The Department of Housing and Urban Development and the FHA have issued a Mortgagee Letter announcing changes to the rules for down payment assistance. FHA loan program rules permit the borrower to get assistance with the minimum required down payment-this assistance can come in the form of gift funds from family or friends, money from employers, or even down payment assistance programs. Government entities are permitted to provide such down payment help, too. In all cases, the down payment assistance must meet FHA loan requirements. Gifts cannot be loans in disguise; there must be no expectation of repayment of a gift of down payment funds. And now, thanks to revisions to the rules governing these issues in HUD 4000.1, government entities must meet certain requirements when providing down payment funds. Mortgagee Letter 19-06 states, “It has come to FHA’s attention that certain Governmental Entities may be acting beyond the scope of any inherent or granted governmental authority in providing funds towards the Borrower’s MRI in circumstances that would violate Handbook 4000.1, the National Housing Act, and is contrary to established law.” “In reviewing its current documentation requirements for Mortgagees, FHA has determined that those requirements should be clarified to provide […]
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The Department of Housing and Urban Development and the FHA have issued a Mortgagee Letter announcing changes to the rules for down payment assistance.
FHA loan program rules permit the borrower to get assistance with the minimum required down payment-this assistance can come in the form of gift funds from family or friends, money from employers, or even down payment assistance programs.
Government entities are permitted to provide such down payment help, too.
In all cases, the down payment assistance must meet FHA loan requirements. Gifts cannot be loans in disguise; there must be no expectation of repayment of a gift of down payment funds.
And now, thanks to revisions to the rules governing these issues in HUD 4000.1, government entities must meet certain requirements when providing down payment funds.
Mortgagee Letter 19-06 states, “It has come to FHA’s attention that certain Governmental Entities may be acting beyond the scope of any inherent or granted governmental authority in providing funds towards the Borrower’s MRI in circumstances that would violate Handbook 4000.1, the National Housing Act, and is contrary to established law.”
“In reviewing its current documentation requirements for Mortgagees, FHA has determined that those requirements should be clarified to provide Mortgagees with specific guidance regarding documentation that will give greater assurances that the standards for providing the MRI have been satisfied by the Governmental Entity”.
According to the mortgagee letter, “In accordance with the Prohibited Sources of Minimum Cash Investment Under the National Housing Act –Interpretive Rule, HUD does not interpret Section 203(b)(9)(C) of the National Housing Act to prohibit Governmental Entities, when acting in their governmental capacity, from providing the Borrower’s MRI where the Mortgage is being originated as part of a Governmental Entity homeownership program”.
But when a government entity provides down payment funds, it must now conform to certain changes in HUD 4000.1 which include a requirement that the lender must document that a government entity providing down payment assistance “as either a gift or through Secondary Financing,” is done in a manner that complies with federal laws including the National Housing Act.
“The Mortgagee must document that the Governmental Entity incurred prior to or at closing an enforceable legal liability or obligation to fund the Borrower’s MRI in its governmental capacity. It is not sufficient to document that the Governmental Entity has agreed to reimburse the Mortgagee for the use of funds legally belonging to the Mortgagee to fund the Borrower’s MRI.”
Borrowers getting down payment help through a government agency should be prepared for this additional layer of scrutiny on such funds and anticipate needing further documentation in such cases.
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April is Fair Housing Month, a time when the FHA and HUD raise awareness of Fair Housing Act issues and how violations of Fair Housing laws can make it difficult for house hunters of all kinds to find and keep a home. The month of April is not the only time when HUD publicizes its’ Fair Housing cases, but it is a time to pay more attention to these cases and their implications. The latest involves a settlement between HUD and a San Diego-based property management company that had a dispute with a rental tenant. According to a press release on the HUD official site. The Department of Housing and Urban Development announced “a fair housing agreement between a San Diego-area property management company and a family with a child who has a respiratory disability”. This agreement is the resolution of allegations “that Property West Residential, Inc., which manages Meadow Woods at Alpine Apartment complex in Alpine, California, refused to grant the mother’s request to be moved to a unit away from her neighbors who were heavy smokers”. Fair Housing Act laws forbid denying–or limiting–housing because of a person’s disability. It is also illegal under the Fair Housing Act to […]
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April is Fair Housing Month, a time when the FHA and HUD raise awareness of Fair Housing Act issues and how violations of Fair Housing laws can make it difficult for house hunters of all kinds to find and keep a home.
