Articles Published in: April 2017

April 5, 2017

Temporary Reduction of Income: FHA Loan Rules

What happens if a borrower fills out an FHA loan application while having a temporary reduction of income either on the record or ongoing during the application process? Does the FHA loan rule book, HUD 4000.1, address these situations? Fortunately, yes. There are many reasons why a loan applicant might experience a temporary reduction of income-short term disability, for example. Maternity leave. Temporary leaves of absence, sabbaticals, etc. According to page 206 of HUD 4000.1, FHA loan rules in this area include the following: “For Borrowers with a temporary reduction of income due to a short-term disability or similar temporary leave, the Mortgagee may consider the Borrowers current income as Effective Income, if it can verify and document that: – the Borrower intends to return to work; – the Borrower | more...

April 5, 2017

April Is Fair Housing Month

By Joe Wallace

April is Fair Housing Month, and a press release from the Department of Housing and Urban Development (HUD) reminds us that 2017 is the 49th anniversary of the Fair Housing Act. We report on these issues here in addition to our usual FHA home loan topics because all borrowers, house hunters, and apartment seekers are protected from being denied housing on a discriminatory basis, but many don’t know or fully understand their rights under federal Fair Housing Act laws. And, as HUD explains, the availability of housing is an important factor in areas far beyond the immediate need of shelter and security. According to a press release at the HUD official site, “This year marks the 49th anniversary of the Fair Housing Act, landmark legislation that became law on April | more...

April 4, 2017

Mortgage Loan Interest Rate Trends: Sharply Lower

By Joe Wallace

Since our last report, mortgage loan interest rates have fallen sharply. Market watchers give at least some of the credit for this to bond market activity, and following a recent persistent upward trend any improvement is a welcome step in the right direction. From Wednesday on, there are a variety of scheduled economic data releases and other events that could (and historically, have) be influential in the continued downward trend. Of course, these scheduled events could also have the opposite effect on mortgage loan rates, so industry professionals will likely be paying individual attention to each of these until week’s end. 30-year fixed rate conventional mortgage loan interest rates were reported at a best execution 4.125%, down from last week’s 4.25%. The big changes are in FHA mortgage loan rates | more...

Can I buy a manufactured home with an FHA loan?

April 4, 2017

Commission Income and FHA Loans: A Reader Question

By Joe Wallace

A reader asked about the FHA loan rules governing commission income this week in our comments section: “My employer recently (1yr) switched the pay scale to a base/commission/bonus format. Basically we now get paid per load instead of hourly. Since weve only received commission for 2016 and not 2015, should my itemized job related expenses for 2015 count against my income over the previous two years?” FHA loan rules in HUD 4000.1 address this issue, but may not be the only rules at work-lender standards would also apply as well as any applicable state law. Here’s what HUD 4000.1 states about commission income: “The Mortgagee must calculate Effective Income for commission by using the lesser of (a) the average net Commission Income earned over the previous two years, or the | more...

April 3, 2017

Mortgage Rate Trends: Mostly Unchanged?

By Joe Wallace

The most current mortgage rate trends put us in a curious place at the moment-there are small changes, there is movement in rates, but our sources say much depends on the lender (both conventional and non-conventional) and how that particular financial institution is reacting to the current rate environment. As we’ll explore in a moment, FHA mortgage rates are in a range that is fairly atypical, at least in terms of the size of that range. Conventional rates are solidly in the bottom four percent zone, but there are factors this week that have the potential to influence that. Specifically, there are scheduled economic data releases this week including today’s (Monday) morning release of construction spending an a national manufacturing index. There’s a scheduled ADP employment report due out mid-week, | more...

April 3, 2017

FHA Loan Amounts: A Reader Question

By Joe Wallace

What are the minimum FHA loan amounts? A reader asked us a question in the comments section along those lines recently: “Is there a minimum amount for FHA Loans? Someone told me you have to borrow at least $90,000. Does the loan depend on your annual income?” FHA mortgages are not approved or denied based on the dollar amount of your annual income, but rather on your ability to afford the loan based on your financial obligations (including an estimate of your monthly mortgage payment) compared to your monthly income. Your debt-to-income ratio is more important in the loan approval equation. When it comes to FHA loan amounts, the minimum loan is based on the appraised value of the property or the asking price, whichever is lower. The FHA loan | more...