Articles Tagged With: FHA Loan Rules

What happens to my FHA loan in a natural disaster?

January 11, 2016

FHA Home Loan Appraisals: Some Basics

In 2015, the FHA and HUD published HUD 4000.1, a new and comprehensive rulebook for FHA single family mortgage loans. This new set of rules updated, revised, expanded, and restated FHA single family mortgage loan policies. One area critical to the entire home buying process with an FHA mortgage is the appraisal process, so we are examining this process as described in HUD 4000.1 to give you a better idea of FHA/HUD policy as it now stands with the new rules. HUD 4000.1 begins by defining its terms. The rules say the FHA appraiser is responsible for insuring a home to be purchased or refinanced (where an appraisal is required to refinance) meets FHA/HUD standards–Minimum Property Requirements (MPRs) and Minimum Property Standards (MPS). “The Appraiser must observe, analyze and report | 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 7, 2016

FHA Loan Down Payment Requirements

By Joe Wallace

A recent question in our comments section asked if the down payment for an FHA home loan could be financed, or does it need to come “out-of-pocket”. This is an important factor for FHA single family home loans as there is what the FHA describes as a “minimum cash investment” or down payment required that a potential FHA home loan applicant will need to budget for. That down payment is, at the bare minimum, 3.5% of the “adjusted value” of the property. This is stated in HUD 4000.1 which says specifically: “Minimum Required Investment (MRI) refers to the Borrowers contribution in cash or its equivalent required by Section 203(b)(9) of the National Housing Act, which represents at least 3.5 percent of the Adjusted Value of the Property.” This must be | more...

January 7, 2016

FHA Loan Rules For Up Front Mortgage Insurance Premiums (UFMIP)

By Joe Wallace

When you buy a home with an FHA mortgage, there’s a requirement to pay an Up Front Mortgage Insurance Premium or UFMIP. This is not to be confused with Private Mortgage Insurance (PMI), and according to the FHA loan rules published in HUD 4000.1 most FHA loans require UFMIP. “Most FHA mortgage insurance programs require the payment of UFMIP, which may be financed into the Mortgage. The UFMIP is not considered when calculating the area-based Nationwide Mortgage Limits and LTV limits.” There are exceptions as found in HUD 4000.1: –Streamline Refinance and Simple Refinance Mortgages used to refinance a previous FHA-endorsed Mortgage on or before May 31, 2009 –Hawaiian Home Lands (Section 247) –Indian Lands (Section 248) How is the UFMIP calculated? “The UFMIP charged for all amortization terms is | 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...

December 30, 2015

FHA Appraisal Fees, Appraiser Integrity Rules In HUD 4000.1

By Joe Wallace

The FHA appraisal process is very important–it helps establish the fair market value of the home and insures that the home meets minimum standards. Just because a home passes the FHA appraisal process does not mean it is defect-free. It’s the borrower’s responsibility is to hire an independent home inspector for verification of the home’s condition in a more complete way than the appraisal. FHA loan rules published in HUD 4000.1 establish some guidelines and ground rules for appraisals, lenders, and others who might be in the home loan “food chain”. Did you know that the FHA does NOT set appraisal fees? That’s just one important aspect of the rules for this process found in HUD 4000.1. “The Appraiser and the Mortgagee or Mortgagee-designated third party will negotiate the appraisal | more...

December 29, 2015

Mortgage Rate Trends: Holiday Calm

By Joe Wallace

Mortgage loan rates are being reported in “holiday mode” at present, so while there was some very minor adjustments for the better in rates, we’re not likely to see much in the way of dramatic movement this week barring some form of breaking news that causes a significant investor reaction. As we move from one short week to another before the new year, there is lighter activity in the financial sector, things slow down, and investor behavior tends to reflect this winding-down time, so it’s no surprise that the word “float” is being used a lot when it comes to advising borrowers on getting a mortgage rate lock or not this week. Many industry pros feel floating carries a smaller degree of risk than it did previously due to the | more...

December 28, 2015

Planning For An FHA Refinance In 2016?

By Joe Wallace

Are you considering refinancing your home in 2016? There are several things you’ll want to consider planning, budgeting, or saving for in the new year. Having plans to examine these important issues connected to an FHA refinance loan can help you get organized and stay organized in the new year. Those issues include deciding on the type of loan, purchasing discount points, and the possibility of applying for extra funds to make energy efficient improvements in the home. For starters, it’s good to consider the type of refinancing you are interested in. Do you want lower payments and/or interest rates? Consider a Streamline FHA Refinance loan. Streamline refinances don’t have an FHA-required credit check or appraisal (though your lender is free to require one or both). For non-credit qualifying and/or | 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...

December 24, 2015

FHA Loans And The Up Front Mortgage Insurance Premium (UFMIP)

By Joe Wallace

FHA loan rules published in HUD 4000.1 include instructions to the lender on how FHA single family mortgages are to include the Up Front Mortgage Insurance Premium, also known as UFMIP. This is an expense borrowers should plan and budget for in the pre-application phase of preparing for an FHA mortgage loan. Borrowers can choose to finance the UFMIP or pay the cost at closing time. The UFMIP is not to be confused with the monthly mortgage insurance premium, also known as MIP, or private mortgage insurance commonly called PMI. According to HUD 4000.1: “FHA collects a one-time Upfront Mortgage Insurance Premium (UFMIP) and an annual insurance premium, also referred to as the periodic or monthly MIP, which is collected in monthly installments.” Of UFMIP, the rulebook says that “most | more...