Articles Tagged With: FHA Loan Rules

June 13, 2023

FHA Loan Expenses That Can Be Paid By The Seller

One common question about FHA loans involves whether the seller can pay some of the expenses of the borrower’s FHA loan as a motivation to purchase. Can the seller pay closing costs, offer to supply appliances, or add other incentives to the sales agreement? According to FHA loan rules in the FHA Lender’s Handbook, the answer is yes–but with limitations. According to HUD, “Certain expenses” paid by the seller (or other “interested third parties”) on behalf of the borrower are considered “inducements to purchase” and result in a dollar-for-dollar reduction to the lesser of the sales price or appraised value of the property before applying the appropriate loan-to-value (LTV) factor. That said, sellers can contribute up to six percent of the sales price without a penalty. They can also offer | more...

June 9, 2023

Should You Apply For An FHA Adjustable-Rate Mortgage?

By Joe Wallace

Borrowers considering their FHA mortgage loan options might wonder about an FHA Adjustable Rate Mortgage or FHA ARM loan option instead of an FHA fixed-rate home loan. It is a great idea to compare the features of both types of loan side-by-side to see which might make sense for you. The motivation to do this now has much to do with the interest rate environment we are still dealing with in 2023–in spite of hopes of improvement as the summer wears on. Why would an FHA ARM loan make more sense for some borrowers? Because an ARM offers a lower introductory or teaser interest rate. You may have the option to keep that rate for a full year or as long as ten years. Much will depend on the type | more...

June 6, 2023

Alimony and Child Support: FHA Loan Rules

By Joe Wallace

FHA loan rules permit alimony and child support to be counted as verifiable income for borrowers who receive it and who choose to list it in their income sources. Like all other sources of income, the rules in HUD 4000.1 state the lender is responsible for verifying the income through documentation such as court agreements or other paperwork. Receiving this income can help you qualify for a home loan, but what about FHA loan applicants responsible for paying alimony and child support? Does this count against a borrower’s debt ratio? HUD 4000.1 says yes, lenders must count alimony and child support payments as recurring debts. The FHA loan rule book gives the following instructions to the lender: “For Alimony, if the Borrowers income was not reduced by the amount of | more...

June 5, 2023

HUD Takes Action To End Appraisal Bias

By Joe Wallace

The Department of Housing and Urban Development is acting against bias in the appraisal system. “Owning a home provides a path to the American dream. Yet, that dream has been deferred for Black and Brown people, as we have consistently had our homes under-valued,” according to HUD Secretary Marcia L. Fudge, quoted in the 1 June 2023 HUD press release on these appraisal reforms. Fudge adds, “Having your home undervalued is bigger than just a number on a page. It can be the difference between getting a loan and not – between having enough money for retirement or not.” According to Fudge, the PAVE Task Force is a project meant to focus on “taking bold action to address appraisal bias – and renewing our commitment to doing everything in our | more...

May 23, 2023

FHA Loans: Existing Construction, New Construction

By Joe Wallace

Which type of property should you buy? A brand-new home, a house that has been on the market for some time, or a house you propose to build from the ground up using an FHA One-Time Close construction loan? This is a question raised by a Yahoo! Finance article from May 20, 2023. That article observed that in the current mortgage market, some borrowers may be getting good deals by purchasing recently built homes; homes that have never been owner by another person. “While the average mortgage rate remains stuck above 6%, buyers of new homes are getting a much better deal,with borrowers buying homes far below the mortgage rate reported at the time this article was written; 6.5%. According to that article published by Yahoo! Finance, house hunters looking | more...

May 18, 2023

Last Days To Apply For FHA Loan Forbearance Due To COVID-19

By Joe Wallace

There is not much time left to apply for FHA loan forbearance because of COVID-19-related financial difficulties. Last month, the FHA and HUD published a Mortgagee Letter announcing a final deadline for COVID-19-related FHA home loan forbearance. That final deadline of May 31, 2023, for both FHA purchase loans and FHA Home Equity Conversion Mortgages, also known as FHA HECMs. There is not much time left to apply for FHA loan forbearance, if you have not started an application or discussions with your lender, now is the time to get started. Contact your lender to discuss your options; this mortgage relief requires the participation of your financial institution. COVID-Related FHA Loan Relief: A Timeline On April 1, 2020, HUD announced a new program called Forbearance for Borrowers Affected by the | more...

May 9, 2023

FHA 203(k) Rehab Loan Standards

By Bruce Reichstein

FHA 203(k) rehab loan standards include a list of things that can be done with a 203(k) rehab loan and a list of ineligible projects. Borrowers should know what is allowed and what is not with these FHA rehab loans. FHA Loan Rules For Renovation, Improvements, Add-Ons In general, FHA home loan programs such as the Energy Efficient Mortgage (which can be used in conjunction with an FHA 203(k) loan) and the FHA 203(k) and FHA 203(h) rehab loan feature a list of approved uses for loan proceeds. There’s a prohibition against cash back to the borrower on these transactions except where it is needed to pay for materials and labor; even then a borrower cannot “profit” from the loan by taking excess funds in cash. FHA loan rules require | more...

May 8, 2023

Is It Smart To Apply For A Home Loan Now?

By Joe Wallace

Is now the right time to apply for a home loan? Some say no, and others may not have a choice but to start looking for a new place to live due to circumstances (new job, change in family size, etc.) and can’t afford to wait out the current market. What are these borrowers to do in an era of interest rate volatility? Mortgage Loan Interest Rates Aren’t Stabilizing Yet At press time, the financial blog headlines talk a lot about mortgage rate volatility. When rates are subject to change like this, it’s tough to predict how things might go week to week or day. A stable mortgage market is more predictable than what we’re experiencing now. After 2022, it’s not shocking that the market must experience a degree of | more...

May 5, 2023

FHA Loans: Terms and Definitions You Should Know

By Joe Wallace

Are you considering buying a home with an FHA mortgage or refinancing a current mortgage loan? If you are new to either process or if it’s been a long time since you purchased your first home, there may be terms and definitions you need to re-familiarize yourself with. Here are some basics you should know: FHA single-family home loans are what most borrowers are after when they want an FHA mortgage to purchase a home, townhome, condo, manufactured home, etc. The idea is basically that the home purchased with the FHA loan is an owner-occupied property that is primarily residential in nature and where at least one of the borrowers or co-borrowers will live once the loan is closed. Occupancy requirements refer to the FHA policy that single-family homes must | more...

May 4, 2023

Interest Rate Issues And Your FHA Mortgage

By Joe Wallace

How high can mortgage loan interest rates go? The highest mortgage rate in American history may have been recorded at a whopping 18.45%. That rate was for a 30-year fixed-rate conventional mortgage in 1981. And what about the lowest mortgage loan interest rate? That may have been the rate we saw in December 2020; 2.68% for a 30-year fixed-rate mortgage, according to Freddie Mac. What influences mortgage loan interest rates? Not the FHA or HUD; these two agencies do not set or regulate FHA home loan interest rates. But other things do affect the rates, indirectly or not: Fed actions to shore up the U.S. economy (more indirectly), investor reaction to those efforts (more directly than Fed acts), whether or not the economy is growing or shrinking, etc. Some Shouldn’t | more...