Archive for the ‘FHA Lending’ Category

10 Myths about FHA Loans

February 28th, 2011
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There is a lot of false information going around about FHA loans, so we wanted to dispel some of the myths about the FHA loan program.

FHA lending has become an extremely popular choice for financing so it is important that you have the full understanding of FHA mortgages and the power of this government finance option. Today’s FHA rates fell to record levels recently and most mortgage companies have started to offer home loans insured by the FHA as they are truly one of the best government initiatives in our country’s history.


FHA Mortgage Loans Have developed a strong reputation over the last 77 years.

Below we listed 10 common myths about FHA loans.

  1.  You do not have to have a government job to qualify for a FHA loan.
  2.  FHA does not stand for Fair Housing Association.
  3.  FHA mortgages are not just for first time home buyers.
  4.  Mortgage insurance is not required with FHA loans on 15–yr terms below 90% LTV.
  5.  FHA does not have a minimum credit score requirement, but many FHA lenders incorporate additional credit score guidelines.
  6.  No cash out is allowed on the FHA Streamline.
  7.  The Max CLTV on a FHA loan is 125%.
  8.  FHA does not allow cash out refinancing to 95%.
  9.  FHA does offer home rehabilitation loans to 115%
  10.  FHA will not approve a loan to borrowers who defaulted on federal government loans

With foreclosure rates and loan defaults rising, you can expect FHA to continue modifying the FHA mortgage products on a regular basis, so check back our blog and stay up to speed.


FHA Lending, FHA Loan Articles

What is an FHA Loan?

February 28th, 2011
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Over the last 5 years, FHA financing programs have been the hottest mortgage product on the market, but many consumers do not really know what a FHA loan consists of.  The Federal Housing Administration was created in 1934, although its purpose has changed somewhat since it was originally put together. Originally, the administration was created to help reduce unemployment and increase home construction. Today, the FHA serves primarily to help those who cannot normally afford housing to purchase homes. FHA loan programs are for borrowers who want to refinance or purchase a home.

How to Qualify for a FHA Loan

Here, we’ll go over just what is an FHA loan, as well as how you can take advantage of these services if you want to own a home but cannot normally afford one. FHA loans are essentially mortgages that work as a kind of federal assistance, and are designed to help Americans with lower incomes borrow money for purchasing homes. The proper term for the loan is an FHA insured loan, because the Federal Housing Administration does not actually give out the loan itself. Instead, FHA lenders have the client pay a mortgage insurance premium, or MIP, that equals a percentage of the amount of the loan at closing. This is typically financed by the lender and paid to the FHA on behalf of the borrower. Today there are private mortgage insurance companies, which work with the FHA to help those that are not able to afford a conventional down payment or who do not otherwise qualify for PMI programs.

An FHA mortgage loan can be a valuable tool for those that want to buy a home, but who do not have the starting capital to be able to place a down payment. FHA loans can only originate from government approved lenders. However, they come in a variety of forms so keep in mind the fact that different lenders have different interest rates, terms and conditions, and other factors is important. Shopping around and comparing the various aspects of loans from different lenders is the best way to ensure you don’t pay more than you need to.

FHA loans can be adjusted based on your needs. Options such as the hybrid adjustable rate, which allows borrowers to finance their mortgages, and down payment grants are a good way to make the loan work better for you. Borrowers can also take advantage of section 251, which insures home purchases and refinanced loans to allow interest rates to be lowered over time. There are a number of ways in which you can make an FHA mortgage meet your specific needs, allowing you to get the house you’ve always wanted at a price you can afford to pay over the correct amount of time.


FHA Lending, FHA Loan Articles

2011 FHA Limits

January 11th, 2011
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Many mortgage professionals feared that Congress would reduce 2011 FHA loan limits in an effort to further tighten lending and mitigate fraud that has devastated the United States housing sector and economy in general.  If congress decreased FHA limits than many borrowers would be unable to refinance because their existing mortgage would exceed the 2011 FHA loan limits.  Fortunately, Congress approved a temporary extension for the current FHA loan limits and that offers a least a glimpse of hope for homeowners struggling to get approved for FHA loan refinancing that would lower their monthly payment.

