Articles in Category: FHA Loan Basics

When Is An FHA Loan Better Than A Conventional Loan?

June 8, 2017

FHA Refinance Loans: Payoffs and Buyouts

We’ve been examining the ins and outs of FHA refinance loans in our last few posts, but one issue we haven’t discussed yet is whether an FHA refinance can be used to buy out an existing title holder, applied for as part of an FHA short refinance, or to pay off land contracts. HUD 4000.1 has a list of the rules in these areas. Where short payoffs are concerned, the rules are fairly simple: “The Mortgagee may approve a Rate and Term refinance where the maximum mortgage amount is insufficient to extinguish the existing mortgage debt, provided the existing Note holder writes off the amount of the indebtedness that cannot be refinanced into the new FHA-insured Mortgage.” Do you need to refinance your existing mortgage in order to buy out | more...

June 6, 2017

HUD: June Is National Healthy Homes Month

By Joe Wallace

The Department of Housing and Urban Development has announced the second-annual National Healthy Homes Month. According to a press release at the FHA/HUD official site, “Launched by HUD’s Office of Lead Hazard Control and Healthy Homes (OLHCHH), National Healthy Homes Month 2017 will focus national attention on ways to keep people of all ages safe and healthy in their homes.” That focus includes an emphasis on lead paint. According to the HUD official site, National Healthy Homes Month is themed, “Just What the Doctor Ordered,” and put the spotlight on “the vital role that pediatricians and the health community play in healthy homes education” The HUD press release observes that due to lead poisoning and other home-connected health risks, creating a healthier home environment should be a top priority. “National | more...

April 10, 2017

FHA Mortgage Occupancy Rules

By Bruce Reichstein

A reader asked us a question this weekend about FHA mortgage loan occupancy rules. “I purchased a home with an FHA loan and intended to live in it for 4 years until my fiancee got orders to relocate with the Air Force. Wellhe got orders to move from Colorado to Florida but I just purchased my house 3 months ago. Can I not leave Colorado and move with my fiancee?” HUD 4000.1, the FHA single-family home loan rule book, addresses situations like these, stating: “Borrowers who are military personnel, who cannot physically reside in a Property because they are on Active Duty, are still considered owner occupants and are eligible for maximum financing if a Family Member of the Borrower will occupy the subject Property as their Principal Residence, or | 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...

November 21, 2016

Occupancy, and First Time Home Buyers

By Bruce Reichstein

Do FHA loans favor first time borrowers? How do occupancy rules affect the FHA mortgage transaction? These issues are key in a recent reader question we answered in the comments section. A reader asks, ” I have never purchased a home and would like to purchase a Town House in Pompano Beach, FL located minutes from both of (family’s) places of employment and continue visiting with them as long as I like. We can share the mortgage cost and living expenses in Florida and I can keep the home that was gifted to me here in Detroit, MI. until it sells at a decent price. They will inherit all that I have and have invested in upon my demise so how can I qualify for an FHA first time buyer | 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...

October 17, 2016

Residency And Occupancy: FHA Loan Rules

By Bruce Reichstein

FHA loan rules have requirements for both U.S. residency for potential borrowers, and occupancy for approved borrowers. Did you know that HUD 4000.1 states that an FHA loan applicant does not have to be a U.S. citizen in order to apply for an FHA mortgage or refinance loan? U.S. citizenship is not required, but legal documentation showing the applicant’s status will be a condition of loan approval. The FHA loan program is open to both non-permanent resident aliens and lawful permanent resident aliens. The FHA loan rules also instruct the lender, “Non-U.S. citizens without lawful residency in the U.S. are not eligible for FHA-insured Mortgages”. While all borrowers are required to show proof of a Social Security Number, this cannot be used to prove immigration or work status, according to | 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...

May 16, 2016

FHA Loan Occupancy, Primary Residence Rules

By Bruce Reichstein

FHA single family home loans permit a qualified borrower to choose from many different types of property to buy with an FHA mortgage. You can choose a typical suburban home, a townhouse, condo, or a manufactured home. Other options include condos, modular homes, and mixed-used property that meets FHA loan requirements. But one thing is required no matter what kind of eligible property you decide to purchase with an FHA mortgage; borrowers must meet FHA loan occupancy rules as a condition of loan approval. What does this mean? HUD 4000.1, page 135 has the FHA loan rules for occupancy, stating that all FHA loans require the borrower to take possession of the property as the principal residence within a reasonable time once the loan has closed. According to HUD 4000.1: | more...

April 25, 2016

FHA Loan Borrower Ownership and Occupancy Requirements

By Bruce Reichstein

FHA loan rules for all single-family home loans, reverse mortgages, and refinance loans are found in HUD 4000.1. Those rules include a variety of instructions for the lender on how to process and approve FHA home loans. But there are also some regulations the borrower must follow, too. For example, FHA single family mortgage loans are intended for owner-occupiers only. HUD 4000.1 states that the borrower must take possession of the property within a reasonable time after closing, usually 60 days or less. There are also rules for borrower ownership and the nature of the borrower’s obligations under the FHA mortgage loan program. HUD 4000.1, page 128 has the following instructions: “To be eligible, all occupying and non-occupying Borrowers and co-Borrowers must take title to the Property in their own | more...