Articles Published in: July 2015

When Is An FHA Loan Better Than A Conventional Loan?

July 14, 2015

FHA Refinance Loans: With Appraisal Or Without Appraisal?

For borrowers examining their refinance loan options, it’s important to know what kind of refinance loan you want so you can plan ahead for expenses that might be related to the loan such as appraisals and up-front closing costs. Some borrowers assume that certain types of refinancing never require an appraisal, but this is not true–FHA loan rules for Streamline Refinancing, for example, say that no appraisal is required by the FHA but the lender may ask for one regardless. This surprises some applicants, and we get a fair number of inquiries asking if certain lender policies (including “appraisal required” streamline loans) are legitimate. “My understanding is that the FHA rules don’t require an appraisal for this refinance loan. My lender says I will need one for my streamline refinance | more...

July 14, 2015

FHA Loans And Your Credit History: One Important Thing To Remember

By Joe Wallace

Are you planning to apply for an FHA home loan soon? There are many credit issues to consider when planning for your mortgage–avoiding new lines of credit before applying, eliminating lines of credit you no longer need or use, checking your FICO scores, etc. But there’s one easy-to-overlook thing all borrowers should do before applying for a new home loan: Review your payment history on all financial obligations. It is highly recommended that borrowers have 100% on-time payments on all bills 12 months prior to applying for a new home loan. That 12 month payment record will definitely be scrutinized by your lender and it’s a very important factor in loan approval. This is true in all cases, but it’s especially relevant for borrowers who have worries that their FICO | more...

July 13, 2015

What You Should Know About FHA Loan Appraisal Fees

By Joe Wallace

Based on the reader questions we get in our comments section, there can be some confusion over the nature of FHA appraisals, appraisal fees, and compliance inspections. The appraisal process is an important part of the overall experience of buying a home with an FHA mortgage loan; borrowers should budget for appraisal fees and anticipate needing to pay for a compliance inspection (just in case). The appraisal process can include a required compliance inspection should the appraiser note conditions that must be corrected as a condition of loan approval. The compliance inspection requires a separate fee and when it’s time to budget for the appraisal process the borrower should assume the compliance inspection might be required. The amount of the appraisal fee and compliance inspection fee will vary depending | more...

July 13, 2015

FHA Home Loans: Brokers, Escrow, and Fees

By Joe Wallace

There are many expenses and services associated with an FHA home loan. Some borrowers experience confusion over some of these, not knowing which are optional, which are mandatory, and what to do about the expenses. Mandatory services include appraisal fees, flood zone determinations (where appropriate), and credit report fees. Optional services include home inspections (strongly recommended) and brokers. When it’s time to pay credit report fees, the borrower may not be charged more than the actual cost of these services; appraisal fees are required no matter what the outcome of the appraisal. These are two examples of FHA loan fees for services rendered–the service must be paid for no matter what the results of those services might be. With respect to brokers, some might assume that they need a broker | more...

July 11, 2015

FHA Loan Mortgage Interest Rate Trends: Moving Up

By Joe Wallace

FHA and conventional mortgage loan interest rates had a rocky week. On Friday rates moved higher for the second day in a row, which has erased the progress we had seen in the rates since investors started worrying about more significant stock market woes in China. Overseas economic developments can and do influence mortgage loan rates, but that influence can be fickle and subject to change. What looked dire a day or two ago (and gave some welcome downward movement in mortgage loan interest rates) is now suddenly no longer as much of a factor where FHA mortgage rates are concerned. 30-year fixed rate conventional mortgage loan interest rates had been flirting with the bottom of the four percent range, best execution. Now those rates are back up to a | more...

July 10, 2015

FHA Loans and Counseling Services: The Rules

By Joe Wallace

There are some cases where a borrower may seek out housing counseling on their own, and others where the applicant is required to do so as a condition of FHA loan approval. FHA foreclosure avoidance programs may require housing counseling, HECM loans definitely require the applicants to get required counseling sessions, and borrowers may choose a pre-purchase counselor based on a referral from the FHA/HUD. In some cases, such as with foreclosure avoidance, the counseling is free. In other cases there may be fees associated with the sessions that the borrower is expected to pay for. In such cases, the FHA loan program has rules that dictate how the counseling is to be carried out, how the billing is to be done, and what services the borrower must get from | more...

July 10, 2015

HUD Announces Final Rule On Fair Housing

By Joe Wallace

The FHA/HUD official site has announced a final rule that will promote and clarify fair housing requirements. A press release titled, “HUD Announces Final Rule On Affirmatively Furthering Fair Housing” announces both new procedures and simplified fair housing rules. According to the press release, the new final rule will “equip communities that receive HUD funding with data and tools to help them meet long-standing fair housing obligations in their use of HUD funds. HUD will also provide additional guidance and technical assistance to facilitate local decision-making on fair housing priorities and goals for affordable housing and community development.” For many decades, the communities that receive funding from the Department of Housing and Urban Development are required to observe fair housing rules so that all eligible applicants can receive help getting | more...

July 9, 2015

FHA Home Loan Closing Policies

By Joe Wallace

In a recent blog post, we discussed some of the rules for closing the deal on an FHA home loan. Did you know that FHA loan rules found in HUD 4155.2 cover specific aspects of the loan closing procedure including taxes, closing costs, and title issues? Chapter Six of HUD 4155.2 explains these policies. For example, in Chapter Six we learn that the lender is permitted to calculate–and collect–property tax payments under the right circumstances: “…The lender may project real estate tax payments, and collect those funds as a portion of the monthly escrow account payment without violating the Real Estate Settlement Procedures Act (RESPA). RESPA requires that a borrower receive an initial escrow account statement at settlement or within 45 days of settlement. In conducting this analysis, RESPA permits | more...

July 9, 2015

FHA Loans, Bankruptcy, and Short Sales

By Joe Wallace

There are many circumstances that can lead to bankruptcy and/or a short sale of the home. We get many reader questions about these scenarios. One recent question involves a married couple who were discharged bankruptcy three years ago, but are currently facing a short sale of their home. Does the couple qualify for a new FHA mortgage loan under such circumstances? There are many factors that could determine whether a lender is able to work with a borrower on a new FHA mortgage or not. One obvious one is credit rating and credit activity since the bankruptcy. Borrowers who have built up good credit since the discharge of the bankruptcy may find a lender willing to work with them–establishing reliable credit history after a “negative economic event” is one of | more...

July 8, 2015

FHA Mortgage Rate Trends: Moving Lower

By Joe Wallace

Mortgage loan rates are as low as they’ve been in about a month; economic headlines from Greece and China are contributing to that move lower, but as some market watchers are quick to point out, it’s important to beware such influence since there’s just as much potential for rates to begin moving higher again if it turns out that these economic conditions–which are currently encouraging investors to behave in ways that currently favor lower rates–aren’t as dire as they seem to be now. We’re still seeing reports of 30-year fixed rate conventional loans at a best execution range between 4.0% and 4.125%, but more lenders are reporting best execution rates at 4.0% than in previous days. FHA mortgage loan rates are also still in their recent range between 3.75% and | more...