Many FHA lenders have feared privately that Congress may allow the conforming and FHA limits to fall when the bill setting mortgage limits expires September, 2011. Tightening FHA guidelines sounds great and looks good on paper, but the reality is that too much tightening can completely strangle the housing market and the cash flow most Americans have become accustomed too.

Let’s be honest and look at the reality of the mortgage industry.  Millions of Americans own homes and if they can document that they can afford a refinance loan for a home that they already have, then the FHA lender should approve the loan and move on.  If a borrower can document to a FHA lender that reducing their interest rate to a competitive level of today’s current FHA rates will increase the likelihood of them paying their mortgage on time, then the lender should approve the mortgage refinance and move on — Isn’t that what a loan modification is any way.

The U.S. government took tax payer dollars and distributed it to the banks so that they would lend more money to homeowners and small business.  Unfortunately the banks did not oversee and mandate the increased FHA lending and liquidity. The fact remains that FHA credit guidelines have tightened significantly in the last 12 months.  The FHA streamline continues to have a few loop holes that are in fact helping FHA borrowers refinance, but you must already have a FHA loan to qualify for the streamline refinance program.


FHA Credit, FHA Guidelines, FHA Lending, FHA Loan Articles

FHA Short Refinance

August 6th, 2010

FHA continues to be active with tightening FHA loan guidelines for many of their loan products, but the FHA short-refinance is very aggressive mortgage relief for a targeted group of troubled borrowers.  The U.S. Department of Housing and Urban Development announced the new FHA loan program because almost 25% of financed homes above 100% loan-to-value.  We have been hearing about this government initiative to help borrowers who property values had declined below their mortgage balance.  Foreclosures continued to rise and HUD felt like this was the time to roll out the FHA Short Refi Program.   This is unlike the other FHA refinance loan programs that limit borrowers to 96.5% loan-to-value and the FHA short refinance goes above and beyond the value of the home.

FHA Short Refi Focuses on Helping Underwater Mortgages

HUD will release the Federal Housing Administration’s new Short Refinance program, which is designed to help facilitate mortgage refinancing by borrowers who are underwater, meaning they owe more on their mortgage than the home is worth. HUD Secretary Shaun Donovan told a group of black real estate professionals Tuesday in Fort Worth that while the Obama administration has made strides in ensuring affordable housing for all, there’s still room to improve.  “There’s no question that the state of today’s housing market is in significantly better shape than anyone predicted a year ago,” Donovan said.

Many borrowers find their homes underwater and with the forecast for continued high unemployment, the housing recovery remain the biggest threats to a double dip recession. At the end of last year, among all U.S. households that had a mortgage on their property, 11.3 million, or 2 %, were underwater, he said. Those depreciated properties are mostly in California, Arizona, Florida, Michigan and Nevada.

Most FHA lenders believe that the FHA short-refi is a unique approach and that this mortgage relief initiative will help out a lot of struggling homeowners, but unfortunately not everyone will qualify and meet the FHA mortgage requirements.


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Key FHA Mortgage Loan Facts for Homebuyers

July 22nd, 2010
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BankRate published a helpful article for new homebuyers that outlined important facts about FHA home loans.  In the wake of the housing bubble’s collapse, FHA loans have taken on renewed importance for today’s mortgage borrowers. Simply stated, an FHA mortgage is a home loan insured by the Federal Housing Administration, a government agency within the U.S. Department of Housing and Urban Development. Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan.  Because of that insurance, lenders can — and do — offer FHA home mortgages at attractive mortgage rates and with less stringent and more flexible qualification requirements.

The FHA doesn’t mandate a minimum credit score, according to Vicki Bott, HUD deputy assistant secretary for single-family housing. Instead, each borrower’s creditworthiness is considered in context.  However, FHA lenders can overlay their own requirements on top of the FHA guidelines. Some lenders might require a minimum credit score. Ask the loan officer about such a requirement if you have bad credit.  “Lenders underwrite FHA home loans to ensure that the customer has the willingness and capability to repay the loan, but we do have flexibility beyond pure credit score to look at the borrower’s financial situation,” Bott says.