The month of April is not the only time when HUD publicizes its’ Fair Housing cases, but it is a time to pay more attention to these cases and their implications.
The latest involves a settlement between HUD and a San Diego-based property management company that had a dispute with a rental tenant. According to a press release on the HUD official site. The Department of Housing and Urban Development announced “a fair housing agreement between a San Diego-area property management company and a family with a child who has a respiratory disability”.
This agreement is the resolution of allegations “that Property West Residential, Inc., which manages Meadow Woods at Alpine Apartment complex in Alpine, California, refused to grant the mother’s request to be moved to a unit away from her neighbors who were heavy smokers”.
Fair Housing Act laws forbid denying–or limiting–housing because of a person’s disability. It is also illegal under the Fair Housing Act to refuse reasonable accommodations in such cases.
“Allowing a parent to move to a different unit in order to protect the health of their child is not special treatment, it is complying with the law,” said Anna María Farías, HUD’s Assistant Secretary for Fair Housing and Equal Opportunity, who was quoted in the press release. “HUD will continue working with housing providers to help them meet their reasonable accommodation obligations under the Fair Housing Act.
Like so many Fair Housing cases, the reason Property West Residential, Inc. was brought back into compliance with federal law was because the victims came forward. According to the press release, “The case came to HUD’s attention when a single mother of a child with respiratory disabilities filed a complaint alleging that the property manager denied her requests to move to another unit because the smoke from her neighbor’s unit exacerbated her son’s disability.”
Financial damages were awarded and the property management company is required to put its’ staff through Fair Housing training as a condition of the agreement.
Have you experienced housing discrimination? File a complaint with the HUD Office of Fair Housing and Equal Opportunity at (800) 669-9777 (voice) or (800) 927-9275 (TTY).
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The FHA home loan program has been described in other publications as being “the mortgage program first-time home buyers love”, but many people worry about closing costs and down payment requirements. How do you pay for FHA home loan closing costs and the down payment? The key is to first understand what these expenses are. FHA Home Loan Origination Fees and Other Closing Costs FHA home loans, like many other mortgage loan products, permit the lender to charge a loan origination fee. These fees will vary from lender to lender and it’s best to contact the lender directly to learn how much the origination fee might be. There may be other closing costs in addition to the ones mentioned below including expenses related to hazard insurance, compliance inspections, flood zone determination, or pest control. FHA Home Loan Discount Points The term “discount points” means “a charge from the Mortgagee for the interest rate chosen”. Paying points to reduce the interest rate is a common practice and if you choose to do so, that charge will be added to your closing costs. FHA Home Loan Prepaid Items Prepaid expenses may include flood and hazard insurance premiums, FHA mortgage insurance premiums, real […]
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The FHA home loan program has been described in other publications as being “the mortgage program first-time home buyers love”, but many people worry about closing costs and down payment requirements.
How do you pay for FHA home loan closing costs and the down payment? The key is to first understand what these expenses are.
FHA Home Loan Origination Fees and Other Closing Costs
FHA home loans, like many other mortgage loan products, permit the lender to charge a loan origination fee. These fees will vary from lender to lender and it’s best to contact the lender directly to learn how much the origination fee might be. There may be other closing costs in addition to the ones mentioned below including expenses related to hazard insurance, compliance inspections, flood zone determination, or pest control.
FHA Home Loan Discount Points
The term “discount points” means “a charge from the Mortgagee for the interest rate chosen”. Paying points to reduce the interest rate is a common practice and if you choose to do so, that charge will be added to your closing costs.
FHA Home Loan Prepaid Items
Prepaid expenses may include flood and hazard insurance premiums, FHA mortgage insurance premiums, real estate taxes, and per diem interest.
The FHA Upfront Mortgage Insurance Premium
The Up-Front Mortgage Insurance Premium is a closing cost that may be paid in cash or financed into the mortgage loan. If you choose to finance this expense, it must be paid in full. You cannot partially finance the Up Front Mortgage Insurance Premium.
Real Estate Agent Fees Where Applicable
HUD 4000.1 states, “If a Borrower is represented by a real estate agent and must pay any fee directly to the agent, that expense must be included in the total of the Borrower’s settlement requirements.”
