Articles in Category: HUD Regulations

August 31, 2023

FHA Home Loan Rules And Fair Housing Laws

We report on Fair Housing cases from time to time, a reminder to those looking for housing that there are federal laws that protect against discrimination in housing. But what are the FHA home loan rules in this area? Did you know that the FHA loan program has specific instructions to the lender regarding Fair Housing laws? Those instructions are found in HUD 4000.1, the FHA Single-Family Home Loan Handbook. Page 120 of that handbook instructs the lender, “The Mortgagee is required to comply with all federal, state and local laws, rules, and requirements applicable to the mortgage transaction, including all applicable disclosure requirements and the requirements of the Consumer Financial Protection Bureau (CFPB), including those related to: The Fair Housing Act protects both renters and home loan applicants looking | more...

August 8, 2023

FHA Minimum Standards Vs. Lender Standards

By Joe Wallace

A frequently asked question about FHA home loan credit score requirements goes like this: “I recently applied for a mortgage loan, and my FICO scores are above 580, which FHA loan rules say is the score you need for the lowest down payment. But my lender wants a higher score for the lowest down payment. What’s going on? Who is right?” The most important thing to remember about the FICO score issue is that FHA minimum standards don’t always match the lender’s requirements. The lender is permitted a higher requirement as long as those requirements are deemed “reasonable and customary” for similar mortgages. FHA minimum standards are just that–minimums. A lender is free to require a higher credit score or look for better debt-to-income ratios, etc., as required by the | more...

June 29, 2023

FHA Mortgage Loans: Second Appraisals

By Joe Wallace

If you or the seller don’t agree with the results of the appraisal, is it possible to get a second appraisal and a reconsideration of value of the home? FHA loan rules specifically prohibit ordering a second appraisal just because one party or the other is hoping for a different result. HUD 4000.1, the FHA Single-Family Lender’s Handbook, states the lender is prohibited from “ordering an additional appraisal to achieve an increase in value for the Property and/or the elimination or reduction of deficiencies and/or repairs required.” FHA loan rules note the lender is permitted to order a second appraisal “for Mortgages that are in accordance with requirements on Property Flipping”. But what circumstances permit a second appraisal? HUD 4000.1 says that the original mortgagee or lender is allowed to | more...

June 5, 2023

HUD Takes Action To End Appraisal Bias

By Joe Wallace

The Department of Housing and Urban Development is acting against bias in the appraisal system. “Owning a home provides a path to the American dream. Yet, that dream has been deferred for Black and Brown people, as we have consistently had our homes under-valued,” according to HUD Secretary Marcia L. Fudge, quoted in the 1 June 2023 HUD press release on these appraisal reforms. Fudge adds, “Having your home undervalued is bigger than just a number on a page. It can be the difference between getting a loan and not – between having enough money for retirement or not.” According to Fudge, the PAVE Task Force is a project meant to focus on “taking bold action to address appraisal bias – and renewing our commitment to doing everything in our | more...

April 21, 2023

The FHA Section 203(k) Rehab Loan

By Joe Wallace

The FHA 203(k) rehab loan is an important FHA mortgage loan option you should know about–this loan is available as a new purchase loan or a refinance loan you can use to buy and rehab a home at the same time. According to the FHA official site, on a page about the 203(k) rehab loan program, we learn that the 203(k) is aimed at borrowers who need to buy and improve or refinance and improve an eligible property. “When buying a house that needs repair or modernization, homebuyers usually have to follow a complicated and costly process. The interim acquisition and improvement loans often have relatively high interest rates, short repayment terms and a balloon payment.” The FHA says its possible to use 203(k) Rehab loans to save time and | more...

January 30, 2023

Before You Start House Hunting: Housing Counseling

By Joe Wallace

Saving money is usually done to prepare for a home loan, but did you know there is a simple trick to saving money on mortgage expenses? It basically involves being a more informed borrower so you don’t mistakenly choose options that cost you more unnecessarily. Getting the right home loan for your needs can help you maximize your real estate dollar, but you’d be surprised at how many people don’t know the options they have where home loans are concerned. A Freddie Mac report indicates that housing counseling and/or good financial education is a key benefit when you start the journey toward buying real estate. Knowing which loans are best for your needs and which ones to avoid is key. A Freddie Mac “Generation Z Study”, concluded, “The dream of | more...

December 9, 2022

HUD Announces Energy-Efficient Initiatives

By Bruce Reichstein

The Department of Housing and Urban Development has announced a climate forward green housing initiatives as part of an update to the HUD program known as the Rate Reduction Initiative, or RRI. RRI supports the HUD Climate Action Plan. That plan was created to foster “climate resiliency, reduce greenhouse emissions, and pursue environmental justice in housing” according to HUD.gov. RRI relies on partnerships with public housing providers, with one stated goal (among many) of encouraging the reduction of public housing utility costs beyond what may already be required by state law, saving money, and helping the environment at the same time. The RRI plan encourages public housing agencies to negotiate special rates with utility companies, or purchase energy through a third-party broker. It also encourages arrangements between utility companies and | more...

November 14, 2022

First-Time Home Buyers And FHA Loan Approval: New Rules

By Joe Wallace

The FHA and HUD made changes to home loan approval procedures aimed at helping first-time home buyers. These changes allow participating FHA lenders to use qualifying “positive rental payment history” in their loan approval process, but only for applicants meeting the FHA description of first-time home buyers. Borrowers who worry about their ability to be approved for a home loan may have an additional advantage using an FHA mortgage because of this. According to the HUD official site, rental data is not included in “most Tri-Merged Credit Reports or Residential Mortgage Credit Reports” which are used for FHA-insured loans. When the information IS available, it may be as separate documentation. The FHA has now updated loan approval processes and software so lenders may add positive rental information as a factor | more...

September 26, 2022

HUD Announces Fair Housing Case Settlement

By Joe Wallace

Did you know that Fair Housing laws are designed to protect you once you start owning or renting a home and not just while you are house hunting? You might not realize that sexual harassment can be a violation of the Fair Housing Act if happens in the context of seeking or owning a home. Has someone sexually harassed you as the employee of a lender, property management company, realtor, or appraiser? If you have, you may have grounds for a complaint with the Department of Housing and Urban Development. One example of this comes thanks to a recent settlement between HUD and California apartment owners/property managers. HUD has announced a conciliation agreement with respodnents including Perris Family Apartments, LLC., Coachella Valley Housing Coalition, Hyder Property Management Professionals, and an | more...

FHA One-Time Close Construction Loans In 2019

September 12, 2022

FHA Loans and Home Inspections

By Joe Wallace

We get many questions about the FHA appraisal process. One variation on a common theme? The questions we get involving readers who opted not to get a home inspection, relied on the FHA appraisal process alone in determining whether the house was defect-free or not, and had complaints about the home later on. This is a situation common enough that it makes sense to emphasize the importance of NOT relying on the FHA appraisal process as a means to detect flaws or defects with a home that could be purchased with an FHA mortgage. Why is relying on the appraisal alone a bad idea? For starters, the FHA and HUD official site makes it very clear that the FHA appraisal is NOT an inspection. “Passing” the FHA appraisal process only | more...