The FHA requires a down payment of just 3.5% of the purchase price of the home. That’s a fraction of the %age typically required on most other loans and a “huge attraction,” says Dennis Geist, vice president of government programs at Wells Fargo Home Mortgage in Carlsbad, California.  Borrowers can use their own savings to make the down payment. But other allowed sources of cash include a gift from a family member, or a grant from a state or local government down payment assistance program.

The FHA allows home sellers, builders and lenders to pay some of the borrower’s closing costs, such as an appraisal, credit report or title expenses. For example, a builder might offer to pay closing costs as an inducement for the borrower to buy a new home.  FHA mortgage lenders typically charge a higher interest rate on the loan if they agree to pay closing costs. Borrowers can use the good faith estimate of closing costs — commonly known as the GFE — to compare interest rates and closing costs on different loans and figure out which option makes the most sense.

Because the FHA is not a lender, but rather an insurance fund, borrowers need to get their loan through an FHA-approved lender. Not all FHA-approved lenders offer the same interest rate and costs — even on the same FHA loan. That’s another reason Bott says borrowers should shop around.  “We encourage consumers — from a cost, service and underwriting standard — to shop around many lenders or mortgage brokers to make sure they understand what the best fit is for their particular situation,” she says.

Two mortgage insurance premiums are required on all FHA home loans: The upfront premium is 2.25 % of the loan amount, and the annual premium is 0.55% of the loan amount. The upfront premium must be paid when the borrower gets the loan but can be financed as part of the loan amount. The annual premium is paid in chunks of 1/12th of the total along with each month’s mortgage payment.  “The perception is that that sounds expensive,” Geist says. However, he adds, borrowers need to compare the FHA-insured loan to a loan that’s not FHA-insured (and consequently requires a much larger down payment). In many cases, the FHA loan is still the best choice, he says.

The FHA has a special loan product for borrowers who need extra cash to make repairs to their homes. The chief advantage of this type of loan, called a 203k, is that the loan amount is based not on the current appraised value of the home but on the projected value after the repairs are completed. The FHA 203k loan allows the borrower to finance up to $3,500 in nonstructural repairs, such as painting and replacing cabinets or fixtures, Geist says.

FHA insurance isn’t intended to be an easy out for borrowers who feel unhappy about their mortgage payments. But loan servicers can offer some relief to borrowers who have an FHA-insured loan, have suffered a serious financial hardship and are struggling to make their payments. That relief might be a temporary period of forbearance, a loan modification that would lower the interest rate or extend the payback period, or a deferral of part of the loan balance at no interest.


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FHA Streamline Refinancing without Costs

July 22nd, 2010
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The FHA Home Loan Blog recent published an article that uncovered some new opportunities for no cost FHA streamline refinancing. There are approved FHA lenders that are offering no cost mortgage refinance opportunities for a select group of borrowers.  If you have good income and high credit scores above 700, there is a good possibility that you may qualify for a no cost FHA streamline loan in which the lender is paying for the closing costs on their end.  This way you do not have to come out of pocket to cover the closing costs and your mortgage balance would not go up because you are not financing fees that FHA will not allow anymore anyways.  Qualifying for no cost FHA streamline loans will take some shopping online to find a credible FHA loan company that offers these unique refinancing incentives, but clearly it will be worth it financially in the long run.   Read the original FHA article online > No Cost FHA Streamline Refinancing


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Will FHA Loan Products Require a Minimum Credit Score for Refinancing?

July 16th, 2010
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It looks like finally the government is tightening the FHA credit guidelines for home loans and refinancing.  The Federal Housing Administration has always been a great proponent of homeownership and fair lending, but FHA loan defaults are sucking up the FHA reserves. FHA announced they were considering a proposal to no longer approve FHA mortgage loans to borrowers with credit scores below 500.  After Congress left the 2010 FHA loan limits at high levels FHA mortgage companies knew that the mortgage news can’t always be good.  Let’s be honest — For the most part, FHA mortgage refinance programs programs have been pretty aggressive with subprime borrowers.

