No matter what kind of FHA loan product you want to apply for--an FHA loan to get your first home, FHA cash-out refinancing mortgage or FHA refinancing loan--there are certain rights and protections you should be aware of before you sign on the dotted line.

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FHA Loans and Your Rights as a Borrower

No matter what kind of FHA loan product you want to apply for--an FHA loan to get your first home, FHA cash-out refinancing mortgage or FHA refinancing loan--there are certain rights and protections you should be aware of before you sign on the dotted line.

In any financial transaction, you have the right to know and fully understand the specific terms and conditions of the paperwork you’re signing. Are there terms that confuse you about your FHA home loan, HOPE for Homeowners refinancing, or FHA refinancing loan? Always ask your lender to explain the terms in as much detail as you need. Never let yourself be rushed into signing an agreement. Do you fully understand the conditions of your FHA mortgage? There are a number of typical questions to ask, including:

• Who pays the closing costs? Are there provisions for outside assistance from family members or HUD?


• What is the total amount due every month on my FHA mortgage? Does that total include mortgage insurance and other extras?
  
• What are “points”? How do they affect the sale and can I purchase points under the terms of the FHA loan?


• What happens if my FHA mortgage payment is a day or two late? Is there a grace period? What’s the penalty for missing a single payment? More than one payment?


• What may cause my FHA mortgage to go into default? Foreclosure? How long do I have before I go into foreclosure?


• What is the actual cost of my FHA home loan above the amount I am borrowing for the house?

You should have—or get-- the answers to all these questions and more. Your lender will assist you, but you may need to make an appointment to discuss the answers fully. It’s also a good idea to become aware of your rights under the Fair Housing Act. No homebuyer can be refused a loan or purchase on the basis of race, creed, or other discriminatory practices.

Reputable lenders don’t discriminate, but sometimes the actions of a few can create the impression that there’s no recourse regarding practices or activities that violate the Fair Housing act. This is not true—but violations must be reported before they can be investigated. If you suspect your rights have been violated, contact the Department of Housing and Urban Development at 1 800 669 9777, and the Department of Justice at 1-800-896-7743.

Most people find their basic rights under the Fair Housing Act easy to research and understand, but there are additional rights for all borrowers which apply to you whether you need an FHA-approved home mortgage or any other type of loan.

Did you know you have the right to make reasonable modifications of an existing home or a new home purchase to accommodate those with disabilities? A seller, housing provider or homeowner’s association that tries to block or prevent reasonable structural repairs or modifications is in violation of HUD and Department of Justice laws. You may discover your modifications run contrary to a specific homeowner’s association covenant, but such prohibitions, while not common, are illegal when they do appear. If you have been approved for an FHA cash-out refinancing loan to make your home wheelchair accessible, for example, you can’t be denied any reasonable alteration create that accessibility.

Before you decide to apply for an FHA mortgage or FHA refinancing loan, ask yourself a few questions about any modifications or repairs you might need to make to the property. How will the cost of the repairs or improvements change your debt-to-income ratio? Does the modification affect the resale value of the home? By how much? Does the home need to be reappraised after accessibility modifications are made?

Not all FHA loan products are affected in these cases, but for example, if you have an FHA Hope for Homeowners refinance loan, changes to your property may affect the resale value. When you sell or refinance, the amount of money you pay back to the government under the HOPE equity sharing program may change depending on how such modifications affected the resale cost.

If you are applying for an FHA cash-out refinancing loan to fund your modifications, the cost of your alterations could affect your debt-to-income ratio guidelines unless you pay for the modifications without using your credit.