Articles Tagged With: FHA Guidelines

What You Need To Know About Your FHA Home Loan

February 28, 2017

FHA Loan Rules On Occupancy And Second Homes

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...

November 10, 2016

FHA Condo Loans: Owner/Occupancy Requirements

By Bruce Reichstein

FHA loans include the option to fill out a loan application for condo loans. Borrowers can apply to purchase a condo unit as long as the condo project is either on the FHA approved list or is added to that list. Recently we reported on the FHA’s change in rules for occupancy requirements for approval of condo projects. According to an FHA mortgagee letter, “In accordance with the passage of the Housing Opportunity Through Modernization Act of 2016 (HOTMA), the Federal Housing Administration (FHA) is required to provide guidance on the percentage of owner occupied units required to obtain condominium project approval.” To be put on the approved FHA condo loan list, the project must meet specific requirements including an owner/occupier ratio. That ratio is addressed in that mortgagee letter | 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...

What you should know about FHA 203(h) Loans For Disaster Victims

October 7, 2015

FHA Loans, HUD 4000.1, and Second Appraisals: When One Can Be Ordered

By Joe Wallace

In our last blog post we discussed FHA appraisals, and the fact that FHA loan rules do not permit the request of a second appraisal simply to raise the value of the property or to eliminate required corrections listed on the original appraisal report. So when can the lender order a second appraisal? What circumstances justify this action? The answer can be found in HUD 4000.1, Section II, Part A. According to this part of the FHA loan rules under “Second Appraisals By Original Mortgagee”: “A second appraisal may only be ordered if the Direct Endorsement (DE) underwriter (underwriter) determines the first appraisal is materially deficient and the Appraiser is unable or uncooperative in resolving the deficiency. The Mortgagee must fully document the deficiency and status of the appraisal in | more...

September 22, 2015

FHA Loans And Federal Debt

By Joe Wallace

Here is a common type of question about applying for an FHA mortgage loan when you have owe a debt to the federal government: “Can anyone tell me what the guideline for FHA loans regarding payment plan with IRS when you do not own property and you owe taxes? ” FHA loan rules here are basically concerned with giving lenders a yardstick to measure a borrower’s creditworthiness with regard to federal debt–and that means that a lender is responsible for insuring the borrower is not delinquent on the payments of that debt. Borrowers who are delinquent and are shown to be delinquent through the lender’s due diligence are not eligible for an FHA mortgage loan until such time as they have corrected the delinquency to the satisfaction of the government. | more...

September 11, 2015

Signature Requirements For FHA Home Loans Under HUD 4000.1

By Joe Wallace

On September 14, 2015, the new HUD policy handbook on FHA single-family home loans goes into effect. There are plenty of changes, revisions and other statements of policy. Borrowers should know that certain changes have already gone into effect as of March, others won’t be effective until September 14. Once the handbook is launched officially, lenders will use it to refer to when in need of FHA loan policy or clarification of that policy. Consider one important issue for certain FHA loan applicants including military members and incapacitated borrowers–the use electronic signatures and/or of a Power Of Attorney in order to advance the FHA loan application. In HUD 4000.1, Chapter Two, Section A has a section titled, “Policy on Use of Electronic Signatures” which includes the following definition: “An Electronic | more...

August 1, 2014

FHA Loan Income Requirements: A Reader Question

By Joe Wallace

A reader asks, “I am applying for an FHA loan, I left a permanent position of 3 years to do contract work which I have done for over a year now. I am currently on my 2nd assignment which still has another 6 months minimum left on it, with a possibility of an extension – I am a W-2 contractor (not 1099.) Would I be disqualified since I only have a one-year history as a contractor vs being a permanent employee?” Let’s examine what the FHA loan rules printed in HUD 4155.1 say about income and employment verification. To star with, let’s look at the FHA instructions to the lender for analyzing employment: “When analyzing the probability of continued employment, the lender must examine • the borrower’s past employment record | more...

June 27, 2014

FHA Loans For Schoolteachers: A Reader Question

By Joe Wallace

A reader asks, “My daughter is a schoolteacher. Where she lives, they do not give new hires full time jobs, but hire the teacher part time all the time so they do not have to give benefits. Can she get an FHA loan? Her total need would be $400,000 for the house less a 20% down payment, which she has. She has been working for a long time under this arrangement, but is not classified a a full time teacher. Her mother or I could co-sign for her if necessary. We are both retired but have verifiable incomes and property well in excess of the total loan amount.” FHA loan rules permit co-signers, non-occupying co-borrowers and other arrangements, so the answer to this question where that is concerned is that | more...