Articles Tagged With: FHA Loan

April 20, 2017

FHA Appraisal Rules: Basements

A reader asked us an appraisal question in our comments section recently about unfinished basements. “We were conditionally approved for FHA. There were two items in to be completed in the FHA appraisal before closing. Finish flooring in bedroom (completed).” “The room was being completely redone And, 2. Finish bathroom in basement. This is an unfinished basement with framing and partial drywall. The rough bathroom has the toilet and sink installed. My question is: Does a basement need to be finished for FHA approval? From what I have read, the basement is not calculated as living space.” While it is true that FHA loan rules in HUD 4000.1 mention not counting the basement as part of the Gross Living Area, FHA appraisal rules are not the only ones which may | more...

April 19, 2017

Multiple FHA Loans? The Rules

By Joe Wallace

Based on some of our reader questions lately, there seems to be some confusion over the rules for FHA loans where the borrower is interested in applying for an additional FHA mortgage. What are the rules in HUD 4000.1 on this issue? There are two general areas of confusion related to those rules. Some borrowers have purchased a primary residence with non FHA loans and want to know if the FHA loan rules governing additional mortgages apply to them. According to a literal interpretation of the requirements in HUD 4000.1, borrowers who have a non-FHA mortgage are free to apply for an FHA mortgage without worrying about being in violation of the rules. FHA loans have rules for additional mortgages apply which specifically to those who already have an existing | more...

April 18, 2017

Mortgage Rate Trends: Lower

By Joe Wallace

Mortgage rate trends have generally been moving in favor or lower rates over the short term, and since our last report we’ve seen those rates move into territory not firmly held for quite some time. What is good for the economy is often bad for mortgage rates, and vice-versa, so the uncertain news you see related to some economic issues at home can be viewed as a contributing factor for lower rate activity in recent days. What we’re seeing as of late includes the influence of global economic headlines, domestic questions about the value of the U.S. dollar following statements out of Washington, and stock market activity. All this contributing toward the downward trend in mortgage rates. Investors hate uncertainty, and often run to the safety of bonds when times | more...

When Is An FHA Loan Better Than A Conventional Loan?

April 14, 2017

Identity of Interest Issues And FHA Loans

By Joe Wallace

A reader got in touch to ask about FHA loans and identity of interest rules this week. “I have a loan that I am working on right now and the underwriter is saying that we have an “identity of interest” issue.” “The situation is this my borrower is not related to the seller but has been renting the house she is buying for five months. Because there is no family relationship between the seller & buyer, does she has to live in the house for six months?” The FHA loan rule book, HUD 4000.1, describes identity of interest transactions as a house sale “between parties with an existing Business Relationship or between Family Members.” The word “interest” in this case refers not to interest rates, but rather to the interest | more...

April 12, 2017

Mortgage Loan Interest Rate Trends: New Lows

By Joe Wallace

In our last report, we noted that mortgage loan interest rates had been on the move, losing a small amount of ground over the previous two business days. We also noted that it was too early to tell if that was becoming a trend, or if the move higher was a short-term fluctuation. At the time of this writing, mortgage rates have since plunged to lows we haven’t seen for a majority of the year. There are complex reasons why rates have suddenly moved downward. Global political headlines often play a role in the direction of mortgage rate movement, especially when those headlines have far-reaching implications. This week we’ve seen French elections, Russia and North Korea dominate headlines in ways that have investors moving their cash into safer bets, which | more...

April 10, 2017

FHA Mortgage Occupancy Rules

By Bruce Reichstein

A reader asked us a question this weekend about FHA mortgage loan occupancy rules. “I purchased a home with an FHA loan and intended to live in it for 4 years until my fiancee got orders to relocate with the Air Force. Wellhe got orders to move from Colorado to Florida but I just purchased my house 3 months ago. Can I not leave Colorado and move with my fiancee?” HUD 4000.1, the FHA single-family home loan rule book, addresses situations like these, stating: “Borrowers who are military personnel, who cannot physically reside in a Property because they are on Active Duty, are still considered owner occupants and are eligible for maximum financing if a Family Member of the Borrower will occupy the subject Property as their Principal Residence, or | more...

April 6, 2017

Credit Report Data, Disputed Accounts, and FHA Loans

By Joe Wallace

Borrowers are often advised to give themselves plenty of time in the pre-purchase planning stages to review credit report details to make sure there are no errors or outdated information. What happens if a borrower does see something on a credit report and chooses to dispute it? Ideally, issues like these should be caught very early in the planning stages. You should check your credit report as early as one year prior to the home loan application in order to give yourself enough time to dispute items if required. But not all borrowers have that much time to deal with such issues, and FHA loan rules address disputed accounts in detail. HUD 4000.1, the FHA single family home loan rule book, has two sections on disputed accounts-one for derogatory credit | more...

April 5, 2017

Temporary Reduction of Income: FHA Loan Rules

By Joe Wallace

What happens if a borrower fills out an FHA loan application while having a temporary reduction of income either on the record or ongoing during the application process? Does the FHA loan rule book, HUD 4000.1, address these situations? Fortunately, yes. There are many reasons why a loan applicant might experience a temporary reduction of income-short term disability, for example. Maternity leave. Temporary leaves of absence, sabbaticals, etc. According to page 206 of HUD 4000.1, FHA loan rules in this area include the following: “For Borrowers with a temporary reduction of income due to a short-term disability or similar temporary leave, the Mortgagee may consider the Borrowers current income as Effective Income, if it can verify and document that: – the Borrower intends to return to work; – the Borrower | more...

Can I buy a manufactured home with an FHA loan?

April 4, 2017

Commission Income and FHA Loans: A Reader Question

By Joe Wallace

A reader asked about the FHA loan rules governing commission income this week in our comments section: “My employer recently (1yr) switched the pay scale to a base/commission/bonus format. Basically we now get paid per load instead of hourly. Since weve only received commission for 2016 and not 2015, should my itemized job related expenses for 2015 count against my income over the previous two years?” FHA loan rules in HUD 4000.1 address this issue, but may not be the only rules at work-lender standards would also apply as well as any applicable state law. Here’s what HUD 4000.1 states about commission income: “The Mortgagee must calculate Effective Income for commission by using the lesser of (a) the average net Commission Income earned over the previous two years, or the | more...

April 3, 2017

FHA Loan Amounts: A Reader Question

By Joe Wallace

What are the minimum FHA loan amounts? A reader asked us a question in the comments section along those lines recently: “Is there a minimum amount for FHA Loans? Someone told me you have to borrow at least $90,000. Does the loan depend on your annual income?” FHA mortgages are not approved or denied based on the dollar amount of your annual income, but rather on your ability to afford the loan based on your financial obligations (including an estimate of your monthly mortgage payment) compared to your monthly income. Your debt-to-income ratio is more important in the loan approval equation. When it comes to FHA loan amounts, the minimum loan is based on the appraised value of the property or the asking price, whichever is lower. The FHA loan | more...