30, 2015

FHA Loans, Escrow Accounts, And Real Estate Taxes

By Joe Wallace

There are many FHA loan questions regarding the use of escrow accounts, especially when it comes to new purchase loans. Applicants sometimes get confused when the lender requires an escrow account. Since FHA loan rules do not require the use of escrow, some borrowers may wrongfully believe they don’t have to use them, period. But your lender may require the use of escrow and this is fully permitted under the FHA loan program. In fact, FHA loan rules anticipate some lenders requiring escrow for a variety of loan transactions; one use of escrow is to collect and pay property taxes. According to the FHA/HUD official site, “It is the lender’s decision whether the borrower must maintain an escrow account for the purpose of paying taxes and other items. The HUD | more...