Articles Published in: November 2015

November 13, 2015

FHA Home Loan Income Rules: Disability Income

FHA loan rules in HUD 4000.1 have requirements for the lender to follow when it comes time to verify income. One type of income the lender may need to verify is disability income from SSI, the VA, or private disability benefits. HUD 4000.1 has this to say about this type of income, starting with a basic definition of terms: “Disability Benefits are benefits received from the Social Security Administration (SSA), Department of Veterans Affairs (VA), other public agencies, or a private disability insurance provider.” “The Mortgagee must verify and document the Borrowers receipt of benefits from the SSA, VA, or private disability insurance provider. The Mortgagee must obtain documentation that establishes award benefits to the Borrower.” The timing of such benefits is crucial, as HUD 4000.1 adds, “If any disability | more...

November 13, 2015

HUD 4000.1 Appraisal Rules: Required Repairs

By Joe Wallace

FHA loan appraisal rules found in HUD 4000.1 give the lender specific instructions on how to proceed with an FHA loan during the appraisal process. HUD 4000.1 has some very specific language that can help a borrower understand key issues surrounding FHA mortgage loans, including why an FHA appraisal should not be mistaken for a “home inspection” nor used in place of one. The FHA appraisal is carried out to make sure the home meets minimum standards, and where a home does not, require minimum repairs or corrections to the property to bring it up to minimum standards. According to HUD 4000.1: “As the on-site representative for the Mortgagee, the Appraiser provides preliminary verification that a Property meets the Property Acceptability Criteria, which includes HUDs Minimum Property Requirements (MPR) and | more...

November 12, 2015

HUD 4000.1 On Lead Paint Disclosures

By Joe Wallace

Since the FHA and HUD published the new single family home loan rulebook, HUD 4000.1 earlier in 2015, we have been examining important aspects of that rulebook. The FHA changed/updated some portions of the rules, added other portions to existing regulations, and issued a message that lenders were expected to become familiar with HUD 4000.1 as a whole, rather than try to explain each and every instance of changed or modified policy in the new publication. So we’ve been tackling some of these relevant issues, discussing them individually as they appear in HUD 4000.1. One such issue has to do with lead paint disclosure requirements. HUD 4000.1 states, “If the Property was built before 1978, the seller must disclose any information known about lead-based paint and lead-based paint hazards before | more...

November 12, 2015

The FHA Appraisal Process: Selecting The Appraiser and Appraisal Integrity

By Joe Wallace

HUD 4000.1, the new FHA single family home loan rulebook, has specific instructions to participating FHA lenders about the appraisal process. An appraisal is required as we learn from this line in Part II Section A of the rulebook: “The Mortgagee must order a new appraisal for each Mortgage or refinance case number assignment and may not reuse an appraisal that was performed under another case number, even if the prior appraisal is not yet more than 120 Days old.” The mortgagee, or participating lender, is required to insure the integrity of the appraisal process as follows: “Appraisers must comply with the Uniform Standards of Professional Appraisal Practice (USPAP), including the Competency Rule, when conducting appraisals of Properties intended as security for FHA-insured financing.” “In appraising any Property for the | more...

November 11, 2015

Happy Veterans Day 2015

By Joe Wallace

Today is Veterans Day. Many banks will be closed, bond markets are closed, and we pause in our usual routine of answering questions about FHA home loans to celebrate the holiday. Today is a day to thank a veteran for his or her service, and remember the sacrifices our troops have made. To all current and former members of the U.S. military, THANK YOU for your service! Our regular posting schedule resumes tomorrow.

November 10, 2015

Mortgage Rate Trends: Highest Since Summer

By Joe Wallace

Monday say mortgage loan rates move higher for yet another day in a row, putting rates at their highest best-execution numbers since mid-summer. Much of the upward trend at present is blamed on Fed discussions of an interest rate hike, and it seems likely (at least according to our sources) that a December rate increase could be on the table. Any talk of rising rates at this point or indications that the Fed might be inclined to raise them could put more upward pressure on mortgage loan rates due to investor reaction to such news or indicators. Some of those indicators don’t come from the Fed directly, but from economic data releases the Fed is likely to take into consideration when it comes to the overall health of the economy | more...

November 9, 2015

Are FHA Loans Permitted For Living Trusts?

By Bruce Reichstein

Here’s a question that doesn’t come up that often, but is still an important aspect of the FHA loan program you might one day need to know: Are FHA home loans available for living trusts? The new FHA single family home loan rules published in HUD 4000.1 address this issue. The rules state: “The Mortgagee may originate a Mortgage for a living trust for a Property held by the living trust, provided the beneficiary of the living trust is a Cosigner and will occupy the Property as their Principal Residence, and the trust provides reasonable means to assure that the Mortgagee will be notified of any changes to the trust, including transfer of beneficial interest and any changes in occupancy status of the Property.” Note the occupancy requirement, which is | more...

November 9, 2015

Mortgage Rate Trends: Higher On Friday After Strong Jobs Report

By Joe Wallace

Last week was a tough one for mortgage loan rates–a strong jobs report, Fed testimony on a possible December interest rate hike, and more have combined and helped to push mortgage rates higher. Since our last report, 30-year fixed rate conventional mortgages have broken into the low four percent zone; at the time of this writing those rates (best execution) are reported in a range between 4.0% and 4.125%. FHA mortgage rates have also moved higher, leaving the previous comfort zone (best execution) of 3.5% behind in favor of rates at 3.75%. Rates shifted so dramatically that FHA mortgage best execution rates didn’t even move into a range of rates with the previously reported 3.5% at the low end–we just saw them shift from 3.5% to 3.75%. Remember, these are | more...

November 6, 2015

FHA Loan Rules For Alimony, Debt-To-Income Calculations

By Joe Wallace

A reader got in touch with us with a question about how FHA loan rules view alimony payments as part of the debt to income ratio calculation. “I pay a certain monthly amount of alimony to my ex-spouse, in addition to usual monthly credit card payments, and utilities, food, etc. I receive considerable income tax reductions due to making the alimony payments, which means that I have more disposable income to live on than I otherwise would have.” “I understand that the FHA can/will take that into account in computing my debt to income ratio. Is that true, and can you explain how it works?” FHA loan rules governing the debt-to-income ratio are found in HUD 4000.1, which has the following instructions to the lender, starting with the FHA definition | more...

Can I buy a manufactured home with an FHA loan?

November 6, 2015

FHA Loan Rules, Non-Borrowing Spouses, and Judgments

By Joe Wallace

A reader got in touch recently to ask if a financial judgment against a non-borrowing spouse could be a liability when applying for an FHA mortgage loan. The answer really depends on whether the borrower resides in a community property state, and whether community property laws in that state might have something to say about how a legally married couple applies for a major financial obligation such as a home loan. FHA loan rules have specific guidance for the lender in community property states when it comes to issues like debts, judgments or other financial issues affecting the non-borrowing spouse. These rules are found in HUD 4000.1 and state: “If the Borrower resides in a community property state or the Property being insured is located in a community property state, | more...