FHA Loans

FHA is a loan insured by the federal government which is the main difference from conventional. This is not a program just for first-time home buyers or people with bad credit. Generally speaking, you can not have two FHA loans at the same time but you can use the FHA program as many times as you need. FHA does allow credit scores below the conventional minimum of 620. Per FHA's handbook, the minimum down payment is 3.50%. 

FHAs handbook is called the SF Handbook 4000.1 Here is a link to it.

https://www.hud.gov/program_offices/housing/sfh/handbook_4000-1

FHA also has a great online search tool if you have addditional questions about the program.   

You can put in your topic and the search tool will help find the answer and reference the 4000.1 page where the data can be found.

https://answers.hud.gov/FHA/s/

One key thing with FHA is the Upfront Mortgage Insurance Premium. FHA charges this fee to participate in the program. That fee is 1.75% of the loan amount and can be financed into your loan.

FHA also has a version of PMI similar to conventional loans. However, on a 30-year fixed-rate FHA loan the PMI is on the loan for the life of the loan regardless of the equity. In this example, it is an FHA loan with 3.50% down. A higher down payment does change the PMI structure.

https://www.hud.gov/sites/documents/15-01MLATCH.PDF

FHA does have loan limits. This means that they will not allow you to borrow more than a specific amount. There are higher cost areas in the US that allow for higher loan amounts but generally speaking the maximum loan amount for a one unit single-family home is $472,030. 

https://entp.hud.gov/idapp/html/hicostlook.cfm 

It's very important when buying a condo to make sure FHA has your condo on their approved list. Yes, FHA must approve a condo before they will allow you to get an FHA loan. Always check that the condo association you are buying into has an active approval. See the below link.

https://entp.hud.gov/idapp/html/condlook.cfm

The condition of a home is important with FHA and there are minimum property requirements. They want a safe, sound, and habitable home. However, there is a lot of miss information online about this and the process has drastically improved over the years. This is a tough topic because the appraiser is responsible to determine if the condition of the home is acceptable or if there are any FHA-required repairs. For the most part, appraisers should all have the same results but I have seen some personal opinions vary. I just want to reference some key things I have personally run into.

-There must be smoke detectors within 15 feet of every bedroom. One detector can service multiple bedrooms.

-There must be a carbon monoxide detector on each floor/level of the home.  

-The roof must be in good shape with no missing shingles or leaks. If there is a concern over the roof a roof certification can be done. I believe FHA requires the roof to have at least a 2-year life expectancy or more. 

-There can not be any mold or mildew in the home. Water in a basement or crawlspace is an issue and should be cleaned up and dried out before inspections.

-Gutters must have downspouts and extensions

-There can not be any exposed electrical. If a cover is off an outlet it needs to be put on.

-Peeling paint is the biggest item we run into. If there is peeling paint inside or outside the home it needs to be scraped, cleaned up, and any bare wood primed or painted. 

-Any stairway with more than 2 steps needs a railing.

Anything that the appraiser has a concern over will need to be addressed. 

Here is FHA's most recent on how student loans should be factored into a borrower's debt.

Regardless of the student loan payment status, a lender must use:

The payment reported on the credit report or the actual documented payment when the payment amount is above zero

OR

0.5% of the outstanding loan balance, when the monthly payment reported on the borrower's credit report is zero

Per the FH Handbook.

The paragraphs below describe the only circumstances in which a Borrower with an existing FHA-insured Mortgage for a Principal Residence may obtain an additional FHA-insured Mortgage on a new Principal Residence.

RELOCATION

A Borrower may be eligible to obtain another FHA-insured Mortgage without being required to sell an existing Property covered by an FHA-insured Mortgage if the Borrower is:

• relocating or has relocated for an employment-related reason; and

• establishing or has established a new Principal Residence in an area more than 100 miles from the Borrower’s current Principal Residence.

If the Borrower moves back to the original area, the Borrower is not required to live in the original house and may obtain a new FHA-insured Mortgage on a new Principal Residence, provided the relocation meets the two requirements above.

INCREASE IN FAMILY SIZE

A Borrower may be eligible for another house with an FHA-insured Mortgage if the Borrower provides satisfactory evidence that:

• the Borrower has had an increase in legal dependents and the Property now fails to meet family needs; and

• the Loan-to-Value (LTV) ratio on the current Principal Residence is equal to or less than 75% or is paid down to that amount, based on the outstanding Mortgage balance and a current residential appraisal.

VACATING A JOINTLY-OWNED PROPERTY

A Borrower may be eligible for another FHA-insured Mortgage if the Borrower is vacating (with no intent to return) the Principal Residence which will remain occupied by an existing co-Borrower.

NON-OCCUPYING CO-BORROWER

-A non-occupying co-Borrower on an existing FHA-insured Mortgage may qualify for another FHA-insured Mortgage on a new Property to be their own Principal Residence.

-A Borrower with an existing FHA-insured Mortgage on their own Principal Residence may qualify as a non-occupying co-Borrower on other FHA-insured Mortgages.