The results of these FHA lending changes are starting to be realized as the FHA loan portfolio is starting to perform better with less delinquencies and defaults.  Stevens continued, “These are the latest in a series of modifications to allow the FHA to manage its risk better while continuing to support the recovery for the U.S. housing sectors.”  HUD reported that in May, FHA loans that were seriously delinquent rose almost 9%.  That was up from 7.93% at this time in the previous year.  The good news is that FHA loan defaults have declined since January, when they rose to 9.16% which was a record high.  The effects of the foreclosures have been drastic as they have nearly drained the once healthy, FHA reserves.  Congress requires that FHA keep the reserves above a minimum of 2%.

Earlier this year, FHA proposed a measure to implement a minimum Fico score system to the FHA mortgage programs.  Jerry Mlnar of Woodfield Planning, who is a trusted Illinois mortgage company said,  ”FHA has to protect the government home finance program to promote affordable home financing and credit score resquirements for FHA mortgages makes sense.”

The initiative is being considered as a pro-active measure to reduce delinquencies and FHA loan defaults.  Congress considered raising the minimum down-payment requirements to 5% and 10% for borrowers with Fico scores that fell below 580.  For the most part, home buyers are only required to come up with a 3.5% down-payment when financing with FHA home loans.  However FHA direct endorsed underwriters have the discretion to require higher down-payments for candidates that pose a higher risk.

In a recent article, CNNMoney evaluated the FHA lending policies that are being considered in the reform circles of the lending community.  stage. Before going into effect, the department is soliciting public comment on the matters for 30 days. Then, it will evaluate the comments before implementing any changes.


FHA Credit, FHA Guidelines, FHA Lending, FHA Loan Articles, FHA Loan Updates, FHA News, Mortgage News, Published Loan Articles ,

FHA Loan Production Dips Slightly

July 8th, 2010
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Recent government reports indicated that FHA mortgage loan origination dropped 3% in May from April’s volume.  FHA lenders originated $22.3 billion of FHA loans for single-family homes in May.  Almost 72% of the 124,750 FHA loan approvals went to borrowers buying a home.  Of the 30,900 FHA refinance loans in May, 68% were conventional loan transactions with borrowers putting only 3.5% down-payments which are the minimum FHA requirements for home purchase transactions.  The Federal Housing Administration indicated that 8.42% of its insured FHA loans are 90 days or more past due which almost the same as the 8.49% reported in April.

Get the Latest Changes from the FHA Loan Blog

Many FHA loan companies are concerned that FHA guidelines could tighten more because of the FHA loan defaults.  Many insiders are predicting that HUD will increase the down-payment requirements from 3.5% to 5%.  This will make it tougher for many consumers to get approved for FHA financing but it may reduce loan defaults that put the FHA mortgage programs at risk.

The government report also noted the lack of volume for the Hope for Homeowners programs that has helped very few borrowers qualify for FHA refinancing.  FHA mortgage rates remain at record lows but the pool of borrowers who qualify for FHA refinancing has clearly been reduced.


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Increased Net Worth Requirements for FHA Approved Lenders

July 1st, 2010
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The recent FHA Mortgagee Letter from HUD all have the underline toned of increased responsibilities for approved FHA lenders.  HUD is driving home the tone of responsible lending in each of the FHA letters in 2010.   FHA outlined key provisions of HUD’s recently issued final rule, and guidance to mortgagees on HUD’s implementation of this final rule. The recent FHA requirements have been changed again as the new rule calls for increased the net worth requirements for FHA approved lenders.  The letter eliminates FHA approval of loan correspondents, FHA requirements of the Helping Families Save Their Homes Act of 2009 and made minor modifications to other aspects of FHA’s regulations for FHA lenders. Increased Net Worth Requirements As stated in the final rule referenced above, FHA is implementing increases to its net worth requirements and is offering additional incentives for existing FHA-approved lenders and mortgagees.  Many borrowers are concerned because there seems to be less competitive lenders out there even as FHA rates have become so affordable.


