Articles Tagged With: Escrow

March 20, 2024

What To Know About FHA Loans And Escrow

FHA loans typically involve some form of escrow. Some FHA loans have different escrow requirements than others and you should know what your specific loan type will require before you commit. What Is Escrow? Finance blogs often describe escrow as an arrangement where a third-party account retains money to facilitate a home loan. It’s done on behalf of the borrower and lender and money comes out of the account based on specific conditions or instructions. You can expect to use escrow to pay for property taxes, paying contractors for labor or materials, and even earnest money if you and the lender agree. Escrow provides a layer of protection for both borrower and lender and it pays to know as much as you can about how it works before you commit | more...

February 3, 2023

Need A Home Loan? Beware Of Escrow Fraud

By Joe Wallace

There are common home loan scams that affect house hunters, even those applying for FHA home loans. One such scam–one you might actually encounter in your home buying journey–is called escrow fraud and it can affect even the most experienced homeowner if they are caught at just the wrong moment. Home Loan Scams Can Affect Any Type Of Mortgage Escrow scams are not associated with FHA mortgages alone, any type of home purchased with any type of home loan could be targeted. An important sense of any successful scam is creating a sense of urgency or emergency or a feeling that a big discount might be missed if you stop to consider the options. The scammer wants you to be in a hurry, not thinking critically, and ready to invest | more...

December 6, 2019

Why Did My Mortgage Payment Increase?

By Bruce Reichstein

There may be circumstances where you find your mortgage payment has increased. There are several reasons why a mortgage payment might increase; regardless of which issue may be affecting your loan it’s crucial to address it right away. Mortgage Payment Increases Due To Interest Rate Adjustment If you have an FHA Adjustable Rate Mortgage, your mortgage payment increases when there is a scheduled interest rate adjustment on the mortgage. The government watchdog agency known as CFPB, the Consumer Financial Protection Bureau, advises, “Some homeowners believe that they have a fixed-rate mortgage loan when their loan actually includes an adjustable-rate or some other feature that can cause their interest rate and payment to change.” Changes To Your Property Taxes If you notice an increase in your mortgage payment, check your monthly | more...

November 20, 2019

FHA Home Loan Rules For Construction Loan Escrow Accounts

By Bruce Reichstein

Do you need a construction loan to build on your own land? The FHA One-Time Close construction loan can help you do just that; this mortgage features one loan application and closing date to build your house, and you aren’t required to pay more than the usual low 3.5% down payment for qualified borrowers. When using a construction loan, the borrower will need to use an escrow account to make the payments for labor, materials, and other construction costs. But there are rules that govern how these “draws” are to be made; HUD 4000.1 contains those rules, which include the following instructions to the lender: “At closing, after funds are disbursed to cover the purchase of the land, the balance of the mortgage proceeds must be placed in an escrow | more...

September 11, 2017

What Should I Know About FHA Home Loan Escrow Account Rules?

By Joe Wallace

What should I know about FHA loan escrow account rules? Depending on the nature of your transaction, lender standards, and other issues, you may be required to use an escrow account to complete or maintain your FHA mortgage. The rules for escrow accounts to be used in FHA loan transactions are found in the FHA loan handbook, HUD 4000.1. The section governing escrow includes guidance that such accounts must be established in accordance with procedures defined in the Real Estate Settlement Procedures Act. The escrow account must be maintained in order to meet monthly financial obligations including the following (where applicable) as found in HUD 4000.1: -hazard insurance premiums; -real estate taxes; -Mortgage Insurance Premiums (MIP); -special assessments, including any assessments related to a PACE obligation; -flood insurance premiums if | more...

Credit Scores For An FHA Home Loan: When Low Credit Is Not Bad Credit

July 5, 2017

Who Are FHA Loans Good For? Part Two

By Joe Wallace

Who are FHA loans good for? We’re examining this issue to help clear up some myths and misconceptions about the FHA loan program including the notion that FHA loans are only intended for first-time home buyers (FHA loans are available to all financially qualified borrowers) and the idea that FHA mortgages have an income limit that prevents those with greater incomes from applying (not true). Who Are FHA Loans Good For? FHA loans are good for both first time buyers and those who have returned to house-hunting after owning property. For second-time house hunters (and beyond) the most important thing to remember is that FHA loans have an occupancy requirement and you can only purchase a primary residence with an FHA loan. No timeshares, vacation homes, or other “occasional occupancy” | more...

May 10, 2017

FHA 203(k) Rehab Loans: Eligible Repairs

By Joe Wallace

In our previous blog post, we discussed the idea that an FHA 203(k) rehab loan could be used to purchase and modify a property to meet FHA requirements for properties to be no more than four units. In HUD 4000.1, under the list of eligible improvements, we learn that “decreasing an existing multi-unit Structure to a one- to four-family Structure” is one of those approved uses of the loan. But what are the other uses? In the original blog post we had a partial list, but there is a complete (at the time of this writing) list of what is considered an eligible use of FHA 203(k) rehab loan funds. The FHA loan rule book states that the improvements on this list is not exhaustive and that what you see | more...

what is mortgage insurance and how does it work?

May 10, 2017

FHA Mortgages For Multi-Unit Properties

By Joe Wallace

A reader asked us a question this week in the comments section about FHA mortgages for properties with multiple units. “I want to buy a 6 residential unit apartment building with a very small store front commercial space on the property (computer repair shop that takes up about 15% of the property space) I plan on living in one of the apartment units. Is there an FHA loan out there for this situation?” FHA mortgages under the single family loan program do allow FHA loans to qualified borrowers for multi-unit properties. The rules for these purchases are found in HUD 4000.1, which states: “FHAs programs differ from one another primarily in terms of what types of Properties and financing are eligible. Except as otherwise stated in this SF Handbook, FHAs | more...

FHA Loans And Natural Disasters: What You Should Know

May 8, 2017

FHA Appraisal Rules: Water Purification Systems

By Joe Wallace

What are the FHA appraisal rules for properties served by water purification systems? A reader asked us a question about that recently: “Im interested in a property that has a UV purification system. Does that qualify under an FHA loan?” A quick look FHA appraisal rules in this area reveals no references that specifically, at the time of this writing, mention UV purification. Instead, they address water purification in general, requiring that any such systems meet basic standards. What are those standards? From HUD 4000.1 we learn that the lender has a responsibility to the borrower in such cases” “If a Property does not have access to a continuous supply of safe and potable water without the use of a water purification system, the Mortgagee must ensure that the Property | more...

January 25, 2017

Cash Back To The Borrower and FHA Loans

By Joe Wallace

Do FHA loans permit cash back to the borrower? We get many reader questions in our comments section about this subject. Some want to know if they can borrow more than the cost of the home and use the excess funds for personal use. Others want to know if cash-back refinance options are available on FHA mortgages. The rules that govern cash back to the borrower can be found in HUD 4000.1. As a general rule, FHA loans for “forward mortgages”, which means typical house purchases, do not allow cash back to the borrower. There’s an exception for money that was paid up front for something that was later permitted to be included into the loan amount. That would be considered a refund and is not forbidden by FHA loan | more...