Articles Tagged With: FHA Loan Rules

July 20, 2016

FHA Loans For Properties With PACE Assessments

The FHA has announced it will insure mortgages on qualifying homes that have PACE assessments. According to a press release on the FHA/HUD official site, the move was initiated to help encourage the use of clean energy. “In order to enable homeowners seeking clean energy technologies in their homes to leverage a range of financing options, the Federal Housing Administration (FHA) today announced guidance that makes clear the circumstances under which it will insure mortgages on properties that include Property Assessed Clean Energy (PACE) assessments. FHA will now approve purchase and refinance mortgage applications in states that treat PACE obligations as special assessments similar to property taxes.” That’s according to the July 19, 2016 press release, which explains that the reason PACE assessments have been troublesome in the past is | more...

July 19, 2016

FHA Loan Appraisal Rule Questions: A New Appraisal For A New Lender?

By Joe Wallace

A reader asks, “I am selling a home that has a septic system that does not meet local requirements but has been grandfathered. The septic system has been inspected and is in good working condition. The appraiser said that because the age of the septic (greater than 30 years) that it would need to be replaced.” “We bit the bullet and decided to replace the septic but under new requirements we are going to also have to replace our water well to fit the new septic on our property. The combined cost of replacing both system will approximately $15k. Should I ask the buyers to try a different lender or is this going to be an issue with all lenders/appraisers?” FHA loan rules governing this issue can be found on | more...

When Is An FHA Loan Better Than A Conventional Loan?

July 18, 2016

FHA Loan Rules On Seller Contributions Part Two

By Joe Wallace

In our last blog post, we answered a reader question about whether or not it’s permitted for the seller to contribute to the buyer’s closing costs and down payment. FHA loan rules do not permit anyone with a financial stake in the outcome to contribute towards a buyer’s down payment, but the rules DO permit the seller or other interested parties to contribute up to six percent of the sales price of the home. There’s a caveat to that listed in HUD 4000.1. Any contributions by the seller (or other interested parties) that exceeds the six percent limit is classified as an “inducement to purchase”. HUD 4000.1 explains what this means on page 221: “Inducements to Purchase refer to certain expenses paid by the seller and/or another Interested Party on | more...

July 14, 2016

FHA Loans and Bankruptcy

By Joe Wallace

A Few Words About Bankruptcy from FHA.com on Vimeo. Some borrowers want to know how credit issues such as foreclosure, Chapter 7 bankruptcy, and Chapter 13 bankruptcy can affect their ability to get an FHA mortgage loan or refinance loan. While those who have been through such proceedings may have a better understanding of what happens to your credit, many who are facing the option of filing bankruptcy, going into loan default and foreclosure, or even doing a deed-in-lieu of foreclosure may not understand what’s at stake. The video above explains some basics about bankruptcy. But how does bankruptcy in particular affect your ability to get an FHA loan? Like foreclosure and deed-in-lieu, filing bankruptcy usually requires a mandatory “seasoning period” or waiting time between the bankruptcy and the new | more...

July 12, 2016

More On FHA Loans And Down Payment Gift Funds

By Joe Wallace

In our last blog post we answered a reader question about whether it’s acceptable to receive gift funds from a family member for an FHA borrower’s down payment. FHA loan rules in HUD 4000.1 permit this, but the gift funds must come from approved sources. For example, no one with a financial stake in the outcome of the FHA loan can provide down payment gift funds for a borrower. And for down payment gift funds that do come from an approved source, the lender has specific instructions in HUD 4000.1 on how to proceed. For example, on page 219 of HUD 4000.1, we learn: “The Mortgagee must obtain a gift letter signed and dated by the donor and Borrower that includes the following: –the donors name, address, and telephone number; | more...

July 12, 2016

FHA Home Loans and Down Payment Funds

By Joe Wallace

A reader asks, “Can I use gift funds from a family member to make my down payment on an FHA mortgage?” This is a common question. FHA mortgages do require a lower down payment than many conventional loans, but a down payment is still required and must come from approved sources. Your lender will be required to verify the source of down payment funds, which must not come from uncollateralized loans, credit card cash advances, “payday loans”, etc. The loan rules that affect down payments are found in HUD 4000.1 in a variety of places but our answers are coming from page 213-214, which begins by stating the FHA definition of a down payment. The rulebook calls the down payment a “Minimum Required Investment” or MRI for short: “Minimum Required | more...

What happens to my FHA loan in a natural disaster?

July 11, 2016

Home Loan Debt Ratios Explained

By Joe Wallace

Analyzing Your Debt Ratio from FHA.com on Vimeo. When you fill out a home loan application, your lender will need employment and income documentation in order to process your loan. The lender is responsible for verifying that you have employment and that your income is sufficient to justify the loan. Not all income counts as “verifiable” by the lender; FHA loan rules have guidelines that include making sure the income is stable and likely to continue. Your lender may also have standards which must be met where income is concerned. There are many types of income, and not all of it comes from employment. Do you receive government assistance, get payments from a trust fund, are entitled to pay or benefits from a government agency related to disability, child support, | more...

July 8, 2016

FHA Loans Versus Conventional Loans

By Joe Wallace

Here’s the Scoop on Conventional Loans from FHA.com on Vimeo. What are the differences between FHA home loans and conventional loans? There are several, some features of mortgage loans can vary depending on the lender, and state law may also affect how your home loan is handled depending on circumstances, but there are a few very important general differences to keep in mind when comparing FHA loans to conventional loans. The first difference is the basic nature of the loan itself. Conventional loans are not backed by the government, unlike FHA home loans where the FHA guarantees a portion of the loan to make it more attractive to the lender to issue credit. In the event that a borrower defaults on an FHA loan, the lender and the FHA have | more...

July 7, 2016

FHA Loan Terms

By Joe Wallace

Understanding Your Loan Term from FHA.com on Vimeo. How long is an FHA mortgage? The answer to that question depends on a variety of factors including the initial choice of fixed or adjustable rate mortgage, whether you plan to pay off the loan early or not, whether you plan to refinance, etc. The typical length of a fixed rate, new purchase FHA mortgage can be 15 or 30 years. If you are refinancing, other variables may apply. Choosing a loan term depends on the individual borrower’s specific needs and goals. You may wish to apply for a 15-year mortgage if you are interested in saving money over the lifetime of the loan; borrowers who choose 15-year mortgages will make higher monthly payments than those who choose 30-year loans, but the | more...

July 5, 2016

FHA Loan Questions: No Money Down Loans

By Joe Wallace

A reader got in touch with us recently to ask about an important aspect of FHA mortgage loans-the down payment. “I would be a first time buyer, 3 years full time work history, only car payment bill which is paid on time with auto pay from bank. looking for a single home, I am single with credit score of 797. However I have no down payment…would I qualify for an FHA loan?” HUD 4000.1 addresses the rules and regulations for FHA home loans and refinance loans. It includes, on page 155, a definition of what the FHA considers a down payment (the “minimum required investment”) and the “Total Required Investment” needed from the borrower. From HUD 4000.1: “Total Required Investment refers to the amount the Borrower must contribute to the | more...