Chapter 5 — Further Reading
Read this file before you quote anything from Chapter 5 to a borrower. More of this chapter's content is perishable than any other chapter's in the book.
Tier 1 — Verified canonical
The Federal Housing Finance Agency's conforming loan limit announcement. Published each November for the following year, with a baseline limit and a county-by-county table of high-cost area limits. This is the only acceptable source for a loan limit. The \$806,500 baseline used illustratively in this chapter will be wrong at some point, possibly before you read this.
HUD Handbook 4000.1, the FHA Single Family Housing Policy Handbook. The complete FHA rulebook — eligibility, credit, income, the minimum required investment, mortgage insurance premiums and their duration, property standards, and the appraisal. Free and public. Chapter 16 works through it. The mortgage insurance premium factors and the duration rules described in §5.8 must be confirmed here.
FHA loan limits, published by HUD by county and unit count, annually.
The VA Lender's Handbook (VA Pamphlet 26-7) and the VA's home loan program materials. The authority for eligibility, the Certificate of Eligibility, entitlement and restoration, the funding fee schedule and its exemptions, residual income tables, the Notice of Value, and the Tidewater process. Chapter 17. The funding fee schedule has been amended repeatedly — verify it.
USDA Rural Development's single-family housing guaranteed loan program materials, including the property eligibility map and the income limit tables. Both are searchable online by address and by county. The upfront guarantee fee and annual fee percentages are set each year.
The Fannie Mae Selling Guide and Freddie Mac Single-Family Seller/Servicer Guide. The authority for conventional conforming eligibility, including the 3%-down HomeReady and Home Possible programs, condominium project eligibility, occupancy and property type requirements, and ARM parameters.
The Homeowners Protection Act. The authority for the 80%-request and 78%-automatic termination rules for conventional borrower-paid private mortgage insurance — and, by its silence, the reason those rules do not apply to FHA.
Regulation Z §1026.43 — the Ability-to-Repay rule, including the requirement to qualify an ARM at the greater of the fully indexed rate or the introductory rate. Chapter 24.
Ginnie Mae — the guarantor of securities backed by FHA, VA, and USDA loans, and the structural reason government loans travel a different path than conventional ones. Chapter 28.
Tier 2 — Attributed, specifics unverified
Every numeric threshold in this chapter. The list is long enough to be worth stating plainly:
| Figure used illustratively | Verify at |
|---|---|
| \$806,500 baseline conforming limit | FHFA |
| 150% high-cost area multiple | FHFA |
| FHA 3.5% / 10% down at 580 / 500–579 | HUD 4000.1 |
| UFMIP 1.75% | HUD 4000.1 |
| Annual MIP 0.55% | HUD 4000.1 |
| FHA MIP duration: 11 years / life of loan at 90% LTV | HUD 4000.1 |
| FHA 31%/43% manual benchmark | HUD 4000.1 |
| VA funding fee 2.15% | VA |
| USDA 115% of area median income | USDA |
| Conventional 620 minimum score | Selling Guide and your overlays |
| MI factors 0.58%, 0.32%, etc. | the mortgage insurers' rate cards |
Lender overlays. Frequently the binding constraint and published nowhere public. A VA loan has no VA minimum credit score; your employer almost certainly has one. Chapter 14.
Mortgage insurer rate cards. Freely available to lenders from the private mortgage insurers, and far more structured than a single factor suggests — they vary by LTV, credit score, coverage level, term, and product. Get one and look at it; the exercise is more instructive than reading about MI.
Jumbo guidelines and pricing. Not public, investor-specific, and genuinely variable. The observation that jumbo sometimes prices below agency is real and market-dependent.
Condominium project eligibility. Real, consequential, and detailed. Approval lists, owner-occupancy ratios, budget and reserve requirements, and litigation review all vary by agency and program.
The FHA Mutual Mortgage Insurance Fund's capital position and the history of premium changes. Documented in HUD's annual reports to Congress on the fund. Case Study 1 describes the 2013 change; the fund's ratio and the premium schedule have both moved since.
VA loan utilization relative to eligibility, and the "sellers reject VA offers" belief. The belief is widespread and documented as a belief; claims about VA closing rates relative to conventional are contested and should not be quoted as statistics. Case Study 2 treats it as folklore with a historical root, which is what the record supports.
SOFR-based ARM indices. Real and current, having replaced LIBOR. The specific index and its averaging convention vary by product.
Tier 3 — Illustrative / constructed
- The Linden Street FHA comparison in §5.3 and §5.8 — base loan \$371,525.00, UFMIP \$6,501.69, total loan \$378,026.69, P&I \$2,327.58 at 6.250%, annual MIP \$173.26, PITI \$3,015.84, back-end 42.49%, total MIP \$62,374.40 against conventional \$24,218.86 for a difference of \$38,155.54. Internally consistent and verified; illustrative rates and factors.
- The VA counterfactual in §5.4 — funding fee \$8,277.50, loan \$393,277.50, P&I \$2,453.54, PITI \$2,968.54.
- The 5/6 ARM illustration in §5.7 — initial 5.875%, index 4.25%, margin 2.75%, fully indexed 7.00%, caps 2/1/5, lifetime maximum 10.875% at \$3,448.62.
- The \$860,000 conforming-limit example in §5.2.
- Case Study 2's borrower — a labeled composite. The Navy Reserve eligibility, the unchecked checkbox, and the \$9,000 in savings are constructed; the program features and the folklore are real.
If you read only one thing
Open HUD Handbook 4000.1 and find the mortgage insurance premium duration table. Confirm for yourself what §5.8 asserts: that the category is set by the loan-to-value at origination, that the threshold is 90%, and that a borrower above it pays annual MIP for the life of the loan.
That one table is worth \$38,155.54 to the borrower on the Linden Street file, and most loan officers have never looked at it.
Then, if you have another twenty minutes: check whether the last house you drove past is in a USDA eligible area. The answer surprises people, and it is the fastest way to stop assuming "rural" means farmland.