April 25, 2016
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 name or a Living Trust at settlement, be obligated on the Note or credit instrument, and sign all security instruments.
In community property states, the Borrowers spouse is not required to be a Borrower or a Cosigner. However, the Mortgage must be executed by all parties necessary to make the lien valid and enforceable under State Law.”
Furthermore, co-signers have a paragraph in this section that applies specifically to them. “Cosigners are liable for the debt and therefore, must sign the Note. Cosigners do not hold an ownership interest in the subject Property and therefore, do not sign the security instrument.”
FHA loans permit a non-occupying co-borrower, but these parties must also observe some rules in HUD 4000.1. “Non-occupying co-Borrowers or Cosigners must either be United States (U.S.) citizens or have a Principal Residence in the U.S.”
Does that make FHA loans unavailable for military personnel, either as a primary borrower or as a co-borrower or co-signer? HUD 4000.1 does provide some exceptions for those in uniform:
“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 the Borrower intends to occupy the subject Property upon discharge from military service.”
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
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.
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