Articles Tagged With: FHA Loan Rules

December 21, 2016

FHA Anti-Flipping Rules

In general, FHA requirements and regulations discourage the practice of flipping, which is defined as buying a home (distressed or otherwise) and quickly reselling it at an inflated price. According to the FHA loan single-family rule book, “The eligibility of a Property for a Mortgage insured by FHA is determined by the time that has elapsed between the date the seller has acquired title to the Property and the date of execution of the sales contract that will result in the FHA-insured Mortgage.” HUD 4000.1 defines the sellers date of acquisition as, “the date the seller acquired legal ownership of that Property. FHA defines the resale date as the date of execution of the sales contract by all parties intending to finance the Property with an FHA-insured Mortgage”. Homes sold | more...

December 20, 2016

Deferred Obligations and FHA Loans

By Joe Wallace

A reader asks, “How do you calculate monthly payments for estimated payment to begin when schooling is complete?” With student loans, there are two types of payments, one of which may apply in this case. Ongoing payments and deferred payments have different requirements. It’s likely safe to assume that this reader question refers to how a lender is to process student loan information as part of the applicant’s debt-to-income ratio. FHA loan rules in HUD 4000.1 include instructions to the lender for processing student loan debt information both as a “deferred obligation” that has not come due yet, and as an ongoing payment where applicable. HUD 4000.1 instructs the lender to use the actual amount of the student loan payment wherever possible, but in cases where the loan is deferred | more...

December 16, 2016

HUD Adds New Housing Counseling Requirements

By Joe Wallace

Housing counseling is an important resource for those who want to apply for a mortgage loan. When borrowers decide to start on the journey to home ownership, there can be many areas they are unsure about. That’s one reason why it can be helpful to contact the FHA directly at their toll-free number (1-800 CALL FHA) to request a referral to a local, HUD-approved housing counselor to get expert advice and help in areas related to budgeting for a mortgage payment, credit issues, the home loan process and more. In some cases, certain types of counseling are actually required as a condition of FHA loan approval; this is true for FHA Home Equity Conversion Mortgages (HECM), where all borrowers must attend counseling to insure they understand the nature of HECM | more...

December 15, 2016

FHA Loan Basics: A Reader Question

By Joe Wallace

A reader asks, “I really don’t understand why i have to pay PMI and MIP. I had credit problems a bankruptcy in 2013 , it was recorded and its been almost 4 years and my score is 709 that the middle score i have hardly no debts, 6% of income. I was told I have to pay the MIP up front of 1.75% and also 240 PMI monthly with mortgage. That’s a little too much, is there a way out of this? I also did not want taxes and insurance added, I’m putting 3.5 percent down. My loan officer said I had to pay the insurance and add taxes to my loan.” It’s not entirely clear from this reader question whether the loan is an FHA mortgage or not, but | more...

December 13, 2016

FHA Loan Rules On Property Acceptability

By Joe Wallace

If you want to purchase a home with an FHA loan in 2017, the property you decide to buy must pass an FHA appraisal process designed to insure the property physically meets certain minimum standards. The foundation, the roof, the sewage and electrical systems must all meet FHA requirements, plus state/local building code, etc. But the FHA loan rulebook, HUD 4000.1, also spells out some basic property acceptability criteria. For example, the rule book begins by stating that FHA loans are only for properties located within the continental U.S. or its territories. “The Property must be located within the U.S., Puerto Rico, Guam, the Virgin Islands, the Commonwealth of the Northern Mariana Islands, or American Samoa”. HUD 4000.1 has restrictions on properties located in certain types of flood zones, coastal | more...

December 12, 2016

FHA Loan Appraisal Issues: Water and Septic

By Joe Wallace

A reader asks, “Im selling a house with a septic tank. The home was renovated and an addition was added, and the septic tank was opened, inspected, drainedor whatever they do to septic tanks. Since there was an addition, we had to get an inspection. A year ago the county ran sewers in the subdivision and now theres a place to connect mine if I decide to do so. But the water bills my neighbors who connected to the sewer get now are close to triple what mine are! Would FHA really make a loan contingent upon” (hooking up to the local utility)? There is no simple answer to questions like these because FHA requirements aren’t the only ones that need to be met; state and local ordinances, building codes, | more...

December 7, 2016

FHA Loan Credit Issues: A Reader Question

By Joe Wallace

Credit issues-an important area to consider when planning for a new FHA mortgage. One reader asks, “I am in the process of settling with a credit card lender from an account that went bad several years ago. Basically I fell on hard times and stop paying it. I owe about 10k.” “However I with my lawyer they have agreed to accept 3400. My understanding is this will reflect on my credit is that this will report on my credit report as settled for less than full balance. How will this affect my chances of buying a home with an FHA loan? Note this credit card is from about 6 years ago. I have many other credit cards probably 7 or 8 that I have applied for since this default and | more...

How much can I borrow with an FHA refinance loan?

December 6, 2016

FHA Loan Limits Rise in 2017: How Much?

By Joe Wallace

In a recent blog post, we discussed the news of FHA loan limits increasing in 2017. Every year the FHA/HUD official site releases the data on FHA loan guaranty limits for the new year. These limits can be affected by legislation, housing market conditions, and other factors so an annual update (at the very least) is required to establish limits for the new year. How much with FHA loan limits increase in 2017? The FHA issued a mortgagee letter (2016-2017) that announces both the new limits for low-cost areas and high cost areas alike. According to the FHA official site, the low-cost area FHA mortgage loan guaranty limits for 2017 are set as follows as described in the mortgagee letter: “The FHA national low cost area mortgage limits, which are | more...

December 6, 2016

FHA Appraisals: A Reader Question

By Joe Wallace

“I am getting ready to purchase a home. It has been under contract for 6 weeks. 1.5 weeks out, ‘…there is concern that there may be moisture. Please have a specialist determine if there is no moisture or mold present’. My contractor that will do renovations says there is no mold present; however, ‘his word does not count because he is not a mold specialist’. Now I am 3 days from closing and a mold remediation person is $900 and a week turnaround time. What are my options?” FHA appraisals are an important part of the home buying process, and where corrections are required by the FHA appraiser, those corrections are usually ordered as a condition of loan approval. The reader question doesn’t specify if this was a correction or | more...

November 23, 2016

FHA 203(k) Loan Rules: A Reader Question

By Joe Wallace

A reader asks, “I’m attempting to buy a mixed use residential/commercial property through an FHA 203(k) loan, and the building meets the size requirements. The commercial section is drywalled and spackled with plywood flooring. The residential section is in compliance, but the FHA appraiser listed a bunch of things needed in the commercial section, like a washroom, finished flooring, and baseboard.” “Where did they come up with this list? Is this a requirement for getting the loan? Ill have to make the seller do these things before the sale since I cant do any 203k work on the commercial section, so how do I know what is expected in the commercial section? The HUD doc says nothing on this.” FHA 203(k) loans are also known as “fixer-upper” loans, but even | more...