Articles and news about FHA loans and HUD requirements. FHA loans are great for first-time homebuyers.

Monthly Archives: November 2015

FHA Loans After A Deed-In-Lieu Of Foreclosure

108A reader question came in recently asking about the possibility of getting an FHA home loan following a deed-in-lieu of foreclosure (DIL) action. “Is a deed-in-lieu derogatory on a credit report?” was one of the questions. The answer to that is that yes, a deed-in-lieu is considered a negative on your credit report. But FHA loans do offer some hope for borrowers who have since the deed-in-lieu established good credit once more.

FHA loan rules in HUD 4000.1 cover the requirements in these circumstances for single-family “forward mortgages” after a deed-in-lieu of foreclosure, and those rules include mandatory waiting times or “seasoning periods” following the DIL.

When can a borrower apply for a new FHA home loan after a deed-in-lieu? According to HUD 4000.1:

“A Borrower is generally not eligible for a new FHA-insured Mortgage if the Borrower had a foreclosure or a DIL of foreclosure in the three-year period prior to the date of case number assignment.”

The waiting period start date is sometimes a confusing issue–when does the clock start ticking for the borrower in these cases? HUD 4000.1 states that the three year mandatory waiting period starts, “on the date of the DIL or the date that the Borrower transferred ownership of the Property to the foreclosing Entity/designee.”

How long it may take to transfer ownership back to the foreclosing entity is an entirely separate issue and is not addressed in this section of the FHA loan rulebook. Borrowers may find that it can take longer than expected to transfer the ownership back–something to keep in mind when considering your options.

The three year rule mentioned above does have some exceptions, according to HUD 4000.1:

“The Mortgagee may grant an exception to the three-year requirement if the foreclosure was the result of documented extenuating circumstances that were beyond the control of the Borrower, such as a serious illness or death of a wage earner, and the Borrower has re-established good credit since the foreclosure.”

Such circumstances are subject to FHA loan rules and lender standards. For example, divorce, and an inability to sell the home prior to a relocation move are not considered under this exception as a factor:

“Divorce is not considered an extenuating circumstance. An exception may, however, be granted where a Borrowers Mortgage was current at the time of the Borrowers divorce, the ex-spouse received the Property, and the Mortgage was later foreclosed. The inability to sell the Property due to a job transfer or relocation to another area does not qualify as an extenuating circumstance.”

Each situation is considered on a case-by-case basis, so your individual circumstances will definitely be a consideration. Also, a borrower’s other credit activity in the months and years after the deed-in-lieu are also considered.

Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:

http://www.fha.com/fha_loan_limits_widget

 

Mortgage Loan Interest Rate Trends: Holding Steady on Black Friday

093Thursday was Thanksgiving, and with banks closed and the markets also not doing business, it was a short week. Mortgage loan rates stayed absolutely quiet on Friday, no surprise there as all eyes were on the Black Friday shopping news and other developments.

But the coming week has some important scheduled economic data releases including jobless claims and the employment situation report. Factory orders is also a report due out this week–lots of potential indicators as to where the economy is heading (or is currently at) and that will no doubt fuel speculation about the Fed’s decisions about a possible December rate hike.

In short, there is potential for volatility this week that borrowers on the fence about locking or floating should consider while making the choice. Floating could get riskier the farther into the week we go.

Locking and floating are decisions only the borrower can make, but it’s crucial in times like these to ask advice from your lender. Depending on who you ask, you may be advised to lock this week (especially if your closing date is near) or you could be told that floating might be acceptable in the mid-term.

But with the Fed still considering that December interest rate hike, the closer we get to the Fed announcement the higher the potential for upward momentum in the rates gets.

Investor reaction to the situation is one potential cause of volatility here, another is the potential for influential breaking news combined with an already volatile rate environment that could have short term consequences. Borrowers should consider all these things ahead of the lock/float decision. Your tolerance of the risks involved with floating will inform–or should inform–your decision.

At the time of this writing, 30-year fixed rate conventional mortgages are holding between 4.0% and 4.125% best execution. FHA mortgage loan rate are, best execution, in a comfort zone at 3.75%. FHA rates tend to vary more among participating lenders. The rates you see here are not available to all borrowers or from all lenders–your experience may vary depending on your FICO scores and other financial qualifications.

Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:

http://www.fha.com/fha_loan_limits_widget

 

FHA Loan Limits For 2016?

2015-02Close to the end of each calendar year, the FHA and HUD issue a set of FHA loan guarantee limits for the coming new year.

These limits, issued by county and variable depending on the housing market and other factors, do not put a cap on the amount of the actual loan you can apply for under the FHA single family home loan program, but the limits do regulate the amount of the loan guarantee by the government.