FHA Requrements Change Again with FHA Lenders Needing Higher a Net-Worth


Effective May 20, 2010, all new applicants for FHA approved lenders, irrespective of size, must possess a net worth of at least $1,000,000, of which no less than 20% must be liquid assets consisting of cash or its equivalent acceptable to the Secretary. FHA Lender Approval Application that is available at:  Effective May 20, 2011, each FHA approved lender or mortgagee with FHA approval as of May 20, 2010, that exceeds the size standards for a small business as defined by the Small Business Administration, must possess a net worth of at least $1,000,000, of which no less than 20% must be liquid assets consisting of cash or its equivalent acceptable to the Secretary.


FHA Credit, FHA Guidelines, FHA Lending, FHA Loan Updates, FHA Mortgage Leters, FHA News, Mortgage News ,

FHA Lenders See Rise for FHA Refinancing and Home Buying

June 23rd, 2010
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Over the last few months many FHA loan companies have been struggling to submit new loans into process because the loan application volumes were down for FHA refinancing and new home buying.  There were a few good weeks here an there, but overall, morale was down for loan officers according to several FHA lenders.  The Mortgage Bankers Association published its weekly home loan application report for the week that ended on June 11th.  Home refinancing and purchase mortgage applications rose and that is good news for mortgage brokers and lenders across the country. 

There was also good news the government mortgage programs as both FHA and VA loan applications increased significantly.  refinance loan guidelines have seen some tightening of one of the most popular programs, the FHA streamline in which borrowers are no longer allowed to finance the closing costs.  Borrowers must pay for the closing costs themselves outside of the loan.  Many FHA lenders have said that this had hurt their FHA refinance business, but it appears the borrowers are still using FHA for refinancing transactions.  FHA first time home buying loans could become fashionable again as more people look to become homeowners this summer.

The MBA’s index measures the volume of home mortgage applications and the report indicated an increase of 17.7% from the week prior. The Unadjusted Index spiked 29.7%, when compared to the prior week but the Memorial Day holiday shortened that week.

Michael Fratantoni who is MBA’s Vice President of Research and Economics, released a statement saying, “Mortgage loan applications for home buying rose last week, the first increase in over a month.  Mortgage refinance applications also roseup dramatically over the week.” He further went on to state that, “While it is clear that home loan applications in May dropped sharply as a result of the tax credit induced increase in applications in April, it is unclear whether we are seeing the beginnings of a rebound now.” The Weekly Home Loan Applications Survey contains over a dozen indices that covers mortgage-related application activity for fixed and adjustment rate, as well as conventional and government loans for home purchase and refinances. 


FHA Credit, FHA Guidelines, FHA Lending, FHA Loan Articles, FHA Loan Updates, FHA News, Mortgage News , , ,

FHA Loan Volume Risking Reserves

June 17th, 2010
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Bloomberg published an article recently that considered the impact of FHA loans.  FHA first time homebuying remains popular with the low FHA interest rates.  FHA home loans re guaranteed by the Federal Housing Administration, the U.S.-owned mortgage insurer, may be involved in more home-purchase transactions than borrowing financed by Fannie Mae and Freddie Mac.  FHA mortgage lending last quarter may have topped the combined volume of government-supported Fannie Mae and Freddie Mac in a home-lending market that’s still a “government-financed market,” David Stevens, the agency’s head, said today at a conference in New York, citing research by consultant Potomac Partners.  “This is a market purely on life support, sustained by the federal government,” he said at the Mortgage Bankers Association conference. “Having FHA do this much volume is a sign of a very sick system.”  The FHA mortgage loan is insured by the government so when loan defaults sky-rocket, there are reasons to worry.  With down payments as low as 3.5%, insured $52.5 billion of home-purchase mortgages in the first quarter, compared with $46 billion of purchases of the debt by Fannie Mae and Freddie Mac, according to data compiled by Washington-based Potomac Partners.  The FHA and Fannie Mae and Freddie Mac, which regulators seized in 2008, have been financing more than 90 percent of U.S. home lending after a retreat by banks and the collapse of the market for mortgage bonds without government-backed guarantees.

