Articles Published in: July 2016

July 29, 2016

FHA Loan Questions: Appraisal Concerns

A reader asks, “I am about to put my house on the market. But now I’m starting to worry about a crack on the basement floor that has been there since I bought the house, I never worried about the crack, its due to the house settling to one side years ago. Other than that the house is structurally sound and basement is very dry. I think the house dips about 3/4 inch. Is this something that would cause an inspection to fail?” There are several issues that can make questions like these difficult to answer. The first is to remind borrowers and sellers alike that an FHA appraisal is NOT an inspection, nor does passing the FHA appraisal process equal an FHA stamp of approval on a property that | more...

July 28, 2016

Mortgage Rate Trends: Slightly Lower After Fed

By Joe Wallace

All eyes were on the Fed on Wednesday, with investors looking for any sign of a Fed move to hike interest rates. Some market watchers thought the Fed might drop a hint or make specific statements about what it might do in the next meeting; the Fed made no such statements. The reaction to this was mixed, some lenders repriced for the better, but not all. You may see changes in the next business day but as it stands at the time of this writing, things are (best execution) more or less where they were yesterday, with some lenders offering slightly lower rates or closing costs. 30-year fixed rate best execution interest rate numbers are at or near 3.5% at the time of this writing, with FHA mortgage rates still | more...

July 27, 2016

FHA Loan Questions: Income Verification

By Joe Wallace

A reader asks, “I threw out my pay stubs not knowing that I would be purchasing a home this soon. Is there anything else that can be used in place of pay stubs to get approved for an FHA loan?” “I provided copies of my last four pay checks, a statement from my employer showing my cumulative earnings so far this year, my original W2s from 2014 and 2015, my federal and state taxes from 2014 and 2015, and three months worth of bank statements that show the direct deposit from my employer every two weeks for those three months.” In general, you may find that tax documentation, current pay stubs, and bank statements COULD provide an acceptable substitute, depending on the lender. However, this is a situation that requires | more...

July 27, 2016

Mortgage Loan Interest Rate Trends: Highest In Four Weeks

By Joe Wallace

There have been many influences on lower mortgage rates as of late, and as the trend has shifted to a move higher, we’re seeing stateside economic data returning to a greater place of influence over rates than Brexit headlines. One good example? All eyes are turning to the Fed this week-nobody expects the Fed to make any earth-shattering pronouncements, but investor reaction to this week’s activity could well pressure rates higher depending on circumstances. In the shadow of a Fed policy announcement on Wednesday, mortgage rates pushed higher on Tuesday, putting 30-year conventional fixed rate loans more solidly in 3.5% best execution territory. FHA mortgage loan rates, at the time of this writing, are at a best execution 3.25%. As always, best execution rates assume ideal conditions. A borrowers FICO | more...

July 26, 2016

FHA Loan Questions: Unpaid Tax Liens

By Joe Wallace

A reader asks, “I entered into an electronic direct withdrawal from my checking account repayment plan with with IRS for tax underpayment…after meeting with IRS, payment agreement request was approved. After the agreement was approved IRS filed a lien on the owed amount. I am not currently not a property owner, but I would like to buy a home in the next year.” “However the tax lien caused my credit score to drop to 649. I currently earn $92,000.00 from retirement income, and $40,000.00 from employment income. debt ration is where it should be. My question is can I ever qualify for FHA home loan, if the lien is not paid? Or (does) the lien (have) to be paid in full, along with a paid document submitted to all credit | more...

July 26, 2016

FHA Loan Questions About Occupancy Rules

By Bruce Reichstein

What are the FHA home loan rules for occupancy? A reader got in touch with us recently with a question that pertains to this important issue, asking, “I live in California, but I want to purchase a home in Virginia Beach, Va. Can I still use FHA loan to purchase a home in Virginia. My son will be living at the house that Im planning to purchase. He lives and works in Virginia.” FHA loan rules that govern this issue can be found on page 135 of HUD 4000.1. FHA home loans are intended for borrowers purchasing principal residences, but what does that term mean? HUD 4000.1 has a specific definition of a “principal residence” on page 135, which states: “A Principal Residence refers to a dwelling where the Borrower | more...

July 25, 2016

FHA Loan Questions: Credit Scores and Down Payments

By Joe Wallace

We get many questions about FHA loan standards for FICO scores and similar issues. Here’s one of the latest: “I am looking to purchase a mobile home for 25000. I have a 610 credit score and a stable job (been there for 8 years). I want to put down 40% of the loan. Do you think I would have any major issues even with a low credit score?” Questions like these are a good reminded that plenty of misconceptions about the home loan process exist. Unfortunately one of the prevailing misconceptions is that FICO scores are THE determining factor in home loan approval. That is not to dismiss the importance of FICO scores. Lender standards require a borrower to have a minimum FICO score (often between 620 and 640 depending | more...

July 25, 2016

Mortgage Rate Trends: Pushing Higher

By Joe Wallace

Since our last report, mortgage loan rates have pushed forward; they moved higher on both Thursday and Friday of last week. We have several scheduled economic data releases this week and a Fed meeting that could push rates further depending on investor reaction to them. At the time of this writing, 30-year fixed rate conventional mortgages are in a best-execution range between 3.375% and 3.625% depending on the lender. 3.5% is likely more common according to our sources but your experience may vary depending on a variety of factors. FHA loan rates are still holding in the best execution 3.25% comfort zone, but if upward movement continues we may see FHA rates break out into a range with 3.25% at the bottom end initially. Best execution rates assume ideal conditions; | more...

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

July 22, 2016

FHA Mortgage Loan Terms: Understanding Equity

By Joe Wallace

Home equity is an important term to understand when you’re applying for any kind of mortgage loan, but for some loans equity is a larger factor than others. For example, when you apply for a new purchase FHA loan to buy a home, you start out with 3.5% of the adjusted price of the home as your equity. That’s the amount of your down payment, and the equity grows over time with the number of payments you make. When you apply for a home equity loan, a home equity line of credit, or an FHA Home Equity Conversion Mortgage (HECM), you’re applying for a loan based on the amount of equity you have built up. HECM loans in particular require the property to be either paid in full or very | more...

July 21, 2016

FHA Revises HECM Policy To Include Third Party Tax Verification Fee

By Joe Wallace

FHA loan rules for Home Equity Conversion Mortgages (HECM) have been modified by the agency to include approval of third party fees for property tax verification. According to FHA Mortgagee Letter 2016-10, the third party fees will be added to the list of approved charges associated with FHA HECM loans, but the verification fees must meet FHA requirements. “A Third Party Property Tax Verification Fee is a fee charged to the mortgagee by a third party to verify the mortgagors property tax payment history and the annual amount of property taxes due for a specific property” states the FHA Mortgagee letter. “FHA is adding the Third Party Property Tax Verification Fee to the list of allowable charges and fees that may be paid by the mortgagor.” According to the mortgagee | more...