Articles Tagged With: Home Equity

July 9, 2024

Home Equity Loans: The FHA Reverse Mortgage

The FHA Home Equity Conversion Mortgage (HECM) loan is a home equity loan option for qualifying borrowers 62 or older. There are no monthly payments on an FHA HECM. The borrower can get cash back on the transaction, and the loan is typically due in full when the borrower dies or sells the home. Qualifying HECM borrowers are, once their loan application is approved, able to withdraw “a portion of your home’s equity to use for home maintenance, repairs, or general living expenses,” according to the FHA and HUD official site. You can also apply for an FHA reverse mortgage to purchase a primary residence, but you must use your own cash to make up any difference between FHA HECM funds, the sale price, and any associated closing costs. HUD.gov | more...

November 22, 2021

How To Get Cash Back On An FHA Home Loan

By Joe Wallace

Do you need to know how to get cash back on an FHA home loan? If you want to purchase a home with an FHA “forward mortgage” you might be tempted to ask your lender if it’s possible to apply for more mortgage loan money than is required to complete the transaction. This question usually comes with the hope of being allowed to take the extra loan funds out in cash similar to a personal loan. Some borrowers want to know if they can do this, but that specific scenario is definitely NOT possible under FHA home loan rules. Borrowers are not permitted to get cash back in such cases (we’re discussing FHA purchase loans here and NOT FHA cash-out refinance loan options) except in the form of a refund | more...

April 25, 2018

FHA Home Loan Closing Costs You Should Anticipate

By Joe Wallace

FHA home loans have closing costs a borrower should plan to save and pay for. No matter if you need an FHA Home Equity Conversion Mortgage, a 203(k) rehab loan, or an FHA One Time Close construction loan, there will be closing costs to pay for. No borrower should plan for a home loan without anticipating the closing costs. You should budget and save for these expenses as early as possible-once you know you are interested in purchasing a home, you should prepare for these costs. HUD 4000.1 tells the lender that FHA loan rules permit closing costs; the lender “may charge and collect from Borrowers those customary and reasonable closing costs necessary to close the Mortgage. Charges may not exceed the actual costs.” This is not a complete or | more...

What happens to my FHA loan in a natural disaster?

May 25, 2016

FHA Reverse Mortgages: Payout Options

By Joe Wallace

Recently we wrote about proposed changes to strengthen the FHA Reverse Mortgage loan program and about basics of the FHA Reverse Mortgage program. We left off with a promise to discuss how the reverse mortgage, also known as an FHA Home Equity Conversion Mortgage (HECM), pays out once the loan has closed. A HECM borrower’s payout (also known as a disbursement) depends on the nature of the HECM loan. The rules for cash back to the borrower differ based on whether the borrower has a fixed interest rate HECM loan or an adjustable rate HECM. The FHA/HUD official site states that borrowers who have adjustable rate HECM loans are eligible for the following payment options: Tenure-equal monthly payments as long as at least one borrower lives and continues to occupy | more...

May 19, 2016

What is an FHA Reverse Mortgage?

By Joe Wallace

In a recent blog post we wrote about the steps the FHA and HUD are taking to further improve the FHA Home Equity Conversion Mortgage (HECM) loan program. The FHA HECM, also known as a reverse mortgage or FHA reverse mortgage, is a different type of home loan than a typical “forward mortgage” for a new purchase or refinance on a previous mortgage. The FHA reverse mortgage or HECM is for qualified borrowers age 62 or older who either own their property outright (with the mortgage paid off in full and documentation of that paid-in-full status) or are very close to paying off the current loan. According to the FHA official site, HECM loans are a “…special type of home loan that lets you convert a portion of the equity | more...

January 15, 2016

HUD Housing Report: Rising Equity, Fewer Homeowners “Underwater”

By Joe Wallace

The Department of Housing and Urban Development (HUD) has issued a housing market report on its official site–“Measuring Progress in the Housing Market” examines the state of the market near the end of the old year and noted that equity is rising, while the number of homeowners still underwater in the wake of the Great Recession is going down. “As 2015 came to a close, we saw our housing market reach key milestones on the path to recovery homeowners equity rose again, the number of homeowners in negative equity continues to decline, and purchases of new homes increased. Its clear that we must continue to support programs that will allow more American families and homeowners to recover from the Great Recession.” HUD offers this report as a regular feature of | more...

January 14, 2016

FHA HECM Loan Facts

By Joe Wallace

The FHA single-family loan program includes reverse mortgages–a loan program where a borrower can apply for a loan that requires no monthly payments, offers cash back to the borrower, and is based on the value and equity in the home. If you are looking for a reverse mortgage, the FHA program might be just what you need. Here are some basic facts about the FHA reverse mortgage loan option: FACT: FHA reverse mortgages are known as Home Equity Conversion Mortgages or HECM for short. These two terms refer to the same thing when it comes to FHA reverse mortgages. FACT: FHA HECM loans are for borrowers aged 62 or older who either own their home outright or are very close to doing so. HECM loans are declared due when the | more...

December 2, 2015

FHA Refinancing: When Is A Credit Check/Appraisal Required?

By Joe Wallace

Are you considering refinancing your dream home? Are you looking for cash out, lower payments, or a lower interest rate? Your financial needs and goals will dictate the type of FHA refinance loan you should apply for. Knowing which type of loan you need is an important part of the refinance preparation process. Borrowers who have existing conventional, VA, or other non-FHA home loans can refinance into an FHA mortgage loan using an FHA cash-out or non-cash out option. This type of refinancing requires both a new appraisal and a new credit check. To get cash out on such a loan, you’ll need to have enough money left over in the new loan after paying off the old mortgage plus any fees and expenses associated with the loan. Borrowers who | more...

June 23, 2014

New FHA HECM Rules: Determining The Principal Loan Amount

By Joe Wallace

Last week we reported on changes to the FHA Home Equity Conversion Mortgage loan program–changes announced by FHA and HUD that change the terms of the loan program for fixed rate HECMs and adjustable rate HECM loans. As of HECM loans with case numbers assigned on or after June 25, 2014, FHA HECM loans for fixed rate mortgages feature the following restrictions as per the FHA official site: “FHA will only insure fixed interest rate reverse mortgages where the mortgage limits the mortgagor to: –A single, full draw to be made at loan closing; and –Does not provide for future draws by the mortgagor under any circumstances.” The FHA also made changes to adjustable rate HECM loans–the FHA official site says: “The Single Disbursement Lump Sum payment option shall not | more...

July 26, 2013

FHA Loan Downpayment Sources: A Reader Question

By Joe Wallace

A reader asks, “Can I use money from a residential loan or my thrift savings towards a FHA downpayment and closing costs?” The rules that cover down payment funds for FHA insured mortgages are found in HUD 4155.1, Chapter Five. That chapter begins by stating, “Under most FHA programs, the borrower is required to make a minimum downpayment into the transaction of at least 3.5% of the lesser of the appraised value of the property or the sales price. Additionally, the borrower must have sufficient funds to cover borrower-paid closing costs and fees at the time of settlement. Funds used to cover the required minimum downpayment, as well as closing costs and fees, must come from acceptable sources and must be verified and properly documented.” Specifically, the reader wants to | more...