Repairs and Improvements
HUD 4000.1 states that the cost of repairs and improvements, “or any portion paid by the Borrower that cannot be financed into the Mortgage, are part of the Borrower’s total cash requirements”. This cost may be required because of appraiser-required corrections to the property that must occur as a condition of home loan approval.
The FHA Home Loan Down Payment
FHA home loans have a mandatory 3.5% minimum down payment requirement. The closing costs mentioned above cannot be counted toward this down payment, it is separate from the other expenses of your mortgage and must be paid at closing time. Borrowers with credit issues who do not meet FHA minimum FICO score requirements and lender standards may be asked to make a higher down payment as a condition of loan approval.
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First-time home buyers new to FHA home loans don’t always realize how many different FHA home loan options are available to them. You don’t have to buy a one-bedroom house in the suburbs; FHA mortgages are more flexible and offer many ways for you to find and buy a dream home. FHA Condo Loans Because of a long-time misconception held even today about FHA loans being need-based, having income caps, or intended only for low-income borrowers (none of those things actually apply to the FHA mortgage loan program) some are surprised to learn that there is such a thing as an FHA condo loan. Any qualified borrower (based on income, credit history, employment stability, and other financials) can apply for an FHA condo loan in a condominium project that meets FHA standards. FHA Mobile Home Loans Borrowers who want to purchase a mobile home, manufactured home, modular home, or a combination of land and a home of this type will find an FHA mortgage loan for them. It’s good to shop around for an FHA mobile home loan; not all lenders offer them depending on the nature of the housing market and demand for this type of mortgage. It’s good […]
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First-time home buyers new to FHA home loans don’t always realize how many different FHA home loan options are available to them.
You don’t have to buy a one-bedroom house in the suburbs; FHA mortgages are more flexible and offer many ways for you to find and buy a dream home.
FHA Condo Loans
Because of a long-time misconception held even today about FHA loans being need-based, having income caps, or intended only for low-income borrowers (none of those things actually apply to the FHA mortgage loan program) some are surprised to learn that there is such a thing as an FHA condo loan.
Any qualified borrower (based on income, credit history, employment stability, and other financials) can apply for an FHA condo loan in a condominium project that meets FHA standards.
FHA Mobile Home Loans
Borrowers who want to purchase a mobile home, manufactured home, modular home, or a combination of land and a home of this type will find an FHA mortgage loan for them.
It’s good to shop around for an FHA mobile home loan; not all lenders offer them depending on the nature of the housing market and demand for this type of mortgage.
It’s good to shop around for an FHA mobile home loan; not all lenders offer them depending on the nature of the housing market and demand for this type of mortgage.
FHA Multi-Unit Home Loans
FHA loan limits go higher for home loans to purchase multi-unit property. Real estate up to four living units can be approved for purchase with an FHA mortgage, as long as the home is owner-occupied.
Occupancy is a requirement for all FHA mortgages, and buying a home with up to four living units can be a way for some to experiment with being a landlord.
Remember, at least one borrower obligated on the FHA mortgage loan must live in the property as a condition of loan approval. Your multi-unit home cannot be used as a bed-and-breakfast, Air b-nb, or serve any other “transient housing” type where the renter stays for 30 days or less.
FHA home loans can help first-time home buyers with a low down payment requirement (3.5%) which applies no matter how many units the home to be purchased has.
The seller can contribute a certain amount toward closing costs (you must negotiate this with the seller), and you can get down payment assistance if it is offered in your area.
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There are plenty of misconceptions about refinancing real estate. If you have a house you want to refinance, it’s good to learn what you can and cannot do with an FHA refinance loan before you start shopping around for a lender. And you WILL want to shop around. FHA Refinance Loan Myths: You Have To Keep Your Original Lender You are free to refinance you home with another lender offering more competitive terms, rates, or perks for borrowing with that financial institution. FHA Refi Loan Myths: You Have To Refinance Into A Fixed-Rate Mortgage Borrowers can choose an FHA Adjustable Rate Mortgage (ARM) at refinance time if the lender offers such a loan. Not all participating lenders will, which is another reason to shop around for the right lender for you. Refinancing an ARM into anothe ARM loan is possible with an FHA refi. FHA Refinance Loan Myths: Cash Out Is Always Part Of The Transaction FHA refinance loan options do include a cash-out refinance option, but some borrowers are not interested in this feature and opt for no-cash out refi loans, simple refinance, or other options. Some refi loan options offer funds for approved repairs or upgrades to the […]
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There are plenty of misconceptions about refinancing real estate. If you have a house you want to refinance, it’s good to learn what you can and cannot do with an FHA refinance loan before you start shopping around for a lender. And you WILL want to shop around.
