Articles Published in: April 2017

April 13, 2017

Mortgage Rate Trends: Still Moving Lower

Mortgage rate trends this week have been dragging rates to their lowest levels of the year. Around election time last year, we began to see the stage being set for some upward trending that pushed mortgage loan interest rates out of their three percent ranges and back into four percent territory. At one point it seemed likely that the mid-fours could be the range for the new year. But now, at least in the short term, we are seeing rates creep back down, closer to where they were pre-election (assuming the downward trend persists). There are several reasons for this, including bond market activity, geopolitics, and most recently a reaction to statements from the White House that the dollar is performing too robustly (paraphrasing ours). To learn more about what | more...

April 12, 2017

FICO Scores and FHA Loans: A Reader Question

By Joe Wallace

Can a co-borrower make up for another borrower’s FICO score issues? A reader asked us a question along those lines in our comments section recently: “My credit is not good enough to get a home loan. However, if my sister was willing to cosign for me to get a home can she sign? What are the requirements” FHA loan rules require all borrowers to be obligated on the mortgage to credit qualify. We get a glimpse at FHA loan policy in HUD 4000.1 page 132 which discusses “Minimum Decision Credit Scores” for all borrowers: “The Minimum Decision Credit Score (MDCS) refers to the credit score reported on the Borrowers credit report when all reported scores are the same. Where three differing scores are reported, the middle score is the MDCS. | more...

April 12, 2017

Mortgage Loan Interest Rate Trends: New Lows

By Joe Wallace

In our last report, we noted that mortgage loan interest rates had been on the move, losing a small amount of ground over the previous two business days. We also noted that it was too early to tell if that was becoming a trend, or if the move higher was a short-term fluctuation. At the time of this writing, mortgage rates have since plunged to lows we haven’t seen for a majority of the year. There are complex reasons why rates have suddenly moved downward. Global political headlines often play a role in the direction of mortgage rate movement, especially when those headlines have far-reaching implications. This week we’ve seen French elections, Russia and North Korea dominate headlines in ways that have investors moving their cash into safer bets, which | more...

April 11, 2017

Maximum Loan Amounts For FHA Loans

By Joe Wallace

What are the FHA loan rules for maximum loan amounts? The rules for loan amounts are found in the FHA single family home loan rule book, HUD 4000.1 has answers, starting with this from page 155: “A Mortgage that is to be insured by FHA cannot exceed the Nationwide Mortgage Limits, the nationwide area mortgage limit, or the maximum Loan-to-Value (LTV) ratio. The maximum LTV ratios vary depending upon the type of Borrower, type of transaction (purchase or refinance), program type, and stage of construction.” Borrowers sometimes wonder if they can apply for a home loan for more than the purchase price of the home. The answer to such questions depends greatly on what the extra money is to be used for. For forward mortgages and refinance loans alike, FHA | more...

April 11, 2017

Mortgage Loan Interest Rate Trends: Higher

By Joe Wallace

Since our last report, mortgage loan interest rates have risen slightly but overall remain within the same range as we’ve been reporting on now for several weeks. Both Friday and Monday saw rates moving higher in spite of conditions that have in the past contributed to helping rates move lower. This is not unusual, but it happens infrequently enough to raise eyebrows among those who aren’t used to watching these ups and downs. The contrarian moves in rates as of late gives market watchers reason to be lukewarm on “floating” or holding off on a mortgage loan interest rate lock with a lender in hopes that rates may go lower before the lock agreement is finally made. The moves higher aren’t enough to create the impression that we’re headed into | more...

April 10, 2017

Seller Contributions on FHA Loans

By Joe Wallace

A reader asks a question about seller contributions on an FHA mortgage loan. “What is included in seller contributions with a max of 6%?” The question refers to something informally known as the “six percent rule” on FHA mortgages, which limits the contributions of an “interested party” to six percent of the sale price of the home. This rule is found on page 232 of HUD 4000.1, which defines both interested parties and their contributions to the sale as follows: “Interested Parties refer to sellers, real estate agents, builders, developers or other parties with an interest in the transaction. Interested Party Contribution refers to a payment by an Interested Party, or combination of parties, toward the Borrowers origination fees, other closing costs and discount points.” What are the FHA loan | more...

April 10, 2017

FHA Mortgage Occupancy Rules

By Bruce Reichstein

A reader asked us a question this weekend about FHA mortgage loan occupancy rules. “I purchased a home with an FHA loan and intended to live in it for 4 years until my fiancee got orders to relocate with the Air Force. Wellhe got orders to move from Colorado to Florida but I just purchased my house 3 months ago. Can I not leave Colorado and move with my fiancee?” HUD 4000.1, the FHA single-family home loan rule book, addresses situations like these, stating: “Borrowers who are military personnel, who cannot physically reside in a Property because they are on Active Duty, are still considered owner occupants and are eligible for maximum financing if a Family Member of the Borrower will occupy the subject Property as their Principal Residence, or | more...

April 7, 2017

FHA Loan Rules: Borrowers, Co-Borrowers, Co-Signers

By Joe Wallace

Do you know what the FHA loan rules are for borrowers, co-borrowers, and/or co-signers? What are the requirements for each and how is your lender required to proceed with each? The FHA home loan rule book for single family mortgages, reverse mortgages, and refinance loans is HUD 4000.1 It instructs the lender that borrowers have an occupancy requirement-the borrower must agree to take ownership of the home and use it as her or his primary residence after loan closing. Usually the borrower will have to move in within 60 days of closing. HUD 4000.1 also tells the lender that borrowers may only purchase homes with FHA loans within the United States or its’ territories. Purchase of non-U.S. real estate is not permitted with an FHA mortgage. All parties to be | more...

April 6, 2017

Credit Report Data, Disputed Accounts, and FHA Loans

By Joe Wallace

Borrowers are often advised to give themselves plenty of time in the pre-purchase planning stages to review credit report details to make sure there are no errors or outdated information. What happens if a borrower does see something on a credit report and chooses to dispute it? Ideally, issues like these should be caught very early in the planning stages. You should check your credit report as early as one year prior to the home loan application in order to give yourself enough time to dispute items if required. But not all borrowers have that much time to deal with such issues, and FHA loan rules address disputed accounts in detail. HUD 4000.1, the FHA single family home loan rule book, has two sections on disputed accounts-one for derogatory credit | more...

April 6, 2017

Pre-Foreclosure Sales and New FHA Loans

By Joe Wallace

Many potential FHA borrowers want to know how long they must wait following pre-foreclosure sales in order to successfully apply for a new mortgage. There is a specified “seasoning period” (industry jargon for the amount of required waiting time following pre-foreclosure sales) required of borrowers after a short sale, bankruptcy filing, etc. The amount of that required waiting time will vary based on a number of factors including lender standards, so borrowers should keep in mind that the FHA loan rules we’re about to mention are only one of the sets of rules that must be followed for such transactions. That said, HUD 4000.1 instructs the lender on how to proceed in these cases, beginning with a definition of pre-foreclosure sales: “Pre-Foreclosure Sales, also known as Short Sales, refer to | more...