March 9, 2017
There are many questions about FHA loans-those who are new to the process want to know some very basic, but very important things including how down payments are calculated, who is eligible for an FHA loan, and whether the borrower is free to sell the home purchased with an FHA mortgage after buying it, and how soon. Let’s explore some of these questions:
Am I Eligible For An FHA Loan?
The implication with a question like this sometimes includes another question. “Do I make too much money to qualify?” This is due to a misconception that FHA mortgages are intended only for first-time buyers, the economically disadvantaged, or those who have earnings that fall within a certain range.
But the truth is, FHA mortgage loans have no income limits and are available to any applicant who is financially qualified. You do not have to be a first time buyer, and there is no income restriction of any kind beyond the FHA minimum requirements for a borrower’s debt-to-income ratio. That ratio has more to do with being able to afford the loan on top of current financial obligations than it does with the specific income range a borrower has.
How Much Will My Down Payment Be?
FHA loan down payments are at a minimum, 3.5% of the adjusted value of the home. Down payments are calculated on an individual basis, so you will need a basic dollar amount sales price or home value in order to make a rough estimate of what you could be paying. FHA loans may require higher down payment if a borrower has marginal credit scores, or if there is a situation such as “identity of interest” that requires higher money down.
Can My Down Payment Include What I Spend On Closing Costs Or Other Expenses?
Some borrowers want to know if the money they pay on other aspects of the FHA loan can be counted as part of the down payment. This is not possible-FHA loan rules require the down payment to be made in full independently of other expenses or costs such as the FHA loan funding fee, appraisal costs, etc.
When Can I Sell The Home I Purchase With An FHA Mortgage?
FHA loan rules discourage the practice of “flipping”, or selling a home at a higher price soon after acquiring it. But in general, the borrower is free to sell her property at any time. FHA’s anti-flipping rules are primarily aimed at transactions where the FHA loan is purchasing a home the seller has owned for 90 days or less (longer in some cases).
The seller is free to offer the home, but in general, FHA loans won’t be approved in cases where the property has been in the seller’s name for such a short amount of time. There may be some exceptions possible, including cases where the owner inherited the property. It’s best to discuss these exceptions with the lender to see what may be possible.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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