FHA Refinance Loan Myths: You Have To Keep Your Original Lender
You are free to refinance you home with another lender offering more competitive terms, rates, or perks for borrowing with that financial institution.
FHA Refi Loan Myths: You Have To Refinance Into A Fixed-Rate Mortgage
Borrowers can choose an FHA Adjustable Rate Mortgage (ARM) at refinance time if the lender offers such a loan. Not all participating lenders will, which is another reason to shop around for the right lender for you. Refinancing an ARM into anothe ARM loan is possible with an FHA refi.
FHA Refinance Loan Myths: Cash Out Is Always Part Of The Transaction
FHA refinance loan options do include a cash-out refinance option, but some borrowers are not interested in this feature and opt for no-cash out refi loans, simple refinance, or other options. Some refi loan options offer funds for approved repairs or upgrades to the home, but these funds will be paid specifically for the repairs/upgrades and are not cash-out refinance loans.
FHA Refinance Loan Myths: You Have To Have A Financial Need
FHA loans are not need-based, they are not for a specific demographic of home buyer or refinancer, there is no maximum income limit. If you financially qualify for the loan with your FICO scores, debt ratio, employment stability, and other factors, you can qualify for an FHA refinance loan whether that is a cash-out, no cash out, FHA rehab loan, etc.
FHA Refinance Loan Myths: FHA-To-FHA Refinances
FHA refinance loans are definitely available for FHA-to-FHA transactions, but you can also refinance a non-FHA mortgage with an FHA loan. You do not need to have an existing FHA mortgage to refinance a home loan, it can be any non-FHA mortgage loan as long as the lender agrees and the transaction meets FHA loan program requiremens.
Talk to a loan officer about your FHA home loan refinance options today including FHA rehab loans, cash-out refinancing, FHA reverse mortgages, and other options.
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April is Fair Housing Month, and while housing discrimination headlines are nothing new, April’s are especially relevant. Discrimination at any stage in the housing process can seriously interfere with those planning to buy a home, and sometimes the only line of defense against further violations of the Fair Housing Act is having the victims report the illegal activity. The Department of Housing and Urban Development has announced a settlement in a housing discrimination case in Maine. A press release on the HUD official site announces that “Page Realty, LLC, the owner of a Manchester, Maine, rental property, and its rental agent, Ramona Venskus, will pay $ 18,000 under a HUD Consent Order resolving allegations that they denied housing to families with children”. The Fair Housing Act, a federal law, prohibits housing providers from “denying or limiting housing to families with children under age 18, including refusing to negotiate, making discriminatory statements, and publishing discriminatory advertisements” that single people out based on family status or lack thereof. “It’s hard enough for families to find places to live that meet their needs without being denied suitable housing because they have children,” said Anna María Farías, HUD’s Assistant Secretary for Fair Housing and Equal […]
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April is Fair Housing Month, and while housing discrimination headlines are nothing new, April’s are especially relevant. Discrimination at any stage in the housing process can seriously interfere with those planning to buy a home, and sometimes the only line of defense against further violations of the Fair Housing Act is having the victims report the illegal activity.
The Department of Housing and Urban Development has announced a settlement in a housing discrimination case in Maine.
A press release on the HUD official site announces that “Page Realty, LLC, the owner of a Manchester, Maine, rental property, and its rental agent, Ramona Venskus, will pay $ 18,000 under a HUD Consent Order resolving allegations that they denied housing to families with children”.
The Fair Housing Act, a federal law, prohibits housing providers from “denying or limiting housing to families with children under age 18, including refusing to negotiate, making discriminatory statements, and publishing discriminatory advertisements” that single people out based on family status or lack thereof.
“It’s hard enough for families to find places to live that meet their needs without being denied suitable housing because they have children,” said Anna María Farías, HUD’s Assistant Secretary for Fair Housing and Equal Opportunity, who was quoted in the HUD press release.
