Articles Tagged With: RESPA

When Is An FHA Loan Better Than A Conventional Loan?

December 31, 2015

FHA Loan Rules In HUD 4000.1 On Closing Costs, Discount Points

FHA loan rules in HUD 4000.1 include some instructions to the lender about closing costs, discount points, down payment funds, and much more. Can a borrower use closing costs as part of his or her down payment? What does the FHA rulebook say about interest rate lock-in fees? There are many rules and regulations–borrowers and lenders alike should be familiar with the guidelines. For example, when it comes to the down payment question, FHA loan rules are clear that the down payment money is a separate and distinct thing from closing costs. Specifically, HUD 4000.1 states: “The Mortgagee is not permitted to use closing costs to help the Borrower meet the Minimum Required Investment (MRI).” So that means an FHA borrower will need to budget for both closing costs and | more...

September 11, 2013

FHA Loan Rules Updated: Maximum Loan Amounts For Streamline Refinancing

By Joe Wallace

The FHA and HUD have updated some of the rules used to calculate maximum mortgage loan amounts for FHA Streamline Refinancing loans. According to Mortgagee Letter 2013-29, there are new guidelines to lenders on how the maximum amount is calculated, and what can be included in the loan amount when calculating the mortgage amount. “Mortgagees are reminded that when processing an FHA-insured streamline refinance mortgage, the new maximum mortgage amount must always be calculated starting with the outstanding principal balance on the existing mortgage, not with the payoff amount for the existing mortgage.” Borrowers should know the difference between the outstanding balance and the payoff amount. According to the Consumer Financial Protection Bureau (CFPB) official site, “Your payoff amount is how much you will actually have to pay to satisfy | more...

June 11, 2013

HUD, Bank of American Settle Home Loan Refinance Discrimination Case

By Joe Wallace

The FHA/HUD official site has issued a press release announcing the settlement of a housing discrimination case involving Bank of America, “settling allegations that the Charlotte, NC-based lender and Fannie Mae violated the Fair Housing Act by denying a borrower’s application to modify her mortgage loan because she did not provide sufficient information about the nature of her disability.” We report on such cases here as they happen as a reminder to borrowers that they are often the only line of defense against violations of the Fair Housing Act. Without reporting such discrimination cases, it’s possible they may never be prosecuted or settled. In this particular instance, HUD officials make it quite clear what the rules are. “People with disabilities should not have to answer unnecessary questions about the nature | more...

June 3, 2013

FHA Loan Reader Questions: Bankruptcy Issues

By Joe Wallace

A reader asks, “I recently completed a debt reorganization on ch 11 bankruptcy. My plan is 5 years. I will not be discharged until then (5 years).” “However, I would like to refinance my mortgage loan. my credit score is bad because I am in bankruptcy for the next 5 years. Can I refinance ? Can a FHA loan help me and would they refinance my existing loan?” FHA loan rules have plenty to say about bankruptcy issues. For example, in HUD 4155.1 Chapter Four, we find the following: “A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have elapsed since the date of the discharge of the bankruptcy. During this time, the borrower must have • re-established good | more...

May 2, 2013

FHA Loan Reader Questions: Short Sales, Credit Scores and FHA Loans

By Joe Wallace

A reader asks, “I was in the Independent Foreclosure Review. I was put in a modification for a year made all my payments and they sold my mortgage and then sent me a letter saying I was denied. I ended up short saleing on 7/5/11. My credit score is 561, what are my chances of getting an FHA loan?” Short sales in and of themselves may not be an automatic barrier to an new FHA home loan if the borrower was current on the mortgage at the time of the sale. You may find that in cases where there was a delinquency or late payments at the time of the short sale, a borrower may be required to wait at least 12 months from the time of the last late | more...

March 21, 2013

FHA Loan Answers: Child Support and Debt-To-Income Ratios

By Joe Wallace

A reader asks, “What about Child Support? My mortgage broker said that if it doesn’t come up on credit report it will not count as a deduction. However it does reflect on my paycheck every 2 weeks. My question is this considered a voluntary deduction at that point or was I misinformed?” FHA loan rules require a borrower’s debt-to-income ratio to be within certain limits in order to qualify for an FHA home loan, and while it’s true that FHA rules do take compensating factors into account, the amount the borrower is obligated to pay every month before the mortgage amount is important. What do the rules say about debt such as child support, alimony, etc.? The FHA official site says, “Most recurring obligations, including child support and alimony are | more...

March 20, 2013

FHA Loan Questions: Building Codes and Minimum Property Standards

By Joe Wallace

A reader asks, “My mom is trying to sell her house and when it was built it was on septic. When my parents bought the house in 1988, the neighborhood had been subsidized and city sewer was installed but not to their house that was already there prior to subsidizing.” “Now to get it on city sewer is gonna cost 13,000 dollars that she doesn’t have. A potential buyer has put a bid on the house and is applying for an FHA insured loan and they are saying it HAS to be hooked to city sewer. Is this correct or does her existing system which is up to codes and works appropriately acceptable?” The answer to this question may well depend on state or local building codes. In these cases | more...

October 30, 2012

FHA Warning On Scams Related to the National Mortgage Settlement

By Joe Wallace

In early 2012, a landmark mortgage settlement between five major lenders and the U.S. government was reached after complaints were filed regarding home loan abuses and foreclosure abuses. According to a Department of Justice press release dated March 12, 2012, “The Justice Department, the Department of Housing and Urban Development (HUD) and 49 state attorneys general announced today the filing of their landmark $25 billion agreement with the nation

October 11, 2012

FHA Loan Reader Question: Title I Loans For Remodeling/Rehab

By Joe Wallace

A reader asks, “I am interested in borrowing a small amt. of money for remodeling my home. Is there any way I can qualify for an FHA loan for this purpose? I have never had bankruptcy, never missed a payment, never defaulted on any loan…” Something called a Title I Home Improvement loans are described on HUD.gov as a way to do just what this reader question describes. According to the official site on the page titled “About Title I Home Improvement Loans” you’ll find the following description: “HUD insures private lenders against loss on property improvement loans they make. The applicant must have a good credit history and the ability to repay the loan in regular monthly payments. Both large and small improvements can be financed. Search HUD’s list | more...

June 29, 2012

Questions and Answers About Escrow Accounts and FHA Loans

By Joe Wallace

The Department of Housing and Urban Development official site at www.hud.gov offers a large amount of valuable resources for first time home buyers interested in purchasing a home with an FHA guaranteed mortgage loan. Among those resources are details of the Real Estate Settlement Procedures Act (RESPA) which governs a variety of aspects of the home loan process. One of those aspects is the escrow account–something many lenders may require as a part of doing business in a home loan transaction. What does RESPA say about escrow accounts? For starters, the FHA does not require an escrow account as a condition of loan approval. Escrow accounts may be required by the lender, but no lender should be telling you it’s because of FHA requirements or RESPA laws. HUD does regulate | more...