Articles Tagged With: Discount Points

April 10, 2017

Seller Contributions on FHA Loans

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 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...

Can I Get A Second FHA Appraisal If I Don't Agree With The First One?

March 3, 2017

Are You Ready For An FHA Mortgage Application?

By Joe Wallace

If you are thinking about filling out an FHA mortgage application, there are a few questions to ask yourself before you do-if you’re ready to apply for an FHA loan, you’ll have the answers ready. How Much Down Payment Money Do You Have? In the planning stages of buying a new home, one of the most important things you can do early is determine how much home you can realistically afford. Using a mortgage calculator can help you estimate how much you need. Since FHA home loans typically require a minimum 3.5% down based on the adjusted price of the home, you can get an estimate of how much will need to be saved up to make that down payment. Know how much you’ll need-at least a rough estimate-early in | more...

Can I get an FHA home loan if I owe back taxes?

December 22, 2016

FHA Loan Fact and Fiction

By Joe Wallace

An FHA loan comes with a variety of options including the types of property you can buy (suburban home, townhome, condo unit, manufactured home, etc.) and the types of mortgage you can apply for (15-year term, 30-year term, fixed rate, adjustable rate mortgage, etc.). FHA Loan Fact: Applying For An FHA Mortgage With A Participating Lender There are many participating FHA lenders waiting to help you, and while FHA loans are NOT available from a financial institution that does not participate, the number of those who do is quite high. If you need to refinance a conventional loan and your lender is not an FHA lender, you’re free to find one who does and refinance into an FHA mortgage. FHA Loan Fiction: First Time Home Buyers Only? FHA loan rules | more...

August 24, 2016

FHA Loan Basics You Should Know

By Joe Wallace

If you are thinking about buying a home and are weighing your options for an FHA home loan, there are some basics you should know about FHA mortgages that can help you better prepare for an FHA loan application. FHA home loans are for all financially qualified applicants; there are no income minimums OR maximums. Borrowers should know that FHA mortgages are designed to help borrowers at all income levels find an affordable home. Your debt to income ratio (the amount of money coming in each month compared to your monthly expenses and financial obligations) is an important factor in loan approval, but you will not be disqualified because of an income threshold based on your annual income or monthly income alone. FHA mortgages allow you to purchase a home | more...

Can I get an FHA loan after foreclosure?

August 11, 2016

FHA Loans and Cash Back

By Joe Wallace

FHA home loans have specific rules about when a borrower can get cash back on an FHA transaction and how. In general, FHA mortgage loans for new purchases don’t permit cash back except in the form of legitimate refunds, but HUD 4000.1 outlines certain circumstances where a small amount of cash back is permitted. However, that cash back cannot be “excessive”. A lender is required to estimate the costs of the loan before the actual expenses are tallied. These estimates could result in the borrower budgeting more than is required. When money is due back to the borrower, HUD 4000.1 states: “When the estimated costs utilized in calculating the maximum mortgage amount result in greater than $500 cash back to the Borrower at mortgage Disbursement, Mortgagees may reduce the Borrowers | more...

What Is A New Construction FHA Home Loan Compared To Existing Construction Loans?

August 2, 2016

FHA Loan Questions About Seller Contributions

By Joe Wallace

A reader asks, “What extra expenses does a seller pay for a FHA offer compared to a conventional offer when selling their home?” Seller contributions and their limits are covered in HUD 4000.1. It’s impossible to speculate what the differences might be between an FHA mortgage and a conventional mortgage as loan terms may vary from lender to lender. However, FHA loan rules are clear on this subject in terms of what is permitted and what is not. Seller contributions are known as “interested party contributions” in HUD 4000.1. These must be negotiated between borrower and seller, but the agreed-upon contributions must meet FHA standards. FHA loan rules are quite clear-there is a cap on the value of seller concessions. Page 220 of HUD 4000.1 states: “Interested Parties may contribute | more...

July 18, 2016

FHA Loan Questions: Down Payment Assistance From The Seller?

By Joe Wallace

A reader asks, “Can the buyer use seller assist for the down payment and closing costs? If yes, what is the limit?” This is a more common question than it may seem at first-sellers can and often do contribute toward the closing costs of an FHA loan, but the FHA loan rulebook definitely has some things to say about how much and what kinds of contributions a seller may make. FHA loan rules governing these contributions are found on page 220 of HUD 4000.1 and cover more than just the seller’s assistance. Any financial help toward the closing costs coming from what the FHA terms “interested parties” is governed by these rules. To begin with, no one with a financial stake in the outcome of the sale of the property | more...

June 28, 2016

FHA Loans: Calculating The Monthly Mortgage Payment

By Joe Wallace

One of the most important questions a home loan applicant can ask is, “How much will my monthly mortgage payment be?” While this may seem to be a simple calculation of how much the loan is, divided by how many months the mortgage loan payments are required, the truth is that it’s more complex than that. Mortgage loan applicants have a variety of online mortgage calculators to help them arrive at estimates, but what actually goes into the calculation of your monthly mortgage payment? If it’s not a simple matter of taking the loan amount and dividing it by the number of months the loan term is set for, what DOES go into those calculations? There are a variety of things. The basic calculation we mention is part of it, | more...

June 9, 2016