FHA has been taking steps to shore up its program after being left with “terrible portfolios” from 2007 and 2008, Stevens said.  Freddie Mac has mainly “eliminated” its financing of certain “esoteric products,” Donald J. Bisenius, executive vice president of the McLean, Virginia-based company’s single- family credit-guarantee business, referring to debt such as low- documentation lending or so-called option adjustable-rate mortgages with growing balances. The company’s “parameters around” 30-year fixed-rate loans still allow for relatively low down payments and credit scores and high debt-to-income ratios, he said.  “It’s not obvious to me that the credit box has shrunk as much as the numbers might suggest,” Bisenius said. Article was written for Bloomberg by Jody Shenn and John Gittelsohn.


FHA Credit, FHA Guidelines, FHA Lending, FHA Loan Articles, FHA News, Mortgage News

Government Increasing the FHA Loan Premiums

June 11th, 2010
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The US House passed a bill yesterday that would give HUD the authority to increase the FHA mortgage insurance premiums over a period of time. Keeping the FHA loan premiums low would help increase homeownership and raising the premium would likely decrease new home buyers.  This bill was created in an effort to help the Federal Housing Administration shore up its finances is set for a vote this week in the U.S. House of Representatives.  FHA loan defaults have eroded the reserves for the FHA loan programs, which drives the probable bailout for taxpayers.  The legislation’s goal is to help replenish FHA reserves without harming the agency’s mission of backing low down payment loans for low- and moderate-income borrowers.   The bill would nearly triple the cap on the annual premiums the FHA charges borrowers to 1.50% from 0.55%.  Many government lenders are concerned about the effect high premiums will have on the FHA house financing market.

This bill should make it easier for the FHA to shield itself from losses on loans that were underwritten fraudulently or violated FHA standards.   FHA Commissioner David Stevens said the legislation will make “absolutely certain” the agency has the power to protect itself from bad lenders and rebuild its capital-reserve fund.   The FHA estimates the proposed changes will generate about $300 million a month in positive receipts, allowing the agency to replenish its reserves at a much faster rate than it otherwise would.  This FHA mortgage insurance bill could pose some problems with FHA borrowers who are struggling with affordability on their exiting FHA loan.

In recent months, the FHA has tightened standards for borrowers and expelled more than a thousand lenders from its program.  The FHA raised its upfront borrower premiums to 2.25% from 1.75%, but it intends to lower that premium to around 1% once it has the power to increase the annual premium. The FHA plans to raise the annual premium to 0.90% from the current 0.55%, Stevens has testified.  The FHA estimates the change will result in a premium increase of $42 a month for the typical new borrower.


FHA Lending, FHA Loan Articles, FHA News, Mortgage News, Published Loan Articles

Considering the Future of FHA Loan Financing

June 9th, 2010
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Yes FHA mortgage rates are low, but the FHA loan program as a whole may be in jeopardy of existence.  Many FHA blogs have posed the reality that the FHA loan product is at serious risk to be shut down.  In this political climate it becomes obvious that anything is possible because Congress must pass bill to continue to fund the FHA finance programs. FHA FHA first time home buyer loans have been promoting home ownership since the great depression.  Even as we discuss their recent failures, the argument could be made that FHA is one of the most successful government initiative in the last century.  

The FHA Home Loan Refinancing blog reported that the FHA reserves have covered $6 billion over the last 6 months. Yet HUD had predicted the FHA agency would pay $8.7 billion for loan defaults.  This FHA blog poses the question, “should we cheer because the FHA home loans are preforming better than anticipated or be critical of a federal loan program that is failing in a failing economy?”  Read the original FHA loan article online > Is FHA Mortgage Financing in Trouble?


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New FHA Loan Requirements for Condo Sales

June 1st, 2010
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Over the last few years, FHA loan policies have been different for condominiums.  Recent changes in the way the Federal Housing Administration approves home loans for condominiums have left many would-be homeowners out in the cold, at least temporarily. That’s because the FHA will no longer approve a mortgage for a unit in a community that does not comply with new, stringent standards that went into effect on February 1st. In order to be certified as a compliant community, the condo association must apply to the FHA become certified as meeting all the standards. An FHA mortgage lender can also apply on the condominium community’s behalf to get this certification.  The FHA doesn’t make loans itself, but it does ensure home loans made to people with small down payments or less than perfect credit. This is why among first-time buyers, FHA mortgage loans are often the only option for buying a home.

