Articles Tagged With: FHA Loan Rules

December 23, 2015

HUD 4000.1 On FHA Refinance Loans

When the new FHA single family home loan rulebook , HUD 4000.1, was released, it contained updates, revisions, restatements, and clarifications of FHA home loan policy. We’ve been examining critical areas of HUD 4000.1 and discussing them here. One of those critical areas involves the FHA loan rules for refinance loans. What does HUD 4000.1 say about refinancing in general? Let’s begin with how the FHA now defines refinance loan transactions: “A Refinance Transaction is used to pay off the existing debt or to withdraw equity from the Property with the proceeds of a new Mortgage for a Borrower with legal title to the subject Property.” Then there are the types of refinance loan transactions as described in HUD 4000.1, starting with cash-out loans: “(1) Cash-Out A Cash-Out Refinance is | more...

December 22, 2015

HUD 4000.1 On Verifying Military Income

By Joe Wallace

FHA loan rules in HUD 4000.1 specify a variety of requirements for verifying a loan applicant’s income. Military income is one type of earnings brought to the FHA loan process–how is the lender instructed to review this type of employment and verify the earnings? According to HUD 4000.1, the process is similar to other typical types of employment, but thanks to military benefits, allowances, and special pay some additional guidance is required for the lender, starting with a basic definition of the term “military pay”. “Military Income refers to income received by military personnel during their period of active, Reserve, or National Guard service, including: –base pay –Basic Allowance for Housing –clothing allowances –flight or hazard pay –Basic Allowance for Subsistence –proficiency pay” All of those could be used to | more...

December 21, 2015

FHA Loans, First Time Home Buyers, and Job History

By Joe Wallace

We get plenty of questions about FHA home loan rules about income, employment, and issues related to being a first time home buyer. Here’s one that came in recently: “I purchased a condo in February 2012, and it was sold three years later,due to financial hardship. I started a new job November 30, 2015 in the same profession as my previous employment history as a customer service representative. Do I qualify as a first time homebuyer to apply for a FHA loan? Would I be required to be employed for at least six months on my new job?” FHA loan rules focus on the borrower’s overall employment history. Here’s what’s written in HUD 4000.1: “For all Employment related Income, the Mortgagee must verify the Borrowers most recent two years of | more...

December 21, 2015

Mortgage Rate Trends: Creeping Lower

By Joe Wallace

On Friday mortgage rates crept lower, something more than one market watcher has commented on as being a bit contradictory when you think about the idea that the Fed is raising interest rates and that the anticipation of that happening brought a lot of volatility to the markets. Investor reaction to the Fed rate hike announcement was a big “X-factor” last week in terms of which way rates could have gone after that announcement. As we’ve seen, the hike news turned out not to be a big spoiler for mortgage loan interest rates. Rates moved lower but you may notice the changes in the form of lower closing costs instead of actual alterations in the rates. 30-year fixed rate conventional mortgage loans on Friday were still begin reported, best execution, | more...

December 18, 2015

FHA 203(k) and 203(h) Mortgage Loans

By Joe Wallace

The FHA offers two programs with a 203 designation. One is known as the FHA 203(k) Rehabilitation Mortgage, the other is the 203(h) Rehabilitation Mortgage for disaster victims. HUD 4000.1 has the policies for both types of loans–but what are the differences between the two? HUD 4000.1 describes the FHA 203(k) Rehab Loan as follows: “The Section 203(k) Rehabilitation Mortgage Insurance is used to: –rehabilitate an existing one- to four-unit Structure, which will be used primarily for residential purposes; –rehabilitate such a Structure and refinance the outstanding indebtedness on the Structure and the Real Property on which the Structure is located; or –purchase and rehabilitate the Structure and purchase the Real Property on which the Structure is located.” A 203(k) Rehabilitation Mortgage comes in two options, which are described in | more...

December 17, 2015

HUD 4000.1 On FHA Mortgage Loan Credit Score Requirements

By Joe Wallace

When you apply for a mortgage loan to purchase a home, your lender will require you to sign paperwork authorizing your loan officer to run a credit check on all parties to be obligated on the mortgage. FHA loan rules in HUD 4000.1 spell out the minimum FICO score standards and requirements. Do you know what the minimum FHA loan standard is for FICO scores? According to HUD 4000.1, the lender must analyze FICO scores in a specific way. Many borrowers wonder how, if the lender is getting multiple credit reports from the three major credit reporting agencies (Equifax, TransUnion, and Experian), will the lender interpret differences between those scores? HUD 4000.1 states: “The Minimum Decision Credit Score (MDCS) refers to the credit score reported on the Borrowers credit report | more...

Can I buy a manufactured home with an FHA loan?

December 16, 2015

FHA Forward Loan Limits For 2016

By Joe Wallace

Recently we wrote about a press release issued by the FHA and HUD announcing FHA loan guaranty limits for the coming new year. The FHA has published two sets of loan limits mortgagee letters–one for Home Equity Conversion Mortgages (FHA HECM loans) and the other for FHA single-family “forward loans”. We covered the FHA HECM loan guaranty limits in a previous blog post; now we turn our attention to the specifics of the FHA forward mortgage loan guaranty limits as published in Mortgagee Letter (ML) 2015-30, which begins by explaining how FHA loan limits are set. According to that mortgagee letter, “The Federal Housing Administration (FHA) calculates forward mortgage limits based on the median house prices in accordance with the National Housing Act. FHAs Single Family forward mortgage limits are | more...

December 15, 2015

FHA Loan Rules Versus Lender Standards

By Joe Wallace

A reader got in touch to ask about certain FHA loan standards for loan approval. “…underwriting is telling me that I am approved with conditions. One of which is, no missed or over 30 days late payment. I cannot give that. They say it is a law/rule. Is this true in my case?” We get many “is this true?” type questions. Unfortunately there’s no quick or easy answer to this because there are several factors at work. A borrower who comes to the FHA loan process with missed or late payments in the 12 months leading up to the application will find it more difficult to get an FHA home loan approved. We’re not saying that’s the case with this particular reader, but it’s worth pointing out that the lender | more...

December 11, 2015

FHA Announces New Loan Limits For 2016

By Joe Wallace

An FHA press release announces 2016 FHA mortgage loan guaranty limits for mortgage loans with FHA loan case numbers assigned on or after January 1, 2016. Housing market changes in 2015 brought increases in the maximum loan guaranty limit in many counties–188 areas will see new, higher limits according to the press release. According to the FHA official site, “Each year, FHA recalculates its loan limits based on 115 % of the median house price in the area. For counties, or equivalent, located in Metropolitan Statistical Areas (MSAs) the limit for all areas in the MSA is calculated based on the highest cost county.” The press release says there has been no alteration to the FHA national loan limit ceiling which, according to the press release, “remains at $625,500”. The | more...

December 10, 2015

FHA Appraisals and Air Conditioning Units

By Joe Wallace

A reader got in touch with us recently to ask whether a home with window-mounted air conditioning units could pass an FHA appraisal. Unfortunately the answer to this question isn’t as simple as a yes or no–there are several factors involved that may determine how an FHA appraiser views such units. The first and most obvious would be the condition of the units themselves. FHA appraisal rules require all mechanical systems in the home to be in good working order or be brought into compliance with that requirement through repair or replacement. The appraiser’s job would be to determine whether or not the general state of the window units–where permitted–is acceptable. But there are a few other unanswered questions–do these window units act as a replacement for a faulty or | more...