January 24, 2013
One topic we’ve covered recently in blog posts and in our answers to reader questions concerns the permitted uses for single-family FHA home loans. Read what the FHA official site says about FHA policy (in general) on multiple FHA home loans for a single borrower:
“To prevent circumvention of the restrictions on FHA-insured mortgages to investors, FHA generally will not insure more than one mortgage for any borrower (transactions in which an existing FHA mortgage is paid off and another FHA mortgage is acquired are acceptable).”
FHA home loans for single-family properties also have a rule stating the borrower must occupy the property as the primary residence once the sale is complete. That is another rule designed to reinforce the “no investors” policy on these types of loans.
Some borrowers wonder if these rules are actually enforced, or if they are written but rarely invoked. To clear up this question once and for all, read what the FHA loan rulebook, HUD 4155.1 Chapter One says about the lender’s responsibility when processing an FHA single-family home loan application. This information is found under the section titled, “Verifying a Borrower’s Financial Position” and includes the following:
“The lender must
• verify the borrower’s identity, and
• ask sufficient questions of the borrower to get a complete picture of the
− borrower’s financial position
− source of funds for the mortgage transaction, and
− intended use of the property.
(Emphasis ours.)
The reading of this rule makes it quite clear–the FHA takes the “no investors” rule very seriously and charges the lender with ascertaining whether the borrower will comply with these guidelines.
Another portion of the FHA loan rulebook stresses that a home cannot be purchased with an FHA guaranteed mortgage if, “FHA concludes that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties, even if the property to be encumbered will be the only one owned using FHA mortgage insurance.”
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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