Lemar Wooley, an FHA spokesman, said the new regulations were put into place because Congress changed the law, allowing FHA guidelines to make approvals of loans to condominium buyers more similar to single-family home-loan approvals. “The “Housing and Economic Recovery Act of 2008′ (HERA), moved the condominium authority from Section 234 to Section 203 to allow for more flexible condominium policy guidance,” Wooley said. “”Because of this change in law, the Federal Housing Administration (FHA) is implementing a new approval process for condominium projects and insurance requirements for mortgages on individual units, as authorized under Section 203(b) of the National Housing Act.”Wooley explained that Section 234 was a special section dealing specifically with condominiums. Section 203 provides general guidance for single-family homes.

Announced in November, the new regulations fall into three broad categories, according to Orest Tomaselli, the president of National Condo Advisors, a consulting company that works with condominium associations to help them meet the regulations.  First, he said, the community must demonstrate it has a budget reserve that is equal to 10 % of its annual budget. The reserve exists for repairs and maintenance of the common property and plant – the sidewalks, roofing, siding, windows, swimming pool, tennis courts, clubhouse or other facilities. If a community does not have or want such a large reserve, Tomaselli said it can hire an engineer to study the community’s needs and recommend a lower amount. If the FHA accepts the engineer’s study, a lower reserve amount can be set for that community

Second, the condominium community must meet new flood-plain requirements set forth by the Federal Emergency Management Agency. If the community is not in a flood plain, this is not an issue. However, when FEMA redrew its flood maps recently, it expanded the areas it believes will flood. Within those areas, buildings can still comply if the community has flood insurance and the highest living space is 10 feet or more above the flood plain. Or, the community can hire an engineer to file a “Letter of Loan Amendment,’ which, in effect, demonstrates that the FEMA guidance needs adjusting in their case. If FHA accepts this amendment, the community can be certified.

Third, the community must meet certain ownership requirements. At least half of all the units in the community must be owner-occupied, and no one investor can own more than 10 % of all the units. In the case of a community that is still being built, a certain %age of units must be presold.  Tomaselli said that the requirements aren’t really bad. Having sufficient capital reserves to meet maintenance needs is wise. Having most of the units occupied by the owners also ensures that the community will be well looked after. And flooding in some areas has been more frequent in recent years. But that doesn’t change the fact that these regulations have hit hardest those with the least ability to pay for engineering studies or increased budget reserves.


FHA Guidelines, FHA Lending, FHA Loan Product Promo, FHA Loan Updates, FHA News, Mortgage News

Home Buying Opportunities with Declining FHA Loan Rates

May 25th, 2010
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Once again 1st-time home buyers made up almost half of the homes purchased in April.  New home buyers have been inspired by historically low interest rates and low down-payment requirements with FHA loans.  Many mortgage executives privately feared rate hikes once the Federal Reserve allowed $1.25 trillion mortgage-securities purchase program to officially expire, but conforming and FHA loan rates remain at record lows. 

The flexible FHA loan guidelines and aggressive lending standards set forth by the Federal Housing Administration have encourages FHA lenders to finance new home buying if the borrower can document their income.  In 2010, government home financing has taken the market-share for mortgage loans as, through Freddie Mac, Fannie Mae and the FHA, have seized almost 97% of the home financing market.  

According to FHA commissioner David Stevens “This is a mortgage market surviving purely on life support and sustained by the federal government.” Stevens spoke with passion at the Mortgage Bankers Association conference yesterday. He reached out to FHA lenders to start thinking more about the borrower and helping the mortgage industry recover rather than focusing on maxing out loan commissions.  HUD has tightened FHA loan requirements with stricter FHA guidelines that have made qualifying with FHA for challenging for borrower than it was in the past few years.

FHA lenders continue to be blessed with affordable FHA loan rates. The Mortgage Bankers Association mentions that FHA interest rates should remain relatively low in the short term because of concerns in Europe financial woes with debt burdens. Lower FHA rates help to reinforce demand. Despite average thirty-year FHA interest rates dipping below the 5% illustrious threshold, the MBA noted last week that the number of people seeking purchase loan applications has declined by over 27%, the most dramatic drop since May of 1997.   Read the original FHA loan article online at CNN Money >


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