Articles in Category: Loan Limits

November 2, 2016

Down Payment Rules: An FHA Loan Question

A reader asks, “I’m buying a home for 160,000 and the seller is paying up to 4000 in closing costs and pre-paids (which the closing cost ended up only being 3,525 because the lender required me to pay for the appraisal outside of closing POC) I also put 500 earnest money down.” “They are telling me that I have to bring 5,100 to closing instead of 4,625 because they said that I have to bring a total of 3.5% (5600) and the 475 that I already prepaid can not go towards my total 3.5% down. I thought that because I put 500 earnest money deposit and paid for the appraisal outside of closing and the seller is paying for all my closing costs, that I would be able to use | more...

October 19, 2016

Mortgage Payments On FHA Loans: How Much?

By Joe Wallace

One of the most common questions about FHA mortgage payments is naturally, “How much will I have to pay?” And the answer is not as easy as you might think since there are a variety of factors that go into calculating the monthly mortgage payment. FHA loan limits, the amount of the loan the FHA will insure, don’t include the Up Front Mortgage Insurance Premium (UFMIP), for example. So you can’t simply divide the amount of your loan limit and divide by the number of mortgage payments you plan to make. In addition to UFMIP, there are other things to consider. For example, is the borrower planning on an FHA Energy Efficient Mortgage (EEM)? This option allows the addition of extra funds for approved upgrades or improvements to the home, | more...

October 10, 2016

Adding To The FHA Loan Amount

By Joe Wallace

When preparing to fill out an FHA loan application, many borrowers wonder how much FHA loan they will be permitted to get, and whether they can increase that amount. The basic FHA loan rules in HUD 4000.1 state that the loan amount is determined by either the appraised value of the property or the asking price, whichever is lower. Some want to know if they can get cash back on an FHA new purchase single family home loan, but the rules prevent a borrower from receiving cash back on new purchase loans except in the form of a legitimate refund. There are ways to increase the loan amount, however, that do not result in cash back to the borrower. For example, the borrower who chooses to finance the Up Front | more...

October 6, 2016

FHA Loan Employment Rules: Fact and Fiction

By Joe Wallace

FHA home loan employment rules can be easily misunderstood. There is some confusion over the basics of FHA loan policy regarding employment and how that employment must be verified by the lender. One of the most common fictions about FHA mortgage loans is that the rules supposedly require a borrower to be with their current employer for two years or more. This is not true. But there IS a two-year benchmark the FHA uses with respect to employment, as we learn in HUD 4000.1: “For all Employment related Income, the Mortgagee must verify the Borrowers most recent two years of employment and income…” Note that there is no specification for that two years to be with the same company or boss. HUD 4000.1 adds, “Direct verification of the Borrowers employment | 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 5, 2016

FHA Loan Questions: No Money Down Loans

By Joe Wallace

A reader got in touch with us recently to ask about an important aspect of FHA mortgage loans-the down payment. “I would be a first time buyer, 3 years full time work history, only car payment bill which is paid on time with auto pay from bank. looking for a single home, I am single with credit score of 797. However I have no down payment…would I qualify for an FHA loan?” HUD 4000.1 addresses the rules and regulations for FHA home loans and refinance loans. It includes, on page 155, a definition of what the FHA considers a down payment (the “minimum required investment”) and the “Total Required Investment” needed from the borrower. From HUD 4000.1: “Total Required Investment refers to the amount the Borrower must contribute to the | more...

May 12, 2016

FHA Loan Rules On Down Payment Assistance, Gift Funds

By Joe Wallace

We’ve gotten several questions recently about FHA loan rules for down payment assistance programs and related topics. While we’ve addressed issues like this before, it never hurts to revisit topics like these, especially since the FHA transitioned from its previous single family home loan rule books into the single, comprehensive HUD 4000.1. In the past, certain types of down payment assistance grant programs such as NewSong, Grant America, and Nehemiah operated by providing what was known as “seller provided down payment assistance”. In 2008, President Bush signed an act that prohibits such assistance, so all seller-provided down payment funds were no longer possible. But there are state and local programs that do provide some type of down payment assistance. If these programs meet FHA guidelines and requirements, a borrower may | more...

Can I buy a manufactured home with an FHA loan?

April 21, 2016

FHA Loan Rules and Individual Lender Standards

By Joe Wallace

A recent question in the comments section reminds us of the need to differentiate between lender standards and FHA loan rules. Both will have a say in loan approval, terms and conditions, and more. The reader asks, “I was just in bank office today and yesterday. Yesterday before the lender saw my pay stubs i was pre-qualified for 70,000, now after seeing my work hours plus my W2. I’m now approved for only 30,000. How did that happen? I lost 40,000 just by not having 80 hours a week.” There are several issues at work here. The first is the nature of being pre-qualified for a mortgage loan. When you pre-qualify, your lender is giving you an estimate of what you may be able to borrow based on some initial | more...

April 20, 2016

FHA Loan Income Rules: Disability Benefits As Verifiable Income

By Joe Wallace

FHA loan rules in HUD 4000.1 have requirements the lender must meet for verification of income-a borrower’s income must be considered verifiable in order to be counted in the debt to income ratio. Page 268 of HUD 4000.1 starts off by explaining what the FHA considers disability income: “Disability Benefits refer to benefits received from the Social Security Administration (SSA), Department of Veterans Affairs (VA), or a private disability insurance provider.” The lender is required to gather documentation to prove the borrower is receiving such benefits, the duration of them, and whether or not they are likely to continue to be paid. The continuation of the benefits are an important part of this equation: “The Mortgagee must verify and document the Borrowers receipt of benefits from the SSA, VA, or | more...

April 20, 2016

FHA Loan Questions: Identity of Interest Transactions

By Joe Wallace

For some FHA home loans, a higher down payment may be required when there is an “identity of interest” transaction. FHA loan rules in HUD 4000.1 define this as follows: “An Identity-of-Interest Transaction is a sale between parties with an existing Business Relationship or between Family Members. Business Relationship refers to an association between individuals or companies entered into for commercial purposes.”An identity of interest transaction requires a 15% down payment unless the borrower qualifies for an exception. With this in mind, let’s look at a recent reader question in our comments section. A reader asks, “My wife and I went under contract on a house that is owned by her stepfather. We just found out yesterday about the FHA identity of interest certification. It is his rental property. Is | more...