Articles Tagged With: FHA Mortgage Loan

September 30, 2022

Why Choose An FHA Mortgage?

You may have heard that the FHA loan program features a low minimum down payment, lower credit requirements, plus the ability to apply for extra loan funds to add energy-saving improvements to the home you are buying with an FHA loan. This is accomplished using a program called the FHA Energy Efficient Mortgage. FHA home loans, which are NOT for first-time home buyers only, are offered to all financially qualified applicants. These home loans, unlike some of their USDA counterparts, are not need-based and do not feature income restrictions. FHA mortgages are government-backed loans, which means there is an arrangement between the lender and the federal government that reduces the risk to the lender. This is why FHA lenders can offer you lower down payments and more competitive interest rates | more...

September 21, 2022

Article Update: FHA Loan Rules For “Identity Of Interest” Transactions

By Joe Wallace

Back in 2016, we published an article about the specific FHA loan rules that apply in situations where the owner of a rental property wants to sell to her renters. In such cases, it may be a situation where the borrower has been renting for some time and has an offer from the landlord to purchase. Back when we first published the article, we noted that FHA loans do permit these transactions but there are special rules that govern them. Have those rules been modified since we reviewed them last? The rules for these transactions are found in HUD 4000.1, the FHA Single-Family Lender’s Handbook. Today, those rules begin by explaining who is affected in these circumstances, which are described by HUD as “identity of interest transactions”. From HUD 4000.1: | more...

September 19, 2022

Which Is Better: Conventional Mortgages Or FHA Home Loans?

By Bruce Reichstein

Which is better, a conventional mortgage or an FHA home loan? If you are struggling to make this choice, rising interest rates and home ownership costs might make you look twice at your upfront costs and other expenses associated with each type of mortgage loan. The more forgiving credit requirements and down payment expectations of an FHA mortgage may have you thinking twice about going conventional. When it comes to FICO scores, FHA loans on paper are easier to be approved for than conventional home loans. And while a conventional mortgage could be more affordable over the lifetime of the mortgage, those who need more flexible credit requirements and lower upfront costs may find the FHA mortgage worth considering. There are a few objections to FHA loans. Some are less | more...

September 16, 2022

FHA Home Loans For Houses In Flood Zones

By Joe Wallace

In 2017, we wrote an article about the importance of knowing FHA loan rules for loan approval in certain regions of the country subject to flooding. Is it possible to purchase a home with an FHA mortgage in a flood zone? The FHA Loan Single-Family Lender’s Handbook, HUD 4000.1, says that homes in certain types of flood zones or Special Flood Hazard Areas or SFHA are not eligible for FHA mortgages. These areas include, but may not be limited to SFHA Zone A, a Special Flood Zone Area, or Zone V. We reported that in 2017 and we wanted to follow up to see what the rules say today. Proposed or New Construction Homes HUD 4000.1 says that in cases where “any portion” of a home is in an SFHA, the | more...

September 2, 2022

Conventional Loans Versus FHA Mortgages

By Joe Wallace

What’s the major difference between FHA mortgage loans and conventional loans? Actually, there are several, but the first and most basic difference is that an FHA mortgage is guaranteed by the government. A conventional loan is not. The government’s backing of an FHA mortgage makes the loan less of a risk to the financial institution offering you a line of credit to purchase your home. And because the loan is backed by the government, FHA mortgages feature lower down payment requirements than many conventional mortgages. You may find conventional loans requiring 10 or even 20 percent down, whereas an FHA mortgage for qualified borrowers with FICO scores of 580 or above may qualify for maximum financing. That means a down payment requirement of only 3.5% of the adjusted value of | more...

August 29, 2022

Article Update: Using Rental Income To Qualify For An FHA Home Loan

By Joe Wallace

In 2017, we published an article about FHA loan rules and whether it is possible to qualify for an FHA mortgage using rental income. Back then we cited FHA loan rules and regulations that stated it IS possible, but only if certain conditions are met. Part of the issue? Whether or not the rental income meets FHA loan rules in HUD 4000.1, the FHA Single Family Lender’s Handbook. If your income is derived in whole or in part by rent payments, the lender will need documentation to support that. Back in 2017, we reported FHA loan rules in HUD 4000.1 addressing the rental income issue starting on page 202. That section begins, “Rental Income refers to income received or to be received from the subject Property or other real estate | more...

August 22, 2022

Article Update: FHA Loan Rules For Different Income Types

By Joe Wallace

Back in 2017, we published an article examining the FHA loan rules for income. As we noted back then, not every home loan applicant has the same type of employment, compensation, or schedule of compensation. That means a participating FHA lender must have rules that govern how/if certain types of income may be included for the purpose of determining a borrower’s monthly gross income. That information is needed to calculate the debt-to-income ratio your lender must have to help approve the loan. FHA Loan Rules For “Primary Employment” HUD 4000.1, the FHA Single-Family Lender’s Handbook, contains guidance for the lender to review hourly income, salary, and part-time income. The section that includes these guidelines states that the lender is responsible for examining earnings from the home loan applicant’s “primary employment” | more...

August 15, 2022

Assuming An FHA Mortgage: Article Update

By Joe Wallace

Can I assume an FHA mortgage? That is a question we addressed in a 2021 article about FHA mortgages, and it’s an important question on the minds of those looking to take over an FHA home loan from the original borrower. The process of getting a loan assumptions are a bit different than a new purchase home loan application, but under FHA home loan rules, the borrower must be able to afford the loan in both cases. The lender’s job in part has to do with determining whether the borrower is a good risk. The short answer to the original question? Yes, in most cases, assuming there is lender participation, you may be able to assume an existing FHA home loan from the original borrower. You will NOT be able | more...

July 28, 2022

Article Update: Do Townhouses Qualify For FHA Loans?

By Joe Wallace

Back in 2018, we published an article about the FHA home loan rules for townhouses. Do they qualify for FHA home loans? One source defines a townhouse as: “…multi-floor homes that share one- to two walls with adjacent properties” but which feature separate entrances for each property. What do the FHA home loan rules say about purchasing townhomes with an FHA mortgage? FHA Loan Rules For Property Eligibility The FHA Single Family Home Loan rule book, HUD 4000.1, has seen some important changes since we wrote the original article in 2018 but in 2022 it still says the following property types may be purchased with an FHA mortgage: -detached or semi-detached dwellings -Manufactured Housing -townhouses or row houses -individual units within FHA-approved Condominium Projects As you can see from the | more...

July 20, 2022

What To Think About When Comparing FHA Lenders

By Joe Wallace

Why do we say it’s so important to choose the right lender for your FHA home loan? Because no two financial institutions are exactly alike, and you may find a lender willing to offer the type of mortgage you need at an affordable interest rate. But until you compare offers how do you know you have set your price point and target interest rate realistically? It’s not just whether the lender offers the type of FHA mortgage you need–such as an FHA condo loan or an FHA One-Time Close Construction mortgage. It’s also whether the lender is offering you a competitive interest rate. When rates trend higher, does your selected loan officer reprice the interest rates or up the closing costs instead? If you don’t know, you won’t know how | more...