Farías, adds, “HUD is committed to working to ensure that housing providers comply with their Fair Housing Act obligation to treat all applicants the same, including families with children.”
This Fair Housing case was brought HUD’s attention by an organization known as Pine Tree Legal Assistance, Inc., which is described in the press release as “a HUD Fair Housing Initiatives Program agency in Portland, Maine”. Pine Tree Legal Assistance, Inc. filed a complaint “alleging that Page Realty, LLC, and Ramona Venskus discriminated based on familial status when they refused to negotiate with fair housing testers posing as families with children”.
The realty company also allegedly posted discriminatory advertisements indicating that children were not allowed, and made discriminatory statements to fair housing testers. The HUD settlement requires Page Realty, LLC, and Ramona Venskus to pay Pine Tree Legal Assistance, Inc., $ 18,000 and also requires Fair Housing Act training.
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House prices in 2019 seem to be “at risk” to go lower according to some industry reports. If you are researching home prices (especially for those in housing markets on the West Coast) you may read about these issues being higher than usual for a variety of reasons. How Do Declining Home prices Affect FHA Home Loans? If the value or asking price of a neighborhood is in decline, it may affect certain options you have to negotiate with the seller. Your seller may or may not be willing to negotiate on items like the allowable six-percent-of-the-sale-price contributions toward closing costs the seller can make. Sellers may agree to pay this six percent as an incentive for the borrower to purchase the real estate. But if prices are going down in a given housing market and the seller’s profit margin begins to shrink as a result, he or she may think twice about that six percent. Cash Back On FHA Home Loans? Some borrowers want to know if the sale price declines and is lower than the appraised value, can they apply up to the FHA home loan limit and take the rest of the mortgage loan funds in cash. […]
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House prices in 2019 seem to be “at risk” to go lower according to some industry reports. If you are researching home prices (especially for those in housing markets on the West Coast) you may read about these issues being higher than usual for a variety of reasons.
How Do Declining Home prices Affect FHA Home Loans?
If the value or asking price of a neighborhood is in decline, it may affect certain options you have to negotiate with the seller.
Your seller may or may not be willing to negotiate on items like the allowable six-percent-of-the-sale-price contributions toward closing costs the seller can make. Sellers may agree to pay this six percent as an incentive for the borrower to purchase the real estate.
But if prices are going down in a given housing market and the seller’s profit margin begins to shrink as a result, he or she may think twice about that six percent.
Cash Back On FHA Home Loans?
Some borrowers want to know if the sale price declines and is lower than the appraised value, can they apply up to the FHA home loan limit and take the rest of the mortgage loan funds in cash. This can never happen.
FHA home loan rules are designed to prevent exactly such a scenario-the only FHA mortgage you can apply for to get cash back for any purpose the borrower chooses is with an FHA cash-out refinance loan.
Appraisals Versus Sale Price
Sales prices may not be the only things dropping in certain housing markets; if there is a decline in property values overall due to a “market correction”, natural disasters, or any number of other factors, it is entirely possible that appraisal values will begin to reflect this when the borrower comes to the bargaining table.
If the appraised value of a home comes in lower than the asking price, the buyer and seller can renegotiate the sale price, the borrower can feely walk away from the loan without penalty, or the buyer can agree to pay the difference out of pocket.
But the difference between the appraised value and the asking price cannot be financed into the mortgage loan amount.
Talk to a participating lender to learn more about issues like these that can affect your home loan transaction.
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April is Fair Housing Month, a time when the Department of Housing and Urban Development wants to raise awareness about Fair Housing Act laws, remind people of their rights, and reinforce the agency’s commitment to fair housing for all. As part of that fight to end housing discrimination, the U.S. Department of Housing and Urban Development has awarded “an additional $ 15 million to support dozens of fair housing organizations working to confront violations of the nation’s landmark Fair Housing Act. These grants, made possible through the HUD Fair Housing Initiatives Program (FHIP), are intended to help victims of housing discrimination and to raise awareness of fair housing laws. The funds are intended to support a “wide range of fair housing enforcement, education, and outreach activities” under several categories:. Private Enforcement Initiative grants (PEI) – for nonprofit fair housing enforcement organizations to investigate and enforce laws designed to “prevent or eliminate discriminatory housing practices”. Education and Outreach Initiative grants (EOI) – HUD awards these grants to groups that educate housing providers about their rights and responsibilities under federal. state, and local fair housing laws considered “substantially equivalent” to the Fair Housing Act. Fair Housing Organizations Initiative grants (FHOI) – These grants […]
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April is Fair Housing Month, a time when the Department of Housing and Urban Development wants to raise awareness about Fair Housing Act laws, remind people of their rights, and reinforce the agency’s commitment to fair housing for all.
