Articles Tagged With: FHA Requirements

March 9, 2017

FHA Mortgage Questions And Answers

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 | more...

What You Need To Know About Your FHA Home Loan

February 28, 2017

FHA Loan Rules On Occupancy And Second Homes

By Bruce Reichstein

Occupancy is a key issue for FHA single family home loans. When you purchase a residence with an FHA mortgage, one of the requirements loan approval is conditional upon is that the borrower is expected to occupy the home as the primary residence, usually within 60 days of the loan closing. Occupancy is required for both new purchase and FHA cash-out refinancing loans. That’s one reason why FHA loan rules in HUD 4000.1 specify that FHA mortgages can’t be used for vacation properties, timeshares, etc. HUD 4000.1 states clearly, on page 135, the “standard for owner occupancy” which includes the following: “At least one Borrower must occupy the Property within 60 Days of signing the security instrument and intend to continue occupancy for at least one year. 203(k) Rehabilitation products | more...

How much can I borrow with an FHA refinance loan?

December 6, 2016

FHA Loan Limits Rise in 2017: How Much?

By Joe Wallace

In a recent blog post, we discussed the news of FHA loan limits increasing in 2017. Every year the FHA/HUD official site releases the data on FHA loan guaranty limits for the new year. These limits can be affected by legislation, housing market conditions, and other factors so an annual update (at the very least) is required to establish limits for the new year. How much with FHA loan limits increase in 2017? The FHA issued a mortgagee letter (2016-2017) that announces both the new limits for low-cost areas and high cost areas alike. According to the FHA official site, the low-cost area FHA mortgage loan guaranty limits for 2017 are set as follows as described in the mortgagee letter: “The FHA national low cost area mortgage limits, which are | more...

November 9, 2016

FHA Loan Options: What You Should Know

By Joe Wallace

Are you thinking about purchasing a home? Or refinancing your current home loan? FHA mortgage loans and refinance loans offer a variety of options. For new purchases, an FHA mortgage loan allows qualified borrowers to purchase typical suburban homes, but also condo units, town homes, and manufactured homes. Any property that has a permanent foundation or will be affixed to a permanent foundation at closing time may be eligible for an FHA mortgage. (All homes considered for purchase with an FHA loan are subject to an appraisal and must meet basic FHA standards.) Heading 2 For new purchase loans, borrowers can choose a fixed interest rate mortgage or an adjustable rate loan. Borrowers who choose adjustable rate mortgages will be offered an introductory rate, and overall your FICO scores and | more...

October 20, 2016

FHA Requirements, Occupancy, and Business Loans

By Bruce Reichstein

Here’s an example of a question we get fairly often about the intended purposes of FHA mortgages: “I am interested in investing in properties I intend to flip and rent out. I already own a primary residence, can I use a FHA loan to buy a second home for business? FHA loan rules are specific when it comes to flipping a home, starting with the FHA’s definition of the practice as found in HUD 4000.1: “Property Flipping is indicative of a practice whereby recently acquired Property is resold for a considerable profit with an artificially inflated value, often abetted by a Mortgagees collusion with an Appraiser…Property Flipping refers to the purchase and subsequent resale of a Property in a short period of time..” We are not implying that the reader | more...

July 26, 2016

FHA Loan Questions About Occupancy Rules

By Bruce Reichstein

What are the FHA home loan rules for occupancy? A reader got in touch with us recently with a question that pertains to this important issue, asking, “I live in California, but I want to purchase a home in Virginia Beach, Va. Can I still use FHA loan to purchase a home in Virginia. My son will be living at the house that Im planning to purchase. He lives and works in Virginia.” FHA loan rules that govern this issue can be found on page 135 of HUD 4000.1. FHA home loans are intended for borrowers purchasing principal residences, but what does that term mean? HUD 4000.1 has a specific definition of a “principal residence” on page 135, which states: “A Principal Residence refers to a dwelling where the Borrower | more...

When Is An FHA Loan Better Than A Conventional Loan?

July 18, 2016

FHA Loan Rules On Seller Contributions Part Two

By Joe Wallace

In our last blog post, we answered a reader question about whether or not it’s permitted for the seller to contribute to the buyer’s closing costs and down payment. FHA loan rules do not permit anyone with a financial stake in the outcome to contribute towards a buyer’s down payment, but the rules DO permit the seller or other interested parties to contribute up to six percent of the sales price of the home. There’s a caveat to that listed in HUD 4000.1. Any contributions by the seller (or other interested parties) that exceeds the six percent limit is classified as an “inducement to purchase”. HUD 4000.1 explains what this means on page 221: “Inducements to Purchase refer to certain expenses paid by the seller and/or another Interested Party on | more...

May 17, 2016

FHA Mortgage Appraisal Requirements: A Reader Question

By Joe Wallace

We get many questions about the FHA loan appraisal process in our comments section. Here’s one of the latest: “What does whenever feasible mean? My lender is telling me I need a quote on connecting to the public sewerage system and that this should be more than 4% of the purchase price to be considered not feasible. Where are they getting this information?” This question is in reference to an older blog post we made in 2014 discussing FHA/HUD appraisal standards for septic systems. Here is the specific part of the post the reader is referencing: “In general, the FHA minimum property requirements for sewer systems, as listed in HUD Handbook 4940.3 states: ‘Whenever feasible, connection shall be made to a publicly owned or publicly controlled system that is adequate | more...

May 12, 2016

FHA Appraisals and Roof Issues: A Reader Question

By Joe Wallace

A reader got in touch with us recently to ask about FHA loan rules for a home in need of certain types of repair. “If the home needs a new roof, will FHA allow a clause or let money sit in escrow for roof repairs after closing?” While the question is too general to give a specific yes or no answer to, there is at least one option that may be possible. Much depends on what the FHA appraiser recommends for that property. Does the roof need to be replaced completely? Or are there simple repairs required? Has the appraisal happened yet, or is the borrower aware of a situation with the roof that could interfere with loan approval unless repaired or corrected? An FHA appraiser will recommend corrections in | more...

May 10, 2016

FHA Loan Credit Score Requirements: Which Score Gets Used?

By Joe Wallace

How does the lender decide which FICO score to use when processing a borrowers mortgage loan application? This is a common question about FHA mortgage loans, and its not surprising why there is confusion in this area. After all, many borrowers will have three FICO scores, reported from the three major credit reporting agencies. Which of the three will the lender use? FHA loan rules governing this are found in HUD 4000.1 starting on page 127. This section begins by describing what the FHA loan rulebook calls the Minimum Decision Credit Score. According to HUD 4000.1: The Minimum Decision Credit Score (MDCS) refers to the credit score reported on the Borrowers credit report when all reported scores are the same. That doesn’t help clear things up for the borrower confused | more...