Articles Tagged With: FHA Loan Rules

What happens to my FHA loan in a natural disaster?

June 2, 2015

The Purpose of the FHA Appraisal For An FHA Home Loan

When you want to buy a home with an FHA mortgage loan, the appraisal process is an important step towards getting the loan approved. The lender is required to determine the loan amount based on the lesser of the appraised value or the sales price of the property. And while borrowers should not confuse the required FHA appraisal with the optional, but still crucial home inspection process, it’s important to know how the FHA defines and views the appraisal in the home loan process. FHA loan rules for appraisals are currently found in HUD 4155.2, Chapter Four. In that chapter, under a heading titled “Purpose of a Property Valuation”, we find the following: The purpose of the property valuation process is to: –determine eligibility for mortgage insurance based on the | more...

June 2, 2015

FHA Occupancy Requirements

By Bruce Reichstein

One common type of question we are often asked about FHA loan occupancy rules involves situations where the borrower wants to purchase the home for his or her primary residence, but may be gone for extended periods of time because of job-related travel. Some borrowers want to know if the FHA loan rules on occupancy specify a number of calendar days per year of occupancy, or if a spouse and children can fulfill the borrower’s occupancy requirement in his/her absence. FHA loan rules found in HUD 4155.1 Chapter Four Section B simply states, “A principal residence is a property that will be occupied by the borrower for the majority of the calendar year.” It may be at the lender’s discretion to determine what the minimum occupancy for the borrower might | more...

June 1, 2015

FHA Loan Rule Changes and The New Single Family FHA Policy Handbook

By Joe Wallace

The FHA announced important changes to its single family home loan program for 2015–a new Single Family FHA Policy Handbook that would essentially be the go-to guide for all rules and regulations for a typical FHA home loan. The new handbook was supposed to go into effect in mid-June and take precedence over the old collection of policies. But the FHA and HUD have extended the deadline for this new handbook to go into effect and now existing guidance will be valid through September 14, 2015. According to the FHA official site, “As of May, 18, 2015 users can access the online SF Handbook for free from the link provided on HUDs Client Information Policy Systems (HUDCLIPS) web page. The online SF Handbook makes it easier for mortgagees and other | more...

May 30, 2015

Common Myths About FHA Home Loans

By Joe Wallace

FHA loan myths are hard to dispel–no matter how many times you try to set the record straight, there will always be people who simply don’t know the truth about FHA loans and how they can help the typical house hunter. For example, some people mistakenly believe that FHA loans are only for the economically disadvantaged. Others believe something similar along these lines–that it is possible to “earn too much” to qualify for an FHA mortgage. These things are not true. Another myth about FHA home loans is that a borrower’s eligibility is solely dependent on what the FHA loan rules say about FICO scores, credit history, etc. But this is also not the reality behind the FHA home loan process. For example, FHA mortgages do have a minimum FICO | more...

May 29, 2015

Texas Flooding, FEMA, and FHA Disaster Relief Options

By Joe Wallace

With headlines about Texas flooding, FHA borrowers there and in other areas in danger of being affected by natural disasters this spring may wonder what options are open to them in the wake of a flood, a hurricane, tornado or other weather event. The FHA and HUD do have options for qualified borrowers affected by a natural disaster. At the FHA/HUD official site, you’ll find the following: “Was your home or your ability to make your mortgage payments harmed by an event that the President declared a disaster? You may qualify for relief to help you keep your home. Much of the mortgage industry and The United States Department of Housing and Urban Development are committed to assisting borrowers whose lives and livelihoods are thrown into turmoil by a disaster. | more...

May 29, 2015

FHA HECM Loans With Set-Aside Accounts For Property Taxes

By Joe Wallace

The FHA and HUD have been making a number of revisions to the FHA Home Equity Conversion Mortgage program (FHA HECM) including changing the nature of payouts based on the type of HECM loan (adjustable rate or fixed rate) and many other alterations. One of the most recent changes is how the FHA expects participating lenders to deal with unpaid property taxes on an FHA HECM, which technically can result in the loan being declared due and payable. Some lenders and borrowers go into a HECM loan with an arrangement to have a set-aside account created specifically for the purpose of paying property taxes to avoid problems later down the line. But what happens if a HECM borrower lets that set-aside account lapse? When the property taxes begin to go | more...

May 28, 2015

FHA Loan Pre-Approval and Credit Scores

By Joe Wallace

One question that comes up frequently when talking FHA loans involves whether or not a borrower’s credit scores are affected by applying for pre-approval for an FHA mortgage loan. While we aren’t experts in credit reporting, and the FHA loan rules found in HUD 4155.1 do not address this issue, a bit of research into this issue turns up some interesting facts. According to the Kiplinger Magazine’s, “Could Mortgage Preapproval Hurt Our Credit?”, any kind of loan application has the potential to “ding” your credit rating. That, Kiplinger reports, is according to Barry Paperno, consumer operations manager for Fair Isaac (the company that created the FICO score system). “Typically, you would see a drop of five points or less,” says Paperno in the Kiplinger piece, which adds, “…when lenders request | more...

May 28, 2015

HUD Announces Historic “Redlining” Settlement

By Joe Wallace

Redlining, the act of discriminating against a group of people in the mortgage loan servicing process, is prohibited by the Fair Housing Act. Redlining often goes undetected as long as those being discriminated against don’t file a complaint with the government. When such complaints are reported to the FHA and HUD, they are taken seriously and investigated to insure violations of the Fair Housing Act don’t continue. This week HUD announced a historic settlement in a redlining case in HUDNo.15-064. “The U.S. Department of Housing and Urban Development (HUD) today announced an agreement with Associated Bank, N.A. (Associated) to resolve a disparate treatment redlining case, one of the largest redlining complaints brought by the federal government against a mortgage lender. At approximately $200 million, it is the largest settlement of | more...

May 26, 2015

The 2009 First Time Homebuyer Tax Credit: A Reader Question

By Joe Wallace

A reader asks, “Is the tax credit still available to 1st time new home buyers? If not, are there any other credits available that can help new home buyers? Will I be considered a new home buyer if I purchased a home just over 5 (2010) years and attempt to purchase a new one in 2015?” We can’t give out tax advice, as we aren’t tax professionals, so it would be necessary to contact the IRS directly to learn about any homebuyer-related tax credits that might be available for a given tax year. Tax law changes quite frequently and what was legal last year may not be allowed this year due to legislation, expiration of government programs, or other changes. That said, we can report that it appears that, based | more...

May 23, 2015

FHA MIP Rates: A Reader Question

By Joe Wallace

A reader asks, “I closed an FHA loan on 02/18/15 and was charged a rate of 1.689% for Mortgage Insurance Premium. The rates were reduced in January-15. Was I charged an incorrect rate?” This is a common question for some borrowers because their loans happened during a period of time where the change from the old FHA MIP rates to the new rates occurred. The short answer to this reader question is, “It depends”. The timing of the assignment of a borrower’s FHA case number is key in cases like these. According to a Frequently Asked Questions page found at HUD.gov, the deciding factor on whether a borrower got the old rate or the new one is the date when the FHA case number was assigned. According to HUD.gov, “The | more...