March 6, 2018
What can I add to my FHA mortgage loan? There are several options for things you can add to the loan, but it’s important to remember that cash back to the borrower for new purchase home loans is not permitted except as a refund.
But you are permitted to add funds to the mortgage loan to cover certain expenses you wish to finance into the home loan. What follows is information on FHA loan program rules only. Your chosen participating FHA lender may have additional requirements above and beyond what is mentioned here.
FHA Loan Funds For Energy Efficient Mortgages
If you are buying or refinancing a home loan with an FHA mortgage, you have the option to apply for additional loan funds that will be used for approved energy-efficient features, upgrades, or improvements. The upgrades can include approved solar panel systems as described in HUD 4000.1. This type of loan is not automatic, but you can discuss it with your lender to see what may be possible.
Borrowers take note; those applying for cash-out refinancing will have different requirements than those who apply for new purchase loans. Discuss your specific loan needs with a loan officer when you wish to have energy efficient upgrades to the home in conjunction with the refinancing.
FHA Loan Funds For Required Appraisal Corrections
Did you know you may be able to add funds to your FHA loan to pay for required corrections or repairs as ordered by the FHA appraiser? According to HUD 4000.1:
“A Mortgagee may add repair costs to the sales price before calculating the mortgage amount if:
-the repairs are required by the Appraiser to meet HUD’s Minimum Propery Requirements (MPR);
-the repairs are paid for by the Borrower;
-the sales contract or addendum identifies the Borrower as being responsible for the repairs.”
How much can you add to the loan in these cases? HUD 4000.1 spells out the guidelines which include but may not be limited to the following:
“The maximum amount of repair costs that may be added to the sales price is the lesser of:
-the amount by which the value of the Property exceeds the sales price;
-the Appraiser’s estimate of repairs; or
-the amount of the contractor’s bid.”
Lender requirements, state law, and other guidelines may apply in addition to what you see here.
Financing The FHA Up Front Mortgage Insurance Premium (UFMIP)
Borrowers are permitted to finance the FHA UFMIP into the loan amount. This requires the borrower to agree to finance either the entire amount of the UFMIP, or pay the entire amount in cash. Partial financing of the UFMIP is not permitted. Borrowers should note that FHA maximum loan amounts are calculated prior to this amount being added to the loan. Once your maximum loan amount is determined, the UFMIP is added. This prevents the buyer from losing any borrowing power; the financed UFMIP does not hurt your ability to use the maximum available loan funds to buy the home.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
Browse by Date: