Articles Published in: October 2015

October 8, 2015

HUD 4000.1: FHA Loan Rules On Escrow Accounts

When the FHA and HUD switched over to the new FHA Single Family Home Loan policy handbook (HUD 4000.1), it restated some policies, redefined others, and made additions where needed. We’ve been examining FHA loan rules as published in HUD 4000.1 over a variety of topics to help borrowers and lenders alike understand FHA policy as it now stands in the new rulebook. One area some borrowers need information on is escrow accounts. FHA loan regulations address the use of escrow, but do not require it. Your lender might, and is free to do so under the FHA Single Family Home loan program, so it’s good to know the rules. The first thing HUD 4000.1 does is to define the term “escrow”: “An Escrow Account is a set of funds | more...

October 7, 2015

Mortgage Rate Trends: Higher Since Friday

By Joe Wallace

Monday saw mortgage loan rates moving higher, wiping out some of the gains seen on Friday. Tuesday rates were unchanged to slightly higher, depending on the lender. 30-year fixed rate conventional loans are, at the time of this writing on Wednesday morning, in a best-execution range between 3.75% and 3.875%. Higher closing costs are where some borrowers may notice the biggest difference in rates between Friday and today. FHA mortgage rates are still being reported, best execution, at 3.5%, though if the upward trend continues it’s unclear how long until FHA mortgage rates break out of that single number and into a range of rates with 3.5% at the low end. Remember, “best execution” refers to an ideal situation. The rates listed here are offered to potential borrowers with outstanding | more...

What you should know about FHA 203(h) Loans For Disaster Victims

October 7, 2015

FHA Loans, HUD 4000.1, and Second Appraisals: When One Can Be Ordered

By Joe Wallace

In our last blog post we discussed FHA appraisals, and the fact that FHA loan rules do not permit the request of a second appraisal simply to raise the value of the property or to eliminate required corrections listed on the original appraisal report. So when can the lender order a second appraisal? What circumstances justify this action? The answer can be found in HUD 4000.1, Section II, Part A. According to this part of the FHA loan rules under “Second Appraisals By Original Mortgagee”: “A second appraisal may only be ordered if the Direct Endorsement (DE) underwriter (underwriter) determines the first appraisal is materially deficient and the Appraiser is unable or uncooperative in resolving the deficiency. The Mortgagee must fully document the deficiency and status of the appraisal in | more...

October 7, 2015

FHA Loan Appraisal Rules: “Second Appraisal” Requests

By Joe Wallace

We get lots of questions about the FHA appraisal process in the comments section. Here is one of the most recent, which raises an important question about “replacement appraisals” or any request for a new appraisal that has to do with a dispute over valuation of the property. The reader asks, “I have a buyer who is buying a home. The home they are buying already had an appraisal completed. That deal fell through and my buyers offer was accepted. The sellers agent said that the original appraisal came in short and asked that we order a new one.” “He said his seller insists on a new appraisal because the original one done a few week before was less that the purchase price. Is is possible to request a new | more...

October 6, 2015

FHA Loan Appraisal Rules: The Roof

By Joe Wallace

A recent reader question about the FHA appraisal requirements had us looking up details on those requirements in the new FHA Single Family loan handbook, HUD 4000.1. The previous FHA loan rulebooks including HUD 4155.1 and HUD 4155.2 have been superseded by HUD 4000.1, so it seemed like a good idea to post the FHA’s current appraisal requirements for the roof since it’s one of the most commonly asked-about parts of the home with respect to the FHA appraisal process. When the FHA appraiser comes to review the property, the roof is one of the areas that must be evaluated. According to HUD 4000.1 Part II Section B: “The Appraiser must notify the Mortgagee of the deficiency of MPR or MPS if the roof covering does not prevent entrance of | more...

October 6, 2015

FHA Loans, FICO Scores, and First-Time Home Buyers

By Joe Wallace

A reader asked us a question about FHA loan FICO score requirements in the comments section recently, saying, “Im a first time home buyer and my credit score is 599 to 620 avg. from all 3 bureaus. All my credit cards are paid on time never been late. I dont have any negative accounts on my credit report. Do I have a chance of being approved?” There are two important issues to address with this reader’s question. The first is the reader’s status as a first-time home buyer. The FHA loan program itself does not provide any special status, preference, or benefits for first-time home buyers. That’s not to say that your chosen lender, won’t, or that there is not a state or local assistance program for first-time home buyers. | more...

October 5, 2015

FHA Loans For Non-Permanent Resident Aliens

By Joe Wallace

In our previous post we discussed the fact that United States citizenship is not required for borrowers who want to apply for an FHA home loan. A valid Social Security number is required, and there is a U.S. residency requirement that also needs to be met. That means that a variety of people who are not or are not yet citizens have a chance for an FHA home loan if they meet certain requirements (including proof of a valid SSN). The FHA loan rules for non-permanent resident aliens can be found in HUD 4000.1 Section II Part A, which lists the following instructions to the lender: “A Borrower who is a non-permanent resident alien may be eligible for FHA insured financing provided: –the Property will be the Borrowers Principal Residence; | more...

October 5, 2015

FHA Loan Rules, Citizenship, And The New HUD 4000.1 Rule Book

By Joe Wallace

In our comments section, a reader asked if citizenship is a necessity in order to get an FHA home loan. The reader mentioned that he was in the process of getting a Green Card, and that he had a valid Social Security Number. Do FHA loan rules as published in the new HUD 4000.1 permit this reader to apply for a new FHA mortgage loan even though he is not a United States Citizen? The answer is yes–citizenship is NOT a requirement to apply for an FHA mortgage. Proof of a valid Social Security Number is, and since the reader indicated that he had a valid SSN, the only thing needed to move forward is to find a participating FHA lender and fill out the loan application paperwork. Assuming, of | more...

October 3, 2015

Mortgage Rate Trends: Still Lower Depsite Ups And Downs

By Joe Wallace

On Friday a much anticipated jobs report came and went, offering what some market watchers describe as a strong excuse for the Fed not to raise interest rates. Rates on Friday started off strong, but some bond market turmoil did force a reversal of fortune, but not enough to keep rates from ending the day stronger than yesterday. How strong? 30-year fixed rate mortgage rates are squarely in 3.75% territory, best execution, with some more aggressive lenders offering best execution rates even lower than that. FHA mortgage loan rates moved out of the previously reported range and solidly into 3.5% territory, though FHA mortgage loan rates do tend to vary more among participating lenders than their conventional counterparts. Best execution rates are offered to those with outstanding FICO scores and | more...

October 2, 2015

FHA Loan Rules In HUD 4000.1: Deferred Liabilities And Student Loans

By Joe Wallace

We recently got a reader question in the comments section about FHA loan rules covering deferred payments on student loans. In the past we’ve reported that FHA loan rules state certain types of student loan deferments (as explained in the old HUD 4155.1) did not have to be counted in the borrower’s debt-to-income ratio. HUD 4000.1 is the new FHA Single Family Home Loan policy handbook and has plenty of updated information, modifications to rules, and restatements of current policy and supersedes HUD 4155.1. Here’s the reader’s questions about student loans: “I was told by my realtor recently, that my student loan debt, although its deferred for three more years under teacher forgiveness, that the lender she is working with will have to count student loan debt in my DTI, | more...