Articles Tagged With: FHA Loan Rules

November 21, 2014

FHA Loan Reader Questions: Non-Functioning Wells

A reader asks, “I bought a home with FHA loan and a well system and septic. Later found the well was a spring box system and not on the property we were forced to buy the property seperate from the house .” “The well has never worked and runs out all the time , i was told that FHA wouyld be inspecting the well system prior to closing , but now we have asked for the inspection and it was never done on the well or the septic systm . Any ideas on where to get help?” It may simply be a case of the way this reader question was worded, but it’s worth pointing out that the FHA itself does not perform well inspections, or similar services. An FHA | more...

November 19, 2014

FHA HECM Loan Changes: Disbursements

By Joe Wallace

Recently we wrote about FHA Home Equity Conversion Mortgage (HECM) loan rule changes that were announced in FHA Mortgagee Letter 2014-21. Those rule changes include alterations and clarification of policy related to a variety of HECM loan policies. One very important affected area of HECM loan regulation the borrower should know about is related to disbursement of HECM loan funds. Mortgagee Letter 2014-21 announces separate policy for fixed-rate HECM loans and for Adjustable Rate HECM loans. Here is the FHA policy for disbursement limits according to ML 2014-21: “Definitions only for Adjustable Interest Rate HECMs  Initial Disbursement Limit: The maximum disbursement to the mortgagor allowed at loan closing and during the First 12-Month Disbursement Period is the greater of 60% of the Principal Limit; or the sum of Mandatory | more...

November 18, 2014

FHA Extends Program For Underwater Home Owners

By Joe Wallace

The FHA has announced an extension to a program started to help borrowers who are underwater on their mortgages. FHA mortgagee letter 2014-23 describes the original “FHA Refinance of Borrowers in Negative Equity Positions” program started in 2010 which, according to the FHA/HUD official site, “provided enhancements to the Federal Housing Administration (FHA) refinance program that gave a greater number of responsible borrowers an opportunity to remain in their homes.” These FHA enhancements were designed, “to maintain homeownership by providing borrowers, who owe more on their mortgage than the value of their home, opportunities to refinance into an affordable FHA loan. This opportunity allowed borrowers to qualify for an FHA refinance loan provided that the lender or investor wrote off the unpaid principal balance of the original first lien mortgage | more...

November 17, 2014

FHA Loan Answers About FICO Scores And Credit Requirements

By Joe Wallace

We’ve fielded a variety of questions recently about FHA home loans when it comes to FICO scores and credit requirements. There are several issues to be aware of when it’s time to start preparing for an FHA mortgage loan, or any kind of major credit application. One of the first questions you should answer for yourself at the start of your journey to buying a home with an FHA mortgage is, “How much time do I have?” Are you trying to plan for a loan that you want to apply for in a matter of months? If so, a revision of your timeline may be in order–finance experts recommend taking at least 12 months to plan for a new home loan. Why? Saving up for closing costs and other expenses | more...

November 12, 2014

FHA Mortgage Rate Trends: Up and Down

By Joe Wallace

Since our last report on FHA mortgage rate trends, we’ve seen some ups and down with mortgage loan rates in general, but the overall trend seems to be upward. Last Friday was a highly anticipated jobs report, and ahead of that last Thursday we saw rates hold steady. After the report came out on Friday mortgage loan rates did gain back some of the ground lost earlier in the week, but come Monday those gains began slipping away again. Tuesday was Veterans Day so markets were closed and there was no rate movement to report–but on Wednesday it was a bit of false hope to start the day with rates beginning stronger but ultimately weakening by day’s end. What does all this mean? At the time of this writing, 30-year | more...

November 12, 2014

FHA PMI Rules: A Reader Question

By Joe Wallace

A reader asks, “Does the PMI not apply to down payments of 20% and above?” The FHA has changed the rules for PMI–Private Mortgage Insurance–and as a result all FHA home loans known as “forward mortgages” with case numbers assigned on or after June 3 2013 now have different requirements than previously approved FHA mortgages. FHA Mortgagee Letter 2013-04 rescinded a set of FHA PMI rules and enacted new ones in their place. The rescinded rules include the following changes as described in FHA Mortgagee letter 2013-04; “…rescinds the automatic cancellation of the annual MIP collection announced in MLs 2000-38 and 2000-46; ….rescinds ML 2011-35, under which mortgages with terms of 15 years or less and LTVs of less than or equal to 78 percent at time of origination were exempt from the | more...

November 6, 2014

HUD Resolves American Bank Housing Discrimination Case

By Joe Wallace

The FHA and HUD have announced a resolution in a housing discrimination case brought by HUD against a Maryland-based lender. According to HUDNo.14-139, “The U.S. Department of Housing and Urban Development (HUD) announced today that it has entered into an Initial Decision and Consent Order with American Bank, resolving HUD’s charge that the Rockville, Maryland-based lender discriminated against applicants with disabilities when it allegedly required applicants to provide documentation regarding their disabilities and attempted to obtain information about the nature and extent of those disabilities.” Federal Fair Housing laws state that it is a violation of federal law to discriminate against borrowers, “in the terms and conditions of a loan to an individual based on a disability, including imposing different application or qualification criteria. The Fair Housing Act also makes it | more...

November 5, 2014

FHA Loans and Social Security Numbers: A Reader Question

By Joe Wallace

A reader asks, “I live in a community state property. My husband does not have a social security number to run his credit. How can I proceed with a FHA loan without being able to run a credit report on my husband?” FHA loan rules are very specific when it comes to the identity and documentation requirements for all parties to be obligated on an FHA home loan. According to HUD 4155.1 Chapter One, Section B, the following applies: “All borrowers, including United States (U.S.) citizens, must have a valid Social Security Number (SSN) and must provide evidence of that SSN to the lender. The lender is responsible for • documenting an SSN for each borrower, coborrower, or cosigner on the mortgage • validating each SSN either through − entering | more...

November 4, 2014

FHA FICO Score Minimums: A Reader Question

By Joe Wallace

A reader asks, “If I only need a fico score of 580 to qualify for a FHA loan, why would my (lender name deleted) agent tell me that I need 600 score before he could preapprove me for a mortgage loan?” This reader question reveals a common misconception about the FHA single-family home loan program. It is true that the FHA does list a minimum FICO score for borrowers–borrowers who have FICO scores below 580 won’t qualify for the lowest downpayment amount of 3.5% and borrowers with scores below 500 don’t qualify at all. However, these score requirements are the FHA minimums, not the lender’s standards. Lender FICO scores can and do vary from the FHA loan rules–they can be more strict than the FHA loan rulebook’s own FICO requirements. | more...

October 31, 2014

FHA Loans: What Can Affect Your Loan Amount?

By Joe Wallace

One of the first questions on the minds of many borrowers is a logical one: “How much can I borrow?” There’s no single answer for this as county loan guaranty limits apply, and in general the amount of the FHA home loan is based on the sale price of the home or the appraised value, whichever is lower. When it comes to home loan refinancing, the appraised value of the property is very important. There are factors that can affect the amount of the FHA home loan for new purchases or refinance loans beyond those factors. For example, if you choose to finance allowable fees and expenses (including some discount points depending on the transaction and lender policies) your loan amount will increase. If you make a larger down payment, | more...