As part of that fight to end housing discrimination, the U.S. Department of Housing and Urban Development has awarded “an additional $ 15 million to support dozens of fair housing organizations working to confront violations of the nation’s landmark Fair Housing Act.
These grants, made possible through the HUD Fair Housing Initiatives Program (FHIP), are intended to help victims of housing discrimination and to raise awareness of fair housing laws.
The funds are intended to support a “wide range of fair housing enforcement, education, and outreach activities” under several categories:.
- Private Enforcement Initiative grants (PEI) – for nonprofit fair housing enforcement organizations to investigate and enforce laws designed to “prevent or eliminate discriminatory housing practices”.
- Education and Outreach Initiative grants (EOI) – HUD awards these grants to groups that educate housing providers about their rights and responsibilities under federal. state, and local fair housing laws considered “substantially equivalent” to the Fair Housing Act.
- Fair Housing Organizations Initiative grants (FHOI) – These grants build the “capacity and effectiveness of non-profit fair housing organizations” to continue and enhance enforcement of the Fair Housing Act.
Who can receive such grants from HUD? The HUD official site states that federal funds may be offered to the following entities as described on HUD.gov:
- FHOI: Applicants must be qualified fair housing enforcement organizations with at least two years of experience in complaint intake, complaint investigation, testing for fair housing violations, and a record of meritorious claims in the three years prior to the filing of their application.
- PEI: Applicants must be organizations with experience providing quality fair housing enforcement activities.
- EOI: Applicants are state or local governments, qualified fair housing enforcement organizations with at least 2 years of experience, and other public or private nonprofit organizations representing individuals who have been victims of housing discrimination.
Have you experienced discrimination in any stage of the housing process? File a complaint with the HUD Office of Fair Housing and Equal Opportunity at (800) 669-9777 (voice) or (800) 927-9275 (TTY).
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There is a kind of FHA mortgage that first-time home buyers and experienced home owners alike can apply for that will allow the purchase or refinance of a piece of owner-occupied real estate and provide funds for repairs and renovations. The loan comes in two forms, as mentioned above; one for a new purchase and one to refinance an existing mortgage. The FHA 203(k) Rehabilitation Mortgage and the FHA 203(k) Refinance loan offer a range of possibilities for those who wish to buy a fixer-upper house or renovate their existing property. FHA loan rules in HUD 4000.1 describe these loans as follows: The Section 203(k) Rehabilitation Mortgage Insurance is used to: Rehabilitate an existing one- to four-unit Structure, which will be used primarily for residential purposes; Rehabilitate such a Structure and refinance the outstanding indebtedness on the Structure and the Real Property on which the Structure is located; or Purchase and rehabilitate the Structure and purchase the Real Property on which the Structure is located. This rehab loan comes as a “standard” version and a “limited” version, and the choice you make will depend greatly on the scale and scope of your project. The Standard FHA 203(k) mortgage may be […]
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There is a kind of FHA mortgage that first-time home buyers and experienced home owners alike can apply for that will allow the purchase or refinance of a piece of owner-occupied real estate and provide funds for repairs and renovations.
The loan comes in two forms, as mentioned above; one for a new purchase and one to refinance an existing mortgage.
The FHA 203(k) Rehabilitation Mortgage and the FHA 203(k) Refinance loan offer a range of possibilities for those who wish to buy a fixer-upper house or renovate their existing property.
FHA loan rules in HUD 4000.1 describe these loans as follows:
The Section 203(k) Rehabilitation Mortgage Insurance is used to:
- Rehabilitate an existing one- to four-unit Structure, which will be used primarily for residential purposes;
- Rehabilitate such a Structure and refinance the outstanding indebtedness on the Structure and the Real Property on which the Structure is located; or
- Purchase and rehabilitate the Structure and purchase the Real Property on which the Structure is located.