The FHA loan limits are described on the FHA/HUD official site–the following information was issued last year and effective for the 2015 calendar year:

“Each year, FHA recalculates its national loan limit based on a percentage calculation of the national conforming loan limit.”

“Depending on those limits, FHA’s minimum national loan limit “floor” is at 65 percent of the national conforming loan limit. The floor applies to those areas where 115 percent of the median home price is less than 65 percent of the national conforming loan limit.”

“Conversely, any area where the loan limit exceeds the “floor” is considered a high cost area. The maximum FHA national loan limit “ceiling” is at 150 percent of the national conforming limit. In areas where 115 percent of the median home price (of the highest cost county) exceeds 150 percent of the conforming loan limit, the FHA loan limits remain at 150 percent of the conforming loan limit.”

The FHA/HUD official site adds that certain markets may be eligible for FHA loan limits, “above the national standard limit, and up to the national ceiling level, based on median area home prices.”

FHA has not, at the time of this writing, issued the loan limits for 2016, but they should be coming out quite soon.

When the new limits for 2016 do become available, the FHA and HUD will issue a mortgagee letter detailing those limits, any changes (or lack thereof, depending on housing market conditions in a given year) and conditions which may apply.

As soon as the 2016 FHA single family home loan limits are made available, we’ll discuss them in a blog post here.

Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:

http://www.fha.com/fha_loan_limits_widget

 

Mortgage Loan Interest Rate Trends: Flat Ahead of Holiday Break

093

Mortgage loan interest rates were described by market watchers as “flat” on Wednesday before the Thanksgiving holiday. Markets were closed on Thursday and while some volatility is possible the day before a holiday, everything was basically quiet.

Friday’s trading day may or may not be marked by some movement of the mortgage rates (that hasn’t happened at the time of this writing) but industry professionals don’t expect any major developments to occur until next week when scheduled events, breaking news, and other factors could conspire to move rates up or down depending on investor reaction to those things.

Next week there is some potential for volatility due to scheduled data releases. Jobless claims, non-farm payrolls, and unemployment figures all come out late in the week–those economic data releases do have the power to move rates depending on investor reaction to the information in those reports.

For now, 30-year fixed rate conventional mortgages are holding at between 4.0% and 4.125% best execution (depending on the lender) and we see no movement from the FHA loan best execution comfort zone of 3.75%.

Best execution rates are available to those with outstanding FICO scores and other financial qualifications–your experience may vary. The rates you see listed here are not available from all lenders or to all borrowers.

Some advice to those uncertain about locking or floating at the moment includes the notion that much won’t happen until next week; some believe there is a lower risk in floating at the present time. That said, floating is never risk-free, so make the most informed choice you can and decide accordingly. It never hurts to ask the advice of your lender.

Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:

http://www.fha.com/fha_loan_limits_widget

 

Happy Thanksgiving 2015!

100We pause from our usual discussion of FHA loans, answering reader questions about FHA mortgages and refinancing, and FHA loan rules to celebrate the holiday with friends and family. Thank you for reading! We look forward to resuming our normal posting schedule after the holiday.

Have a safe and happy Thanksgiving!

HUD Settlement With Illinois Landlord Over Lead Hazard

002The FHA/HUD official site has issued a press release announcing a settlement in a case involving lead hazards in Illinois rental properties. This may seem at first glance to have nothing to do with FHA home loans. But this case is an important reminder of why it is so important to report issues connected with fair housing, hazardous conditions in housing, and related issues–the victims in cases like these are often the only defense against continued violation of federal laws, environmental guidelines, etc.

According to HUDNo. 15-151, the Department of Housing and Urban Development, “announced a settlement with a Rockford, Illinois landlord to resolve a claim he failed to inform tenants, some with young children, that their homes may contain potentially dangerous lead.”

According to the press release, the agreement requires the landlord, “to replace windows and clean up lead‑based paint hazards in 50 rental properties containing a total of 52 units (see attached list of properties). In addition to the $308,000 worth of lead abatement work, Hardesty agreed to pay $5,000 in penalties.”

HUD alleges that the landlord, “violated the Federal Residential Lead-Based Paint Hazard Reduction Act (Residential Lead Act) by failing to inform tenants that their homes may contain potentially dangerous levels of lead. Winnebago County health department officials identified at least seven children with elevated blood lead levels in the properties Hardesty leased. Investigations by the health department identified lead‑based paint and lead-based paint hazards in the units.”

