Articles Tagged With: Loan Principal

FHA Loans And Natural Disasters: What You Should Know

August 23, 2016

FHA Loan Questions: Identity Of Interest

A reader asks, “I am intending on purchasing a home from my boyfriend’s father. He bought the home for 70k and he is willing to sell it to me for 75k. We are in no way related. Is our relationship an identity of interest?” The “identity of interest” issue arises when a family member wants to sell a property to another family member who is using an FHA mortgage to buy the home. An identity of interest transaction can also be between two people who are business associates. HUD 4000.1 defines an identity of interest transaction as follows: “An Identity-of-Interest Transaction is a sale between parties with an existing Business Relationship or between Family Members. Business Relationship refers to an association between individuals or companies entered into for commercial purposes.” | more...

August 11, 2016

FHA Loans and Cash Back

By Joe Wallace

FHA home loans have specific rules about when a borrower can get cash back on an FHA transaction and how. In general, FHA mortgage loans for new purchases don’t permit cash back except in the form of legitimate refunds, but HUD 4000.1 outlines certain circumstances where a small amount of cash back is permitted. However, that cash back cannot be “excessive”. A lender is required to estimate the costs of the loan before the actual expenses are tallied. These estimates could result in the borrower budgeting more than is required. When money is due back to the borrower, HUD 4000.1 states: “When the estimated costs utilized in calculating the maximum mortgage amount result in greater than $500 cash back to the Borrower at mortgage Disbursement, Mortgagees may reduce the Borrowers | more...

August 4, 2016

FHA Loan Rules: Special Forbearance For Unemployed Home Owners

By Joe Wallace

When a borrower applies for an FHA mortgage, experiencing financial trouble isn’t top-of-mind; qualifying for the loan, making the down payment, and moving in are likely the big issues most think about when applying. But financial difficulties can and sometimes do come, so what can a borrower do if he or she finds themselves unemployed after purchasing a home with an FHA mortgage? FHA loan rules in HUD 4000.1 do permit the lender to offer something known as “special forbearance” or SFB for unemployed borrowers who are in danger of missing payments, going into loan default, etc. “The SFB-Unemployment Agreement is a written agreement between a Mortgagee and the Borrowers, one or more of whom has become unemployed, allowing for reduced and/or suspended Mortgage Payments.” This is an arrangement negotiated | more...

July 26, 2016

FHA Loan Questions About Occupancy Rules

By Bruce Reichstein

What are the FHA home loan rules for occupancy? A reader got in touch with us recently with a question that pertains to this important issue, asking, “I live in California, but I want to purchase a home in Virginia Beach, Va. Can I still use FHA loan to purchase a home in Virginia. My son will be living at the house that Im planning to purchase. He lives and works in Virginia.” FHA loan rules that govern this issue can be found on page 135 of HUD 4000.1. FHA home loans are intended for borrowers purchasing principal residences, but what does that term mean? HUD 4000.1 has a specific definition of a “principal residence” on page 135, which states: “A Principal Residence refers to a dwelling where the Borrower | more...

July 20, 2016

Using a Co-Signer With an FHA Mortgage Loan

By Joe Wallace

The video above gives some basic information about what a co-signer is, but there are some other details you should know about using a co-signer. FHA loan rules governing cosigners and related issues are found in HUD 4000.1 in a variety of places. One of the first things you’ll learn about co-signing an FHA mortgage is that the cosigner will need to verify identity using a Social Security Number. FHA loan rules differentiate between a co-borrower, who has shared ownership of the property purchased with the FHA mortgage, and the co-signer, who does not. In some cases, community property laws for legally married couples may affect how co-borrowing or co-signing is carried out. FHA loan rules in HUD 4000.1 state: “To be eligible, all occupying and non-occupying Borrowers and co-Borrowers | more...

July 20, 2016

FHA Loans For Properties With PACE Assessments

By Joe Wallace

The FHA has announced it will insure mortgages on qualifying homes that have PACE assessments. According to a press release on the FHA/HUD official site, the move was initiated to help encourage the use of clean energy. “In order to enable homeowners seeking clean energy technologies in their homes to leverage a range of financing options, the Federal Housing Administration (FHA) today announced guidance that makes clear the circumstances under which it will insure mortgages on properties that include Property Assessed Clean Energy (PACE) assessments. FHA will now approve purchase and refinance mortgage applications in states that treat PACE obligations as special assessments similar to property taxes.” That’s according to the July 19, 2016 press release, which explains that the reason PACE assessments have been troublesome in the past is | more...

July 6, 2016

FHA Announces Changes To Distressed Note Sales Program

By Joe Wallace

The FHA has announced changes to its Distressed Assets Stabilization Plan that would “have purchasers of severely delinquent mortgages offer qualified borrowers principal reductions and protection from payment shock,” according to the official site. An FHA press release states, “Certain families with distressed mortgages insured by the Federal Housing Administration (FHA) may soon be eligible for a reduction of their outstanding loan amounts should their mortgages be sold through DASP” and steps are being taken to prevent blighted neighborhoods. “FHA’s latest enhancements prohibit investors from abandoning low-value properties in high-foreclosure neighborhoods to prevent blight. FHA is also offering greater opportunity for non-profit organizations, local governments and other governmental entities to participate in DASP. Loans are not eligible to be sold through DASP unless and until all FHA loss mitigation efforts | more...

July 5, 2016

FHA Loans For Military Members

By Joe Wallace

There are a variety of reasons why a military member would consider buying a home with an FHA mortgage, including the desire to own a home instead of renting in a crowded military rental market. While it’s true that VA home loans are available for military members as part of their benefits, some may choose the FHA option instead. What should a military member know about FHA mortgages and refinance loans? The first thing some borrowers need to know is that, yes, it is possible to refinance a VA mortgage into an FHA mortgage loan. FHA refinance loans permit the refinancing of non-FHA mortgages for cash-out refinancing and “non-streamline” refinance options. You do not have to use your existing lender to refinance into an FHA mortgage, instead a borrower is | more...

June 24, 2016

FHA Loan Questions: Co-Borrowers

By Joe Wallace

A reader asks, “My husband is a co burrower on his mothers mortgage loan and he has been asking her to remove his name from it but she hasnt. The mortgage has affected his credit and has made it hard to get a home of our own. Can his name be removed from the mortgage or is this something we need a lawyer for?” Before answering this question, let’s examine how the FHA defines the role of a co-borrower. Page 128 of HUD 4000.1 states: “To be eligible, all occupying and non-occupying Borrowers and co-Borrowers must take title to the Property in their own name or a Living Trust at settlement, be obligated on the Note or credit instrument, and sign all security instruments. In community property states, the Borrowers | more...

June 2, 2016

FHA 203h Loans For Disaster Victims

By Joe Wallace

Did you know the FHA offers a type of home loan specifically for those recovering from a disaster? The FHA 203h loan is described in HUD 4000.1 (the FHA loan rulebook for Single Family Mortgage loans and refinance loans) as follows: “Section 203(h) of the National Housing Act authorizes FHA to insure Mortgages to victims of a Presidentially-Declared Major Disaster Area (PDMDA) for the purchase or reconstruction of a Single Family Property. Mortgages to be insured under Section 203(h) must be processed and underwritten in accordance with the regulations and requirements applicable to the 203(b) program.” Borrowers must have a minimum FICO score of 500 to qualify under FHA loan guidelines, and lender standards may also apply. The FHA 203h loan rules include the following for eligibility. “The previous residence | more...