This rehab loan comes as a “standard” version and a “limited” version, and the choice you make will depend greatly on the scale and scope of your project.
- The Standard FHA 203(k) mortgage may be used for remodeling and repairs with a minimum repair cost of $ 5,000. You are required to use a 203(k) Consultant.
- The FHA Limited 203(k) may only be used for minor remodeling and non-structural repairs and you are not required to use a 203(k) Consultant. Your total rehabilitation cost must not exceed $ 35,000 but there is no minimum.
The FHA loan rules for this type of mortgage requires the home to be an “existing construction” home that has been completed for at least a year before the rehab loan is applied for.
Using an FHA Rehab loan to buy a fixer-upper is permitted under HUD 4000.1, which states, “A Property that is not eligible for a 203(b) Mortgage due to health and safety or security issues may be eligible under 203(k) if the rehabilitation or repair work performed will correct such issues.”
Which type of FHA Rehab loan is right for you? Talk to a participating FHA lender about your options under this program and see what may be right for you. Don’t forget to ask about how much it will cost to use a 203(k) consultant where required.
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A 2019 CoreLogic report states that home flipping, the process of purchasing, renovating, and putting a house back on the market in a short period of time and often at a substantial markup, is at it’s highest levels in about eight years. The CoreLogic report states, “…since the Great Recession, flippers have been increasingly good at acquiring properties at a discount, either because the properties were legally, financially or physically distressed”. Some borrowers may be tempted to flip homes, and others may wish to purchase a flipped home. What does the FHA home loan program’s rulebook say about this practice? HUD 4000.1 states that “eligibility of a Property for a Mortgage insured by FHA is determined by the time that has elapsed between the date the seller has acquired title to the Property and the date of execution of the sales contract that will result in the FHA-insured Mortgage”. That is not good news for property flippers hoping to sell to a borrower who wants to use an FHA mortgage. HUD 4000.1 adds, “FHA defines the seller’s date of acquisition as the date the seller acquired legal ownership of that Property. FHA defines the resale date as the date of […]
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A 2019 CoreLogic report states that home flipping, the process of purchasing, renovating, and putting a house back on the market in a short period of time and often at a substantial markup, is at it’s highest levels in about eight years.
The CoreLogic report states, “…since the Great Recession, flippers have been increasingly good at acquiring properties at a discount, either because the properties were legally, financially or physically distressed”.
Some borrowers may be tempted to flip homes, and others may wish to purchase a flipped home. What does the FHA home loan program’s rulebook say about this practice?
HUD 4000.1 states that “eligibility of a Property for a Mortgage insured by FHA is determined by the time that has elapsed between the date the seller has acquired title to the Property and the date of execution of the sales contract that will result in the FHA-insured Mortgage”.
That is not good news for property flippers hoping to sell to a borrower who wants to use an FHA mortgage. HUD 4000.1 adds, “FHA defines the seller’s date of acquisition as the date the seller acquired legal ownership of that Property. FHA defines the resale date as the date of execution of the sales contract by all parties intending to finance the Property with an FHA-insured Mortgage.”
Why is that information important to an FHA borrower? Because of the following from HUD 4000.1:
“A Property that is being resold 90 Days or fewer following the seller’s date of acquisition is not eligible for an FHA-insured Mortgage. “
There are exceptions, of course, as defined in HUD 4000.1:
-Properties acquired by an employer or relocation agency in connection with the relocation of an employee;
-Resales by HUD under its REO program;
-Sales by other U.S. government agencies of Single Family Properties pursuant to programs operated by these agencies;
-Sales of Properties by nonprofits approved to purchase HUD owned Single Family Properties at a discount with resale restrictions;
-Sales of Properties that are acquired by the seller by inheritance;
-Sales of Properties by state and federally-chartered financial institutions and Government-Sponsored Enterprises (GSE);
-Sales of Properties by local and state government agencies; and
-Sales of Properties within (federal disaster areas), only upon issuance of a notice of an exception from HUD.
Borrowers should know that the FHA does not consider the sale of a new construction home to be property flipping. The rules quoted above are for homes that are already built.
The post Home Flipping And FHA Mortage Loans: The Rules appeared first on FHA News and Views.
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