Articles Tagged With: FHA Loan Requirements

November 4, 2015

HUD 4000.1 On “Flipping”

Ever since the publication of the new FHA single family home loan rule book, HUD 4000.1, have been examining loan rules as published in the new guide. One important area of the FHA single family loan rulebook involves the guidelines for buying property with an FHA mortgage that is being sold after having been recently acquired by the seller. HUD 4000.1 states that, in order for a home to be eligible for an FHA mortgage, a certain amount of time must elapse between the sale of the home to the new owner and the subsequent sale of the property to another buyer–this time requirement is known as the HUD “anti-flipping” rule. It states: “Property Flipping is indicative of a practice whereby recently acquired Property is resold for a considerable profit | more...

November 4, 2015

Mortgage Rate Trends: Moving Higher For A Second Day In A Row

By Joe Wallace

Last week, mortgage rates moved higher on Thursday, then leveled out and didn’t lose any more ground on Friday. But Monday and Tuesday we’ve seen the rates move to their highest numbers in four weeks or so, pushing best execution rates for 30-year fixed rate conventional mortgages farther away from that 3.75% zone we saw last month. 30-year fixed rate conventional mortgages have moved recently into a range between 3.875% and 4.0%; if upward pressure continues we could see 4.0% (best execution) become far more prevalent. At the time of this writing, FHA mortgage rates are still at their 3.5% best execution comfort zone but this time around that might not last as long as the previous FHA mortgage loan rate comfort zone–we’re likely to see rates break out into | more...

November 3, 2015

FHA EEM “Stretch Ratios” For Existing Construction Loans

By Joe Wallace

In our last blog post we discussed a new partnership between the FHA/HUD and the Department of Energy which is allowing eligible borrowers to get access to increased “stretch ratios’ under FHA energy efficient mortgages in 2016. According to an FHA press release, “FHAs existing EEH policy allows stretch ratios for homes that are built or retrofitted to the 2000 International Energy Conservation Code (IECC). For standard FHA loans, debt-to-income (DTI) ratios are limited to 31 percent (front-end) and 43 percent (back-end).” How do these ratios “stretch”? According to the press release, “Under FHA policy for the EEH mortgage, these DTI ratios can be increased to 33 percent and 45 percentrespectively. To increase opportunities for homeowners to achieve and benefit from an energy efficient home, FHA is adding a new | more...

November 3, 2015

FHA Energy Efficient Mortgages: New Standards For 2016

By Joe Wallace

In 2016, FHA borrowers looking to add Energy Efficient Mortgage loans to their transaction will have some new standards to use related to the energy efficient improvements they wish to add. Thanks to a new partnership between the FHA, HUD, and the Department of Energy, certain ratios will be increased in 2016, according to a press release found at the FHA official site. “FHAs existing EEH policy allows stretch ratios for homes that are built or retrofitted to the 2000 International Energy Conservation Code (IECC). For standard FHA loans, debt-to-income (DTI) ratios are limited to 31 percent (front-end) and 43 percent (back-end).” “Under FHA policy for the EEH mortgage, these DTI ratios can be increased to 33 percent and 45 percent respectively. To increase opportunities for homeowners to achieve and | more...

What if my home was damaged in a natural disaster?

October 30, 2015

HUD 4000.1 On FHA New Construction Loans

By Joe Wallace

When you review your options for an FHA home loan, you’ll run across loan information about FHA mortgages for “existing construction” loans and “new construction” or “under construction” loans. The requirements for new construction versus existing construction may differ due to a variety of reasons including the fact that the borrower can’t always take possession of a new or under construction home right away once the loan has closed. FHA loan rules for existing construction include appraisal requirements that may differ (procedurally) from new construction loans. For these reasons, the FHA has specifically defined what constitutes a new, proposed, or under construction property versus one that is “existing construction”. Existing construction is more or less a home that has already had an owner and has been in existence for a | more...

October 29, 2015

FHA Home Loans: How Mortgage Payments Are Calculated

By Joe Wallace

The FHA loan rulebook for single-family home loans has a section instructing the lender, “For all transactions, except non-credit qualifying Streamline Refinances, the underwriter must calculate the Borrowers Total Mortgage Payment to Effective Income Ratio (PTI) and the Total Fixed Payment to Effective Income ratio, or DTI…” This is required to help the lender determine whether the borrower can afford the new loan or not. And borrowers should know how the mortgage payment is calculated for the same reason. It’s easy to assume that your monthly mortgage payment will be the amount of your home loan divided but the term of the loan (plus any interest), but as you’ll see, it’s not quite that simple. FHA loan rules in HUD 4000.1 spell out a list of things that must be | more...

October 27, 2015

FHA Mortgage Loans: Late Charges

By Bruce Reichstein

What happens if a borrower misses the deadline for his or her FHA mortgage loan payments? While it’s true that no borrower goes into a home loan planning to have missed or late payments, knowing what happens when the payment is late or missed can be a big help–taking the mystery out of these issues is important, especially for new borrowers. FHA loan rules for late payments are found in HUD 4000.1 Part Three Section A. There, you’ll find a section titled “Late Charges” which begins by defining what the FHA views as a late payment: “Late Charges are charges assessed if a Mortgage Payment is received more than 15 Daysafter the due date.” Furthermore, FHA loan rules in this section state, “The Mortgagee may consider a Borrowers payment late | more...

October 22, 2015

FHA Loan Rules For Income: Part Time Employment

By Joe Wallace

The new FHA single family home loan program policy handbook, HUD 4000.1, has a section on income verification rules that includes instructions to the lender on how to include part-time income in the FHA loan applicant’s debt-to-income ratio. HUD 4000.1 makes an important distinction between full-time income and part-time earnings, and borrowers need to understand how FHA loan rules make the distinction. When it comes to full-time work, HUD 4000.1 Part II Section A states: “Primary Employment is the Borrowers principal employment, unless the income falls within a specific category identified below. Primary employment is generally full-time employment and may be either salaried or hourly.” For part-time income, the rules say: “Part-Time Employment refers to employment that is not the Borrowers primary employment and is generally performed for less than | more...

October 16, 2015

FHA Loan Income Questions: Commissions

By Joe Wallace

There are lots of questions about FHA loan income standards–especially where commission income is concerned. Here’s one of the latest reader questions from the comments section, asking about FHA loan income rules for commissions–the reader has a job that “… pays 60% income from salary and 40% from commissions now and am being recruited to another company same industry, same job title and scope of work but better pay. A slight increase in salary and commissions with the new company recruiting me, but same type of ratio 60% salary 40% commissions.” “I have been in the same job title for 2+ year now. Can FHA or an underwriter use my new income with new higher commissions at the new company for a loan? Or do I have to wait for | more...

October 15, 2015

FHA Loans, Early Payoff, And Prohibited Fees: HUD 4000.1

By Joe Wallace

With the publication of HUD 4000.1, existing FHA loan rules have been restated, updated, modified, or reprinted. In some cases nothing has changed, in other cases there have been major or minor alterations to the language, terms or conditions of these FHA loan rules. We’re examining many sections of the new rulebook and discussing common issues that may be affected by those changes, even if in some cases the rules haven’t changed. Knowing what’s in HUD 4000.1 as opposed to the old FHA single family home loan rules found in HUD 4155.1 and 4155.2 is important as HUD 4000.1 is THE definitive source for the program now. One big question some borrowers have about FHA loans is what happens if an early payoff is chosen. Can the lender penalize or | more...