August 17, 2017
What kind of FHA loans are available? This is an important question because it’s good to know what is not possible with an FHA mortgage as well as the options available to you. For example, some ask if an FHA loan can be used like a personal loan-is it possible to buy a home with an FHA mortgage but apply for more money than you need to complete the transaction?
The answer in this case would be no, because FHA loan rules do not permit cash back to the borrower in that way at closing time, refunds excepted. So what can you do with an FHA mortgage loan?
FHA Loans For Single Family Residences
FHA home loans are intended for owner-occupiers. That means if you buy a property with an FHA single-family home loan, you will be expected to live on the property as a condition of loan approval. But that does NOT mean an FHA borrower is limited to a single-unit home. You can purchase a home with up to four units with an FHA mortgage, and the loan rules do not prevent you from renting out the unused units to others.
FHA Loans For Refinancing
FHA mortgages can be used to refinance FHA mortgages and non-FHA mortgages alike. Not all FHA refinance loan products are available for all transactions, but when refinancing non-FHA to FHA, you may choose FHA cash-out refinancing or non-cash out refinancing. FHA-to-FHA transactions include the option of FHA Streamline Refinance loans, which are designed to lower payments and/or interest rates. FHA-to-FHA refinance loans also permit cash out and no cash out transactions.
When you apply for FHA refinancing, you have the option of a fixed-rate mortgage, but there are adjustable rate mortgage (ARM) loan options, too. Depending on your financial goals over the long term, an adjustable rate mortgage may make sense, but it’s very important to understand how ARM loans work, how they affect the cost of your loan over its’ lifetime, and what circumstances may not be right for an ARM.
FHA Loans For Rehab and Repair
The FHA 203(k) rehab loan and 203(h) loan are intended for properties that need repair, renovation, etc. These loans, one for natural disaster victims in federally declared disaster areas and one for more “standard” fixer-upper needs, can be applied for as either new purchase or refinance loans. The FHA 203 (k) is described by the FHA official site as being qualified for the following purposes:
-rehabilitate an existing one- to four-unit Structure, which will be used primarily for residential purposes;
-rehabilitate such a Structure and refinance the outstanding indebtedness on the Structure and the Real Property on which the Structure is located; or
-purchase and rehabilitate the Structure and purchase the Real Property on which the Structure is located.
FHA 203(h) rehab loans are described as being approved for the following uses:
“The Section 203(h) Mortgage Insurance for Disaster Victims program allows FHA to insure Mortgages made by qualified Mortgagees to victims of a Presidentially-Declared Major Disaster Area (PDMDA) who have lost their housing, or whose housing was damaged and are in the process of rebuilding or buying another house”.
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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