Lead poisoning in the home is, “entirely preventable but it requires all of us to recognize that we share a responsibility to protect our vulnerable populations, especially young children who are still developing, said Matt Ammon, Director of HUDs Office of Lead Hazard Control and Healthy Homes, who was quoted in the press release. He adds, Landlords of homes built before 1978 have a legal responsibility to make their tenants aware of lead-based paint and lead-based paint hazards they know about or that may be in their homes so that tenants can protect their families.

The FHA/HUD official site reminds residents and landlords that the “Lead Disclosure Rule” requires home sellers and landlords of housing, “built before 1978 to disclose to purchasers and potential tenants knowledge of lead-based paint or lead-based paint hazards using a disclosure form, signed by both parties, attached to the sales contract or lease containing the required lead warning statement, provide any available records or reports, and provide an EPA-approved Protect Your Family From Lead in Your Home information pamphlet.”

“Sellers must also provide purchasers with an opportunity to conduct a lead-based paint inspection and/or risk assessment at the purchasers expense. Acceptable lead disclosure forms can be found at www.hud.gov/offices/lead/dislcosureruleand www.epa.gov/lead/pubs/leadbase.htm.”

The “sellers and landlords” line is an important reminder that lead paint issues such as those mentioned here do affect FHA home loan transactions and not just rental properties.

Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:

http://www.fha.com/fha_loan_limits_widget

Mortgage Loan Interest Rate Trends: Holding Steady After Some Upwards Movement

093Monday say mortgage rates moving slightly higher, while on Tuesday rates held steady. There’s some market volatility this week for reasons that include the Thanksgiving holiday–rates may well move into a defensive posture on Wednesday in anticipation of the down day on Thursday.

Add to that the uncertainty over a Fed interest rate hike in December and you have a combination of factors that equals a risky time to float, at least in the minds of some industry pros.

30-year fixed rate conventional mortgages are, at the time of this writing, between 4.0% and 4.125% depending on the lender (best execution). The rate changes we’ve seen this week so far may be reflected in closing costs rather than an actual higher interest rate, so borrowers should know that when they apply. Some of the smaller increases in interest rates are often reflected in this way.

FHA mortgage loan interest rates are holding in a best execution comfort zone of 3.75%. FHA rates may vary more among participating lenders than their conventional counterparts, and access to best execution rates depends greatly on the borrower’s FICO scores and other financial qualification. Your experience may vary. Best execution rates aren’t available to all borrowers or from all lenders.

Some professionals are advising borrowers to get an interest rate lock commitment from the lender now, especially those who are within 15-30 days of closing. Your degree of risk tolerance will determine how wise it is to “float” in the current rate environment, especially since the Fed rate hike issue is, in the short term, far from being put to rest one way or the other.

Ask some advice of your lender before deciding to lock or float. Floating is never without risk, but many agree that floating is riskier now in the short term given what we haven’t yet heard from the Fed about interest rates come December.

Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:

http://www.fha.com/fha_loan_limits_widget

HUD 4000.1 On Appraisals: Sewage Systems

089In a recent blog post, we examined what FHA loan rules in HUD 4000.1 say about water utility systems. Borrowers and sellers alike should know the FHA stance on public utilities–especially where it comes to water hookup:

“The Mortgagee must confirm that a connection is made to a public or Community Water System whenever feasible and available at a reasonable cost. If connection costs to the public or community system are not reasonable, the existing onsite systems are acceptable, provided they are functioning properly and meet the requirements of the local health department.”

That’s part of the entry in HUD 4000.1 about water utility systems, but there is also a separate entry for sewage. This entry begins by basically restating the above for clarity:

“The Mortgagee must confirm that a connection is made to a public or community sewage disposal system whenever feasible and available at a reasonable cost. If connection costs to the public or community system are not reasonable, the existing Onsite Sewage Disposal Systems are acceptable provided they are functioning properly and meet the requirements of the local health department”.

As you can see, state/local laws will apply in such cases–FHA loan rules never overrule state or local building code, ordinances, etc.

FHA loan rules state that when an on-site disposal system is not available, an alternative may be used, but that alternative off-site system must also live up to state/local requirements:

“When the Onsite Sewage Disposal System is not sufficient and an off-site system is available, the Mortgagee must confirm connection to an off-site sewage system. When the Onsite Sewage Disposal System is not sufficient and an off-site system is not available, the Mortgagee must reject the Property unless the Onsite Sewage Disposal System is repaired or replaced and complies with local health department standards.”

Some borrowers have questions about these issues, but much depends on what the local laws say, so in cases where an unresolved issue is at hand, consulting the local authority is the best first step towards the answer. An experienced real estate agent may also be able to give some general advice as to the local requirements.

Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:

http://www.fha.com/fha_loan_limits_widget

Get Ready For Your FHA Cash Out Refinance Loan

2015-18aWhen you buy a home with a conventional, FHA, or other type of home loan product, one day you may wish to refinance to take advantage of the equity you’ve built up in the home. An FHA cash-out refinance loan can help you do that. With a little planning you can make the most of your refinance experience.

The first step is to figure out how much time you need to prepare for the loan. There are closing costs, and a new credit application and appraisal will be required. Saving money for the appraisal is a good idea, and if you wish to purchase discount points on your cash out loan you can pay for them up front with reduced stress on your monthly budget if you take enough time to save in advance.

The credit check is problematic for some applicants if they haven’t got a full 12 months of on-time payments on the existing mortgage and other financial obligations. Be sure you have this full 12 months of on-time payments before you apply for best results.

Part of getting ready for the credit check is pulling your credit reports and checking both your FICO scores and your record to insure there are no errors or outdated information. Check with the three major credit reporting agencies: Equifax, TransUnion, and Experian.

This is something all borrowers should do early in the planning stages–if you need to dispute or otherwise correct a credit report, you will need time to do so, and checking four to five months ahead of your loan application may not be enough time to get any required corrections made or disputes settled.

When considering an FHA cash out refinance, it’s good to remember that this type of FHA refinance loan can be taken out on existing FHA loans and non-FHA mortgages alike. You may find refinancing to your advantage in the case of non-FHA mortgages thanks to lower interest rates on FHA loan products than conventional mortgages.

You can always use a mortgage loan calculator online to see how much you might lower your monthly payments (where applicable due to lower interest rates) by refinancing. If you are specifically looking for a lower mortgage payment on an existing FHA loan, an FHA streamline refinance (no cash out) might be a better fit for you.

Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:

http://www.fha.com/fha_loan_limits_widget

FHA Loan Minimum Property Requirements in HUD 4000.1: Water Supply, Wells

2015-33FHA loan rules covering minimum property requirements (for all homes to be purchased with a single-family FHA loan) are found in HUD 4000.1. The topic of water supply to the home is one that frequently comes up when borrowers or soon-to-be FHA loan applicants look at homes that are serviced by wells or other “alternative” types of water supply other than a public utility.

What do FHA loan rules have to say about the water supply to the home? HUD 4000.1 begins by stating:

“The Mortgagee must confirm that a connection is made to a public or Community Water System whenever feasible and available at a reasonable cost. If connection costs to the public or community system are not reasonable, the existing onsite systems are acceptable, provided they are functioning properly and meet the requirements of the local health department.”

Note that this language is fairly general–state or local laws/building code/etc. may and often do apply above and beyond this.

For properties that are served by wells, FHA loan rules state:

“When an Individual Water Supply System is present, the Mortgagee must ensure that the water quality meets the requirements of the health authority with jurisdiction. If there are no local (or state) water quality standards, then water quality must meet the standards set by the EPA, as presented in the National Primary Drinking Water regulations in 40 CFR 141 and 142.”

As you can see, FHA loan rules depend heavily on the local ordinances in this area, or federal law where no local guidelines exist. Well water brings up a variety of other potential side issues–something as simple as pest control (as required by FHA loan rules or state/local ordinance) may be affected by the presence of a well on the property.

From HUD 4000.1: “Soil poisoning is an unacceptable method for treating termites unless the Mortgagee obtains satisfactory assurance that the treatment will not endanger the quality of the water supply.”

And what about situations where a property is served by a shared well? FHA loan rules discuss this at length:

“The Mortgagee must confirm that a Shared Well:

–serves existing Properties that cannot feasibly be connected to an
acceptable public or Community Water supply System;

–is capable of providing a continuous supply of water to involved Dwelling Units so that each existing Property simultaneously will be assured of at least three gallons per minute (five gallons per minute for Proposed Construction) over a continuous four-hour period.

(The well itself may have a lesser yield if pressurized storage is provided in an amount that will make 720 gallons of water available to each connected existing dwelling during a continuous four-hour period or 1,200 gallons of water available to each proposed dwelling during a continuous four-hour period. The shared well system yield must be demonstrated by a certified pumping test or other means acceptable to all agreeing parties.);

–provides safe and potable water. An inspection is required under the same circumstances as an individual well. This may be evidenced by a letter from the health authority having jurisdiction or, in the absence of local health department standards, by a certified water quality analysis demonstrating that the well water complies with the EPAs National Interim Primary Drinking Water Regulations;

–has a valve on each dwelling service line as it leaves the well so that water may be shut off to each served dwelling without interrupting service to the other Properties; and

–serves no more than four living units or Properties.”

FHA loan rules in this area may be supplemented by state or local requirements that must also be observed.

Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:

http://www.fha.com/fha_loan_limits_widget