Articles Tagged With: FHA Loan Rules

October 29, 2015

FHA Home Loans: How Mortgage Payments Are Calculated

The FHA loan rulebook for single-family home loans has a section instructing the lender, “For all transactions, except non-credit qualifying Streamline Refinances, the underwriter must calculate the Borrowers Total Mortgage Payment to Effective Income Ratio (PTI) and the Total Fixed Payment to Effective Income ratio, or DTI…” This is required to help the lender determine whether the borrower can afford the new loan or not. And borrowers should know how the mortgage payment is calculated for the same reason. It’s easy to assume that your monthly mortgage payment will be the amount of your home loan divided but the term of the loan (plus any interest), but as you’ll see, it’s not quite that simple. FHA loan rules in HUD 4000.1 spell out a list of things that must be | more...

October 27, 2015

FHA Mortgage Loans: Late Charges

By Bruce Reichstein

What happens if a borrower misses the deadline for his or her FHA mortgage loan payments? While it’s true that no borrower goes into a home loan planning to have missed or late payments, knowing what happens when the payment is late or missed can be a big help–taking the mystery out of these issues is important, especially for new borrowers. FHA loan rules for late payments are found in HUD 4000.1 Part Three Section A. There, you’ll find a section titled “Late Charges” which begins by defining what the FHA views as a late payment: “Late Charges are charges assessed if a Mortgage Payment is received more than 15 Daysafter the due date.” Furthermore, FHA loan rules in this section state, “The Mortgagee may consider a Borrowers payment late | more...

When Is An FHA Loan Better Than A Conventional Loan?

October 27, 2015

FHA HECM Loans And Mandatory Counseling

By Joe Wallace

FHA HECM loans–home equity conversion mortgages, sometimes known as “reverse mortgages”–come with a requirement for all borrowers to be obligated on the FHA HECM to go through HECM loan counseling. This is not a requirement for other types of FHA mortgages, which leads some to wonder why FHA HECMs have this feature. Why do the borrowers have to complete FHA required counseling sessions as a condition of the loan? There are many reasons. Since HECM loans feature no monthly payments, cash back to the borrower, and specific requirements for that cash back, counseling is necessary for the applicants to know exactly what they can and cannot get with their HECM loans. This FHA loan program has changed a great deal in the last two years, and the terms and | more...

October 26, 2015

FHA Loan Rules For Appraisals Under HUD 4000.1

By Joe Wallace

When the FHA and HUD published the new single family home loan rules found in HUD 4000.1, the agencies did not provide a list of every single rule or portion of the rules affected by changes in HUD 4000.1. HUD specifically stated at publication time that it’s the lender’s responsibility to be familiar with the rules as they are today. We’ve been discussing the new rules with that notion in mind. One important area of the new rulebook that’s important to be familiar with? FHA appraisal requirements, which go beyond minimum property standards and other rules. FHA loan rules spell out what is expected of the lender during the appraisal process, starting with this statement found in Section II Part A under “Loan Origination and Processing”: “The Mortgagee must order | more...

October 23, 2015

FHA Loan Income Verification Rules: Seasonal Employment

By Joe Wallace

We’ve been examining FHA loan rules for income verification including requirements for full-time and part-time employment. But some FHA loan applicants have unique jobs that keep them employed on a seasonal basis. Does the FHA loan rulebook, HUD 4000.1, have provisions for these types of soon-to-be homeowners, too? According to the rules, participating FHA lenders may verify seasonal employment if it meets certain FHA standards. HUD 4000.1, Section II Part A includes the following, starting with a definition of “seasonal employment” as acceptable to the FHA: “Seasonal Employment refers to employment that is not year round, regardless of the number of hours per week the Borrower works on the job.” The FHA instructs the lender, “The Mortgagee may consider Employment Income from Seasonal Employment as Effective Income if the Borrower | more...

October 23, 2015

HUD Proposes New Anti-Housing Discrimination Rule

By Joe Wallace

The Department of Housing and Urban Development has issued a press release about a proposed new rule that would create new, formal and standardized claims procedures for discrimination complaints in connection with housing transactions. HUDNo.15-136 was released Wednesday, October 21, 2015, stating, “The U.S. Department of Housing and Urban Development announced today that it is issuing a proposed rule that would formalize standards for victims of harassment in housing to bring claims under the Fair Housing Act.” HUD’s proposed rule, called Quid Pro Quo and Hostile Environment Harassment and Liability for Discriminatory Housing Practices under the Fair Housing Act, was published in the Federal Register and is open to comments by the public for a limited time. “A home should be a refuge where every woman and man deserves to | more...

October 22, 2015

FHA Loan Rules For Income: Part Time Employment

By Joe Wallace

The new FHA single family home loan program policy handbook, HUD 4000.1, has a section on income verification rules that includes instructions to the lender on how to include part-time income in the FHA loan applicant’s debt-to-income ratio. HUD 4000.1 makes an important distinction between full-time income and part-time earnings, and borrowers need to understand how FHA loan rules make the distinction. When it comes to full-time work, HUD 4000.1 Part II Section A states: “Primary Employment is the Borrowers principal employment, unless the income falls within a specific category identified below. Primary employment is generally full-time employment and may be either salaried or hourly.” For part-time income, the rules say: “Part-Time Employment refers to employment that is not the Borrowers primary employment and is generally performed for less than | more...

October 22, 2015

Mortgage Loan Interest Rate Trends: Recovering After A Move Higher

By Joe Wallace

On Tuesday, mortgage loan rates moved a bit higher, then recovered on Wednesday. These are basically small adjustments and loan applicants may, where applicable, find the difference in closing costs rather than an actual higher or lower rate. At the time of this writing, 30-year fixed rate conventional mortgage loans were still offered by many lenders at a best execution rate between 3.75% and 3.875%. The reason for the downward movement on Wednesday included improvements in the bond markets that affect mortgage loan rates, but there’s some European economic data due for release on Thursday that could, depending on report contents and investor reaction to that report, put pressure on rates. FHA mortgage rates are still being quoted at 3.5% best execution, though as usual we like to remind our | more...

October 21, 2015

FHA Loan Rules: Frequent Changes of Employment

By Joe Wallace

HUD 4000.1, the recently published Single Family Home Loan policy rule book, has either reprinted, revised, updated, or restated FHA loan policy for all single family home loan transactions. That’s why we’re examining some of the most important-to-the-borrower sections of the new rules–bringing you the latest FHA requirements so you can make informed decisions about your FHA loan or refinance loan. One area we get asked questions about on a regular basis is FHA loan policy toward borrowers who have recently changed jobs, or frequently change jobs due to the nature of their work. How do FHA loan rules address such issues? The answers, found in HUD 4000.1, Section II, Part A, include the following introductory statements about borrowers with frequent or recent job changes: “If the Borrower has changed | more...

October 20, 2015

FHA Loan Rules: Self Employment Income

By Joe Wallace

Ever since the FHA and HUD published the new guidelines for single-family home loans, HUD 4000.1, we have been reviewing the new rules and discussing important issues as the new rules affect them. One of these areas has to do with income verification for credit-check-required FHA mortgages and refinance loans. The last time we discussed the FHA loan rules on income verification for self-employed borrowers, the old FHA loan rulebooks HUD 4155.1 and HUD 4155.2 were still in effect. What does HUD 4000.1, which supersedes all previous FHA loan rules for single family mortgage loans, have to say about borrowers who are self-employed? For a start, the FHA defines what it means by “self employment income”: “Self-Employment Income refers to income generated by a business in which the Borrower has | more...