FHA LOANS
Down payment 3.5% up-to 6%seller contribution
minimum credit score 640
UP-FRONT MIP 1%
MONTHLY MORTGAGE INSURANCE .9%
Loan Programs and Descriptions
Section 203(b) – Mortgage Insurance for One-to-Four Family Homes
FHA Section 203(b) insures mortgages for the purchase or refinance of 1-4 unit family homes.
Section 234(c) – Condominium Housing Program
FHA 234(c) insures mortgage for the purchase or refinance of condominium units in FHA-approved condominium projects only. To determine which condominium projects are FHA-approved, refer to the following website:
https://entp.hud.gov/idapp/html/condlook.cfm
Section 203(k) Streamlined
Streamlined rehabilitation mortgage insurance program is eligible
Occupancy
Primary Residence
A primary residence is a property that will be occupied by the borrower the majority of the calendar year and meets the following criteria:
• 1-4 units, PUDs, Site Condos, FHA-approved condos and HUD-owned properties.
• At least one borrower must occupy the property and sign the Note and security instrument for the property to be considered owner-occupied.
• The borrower must occupy the property within 60 days after the loan closes with continued occupancy for at least one year. The only exceptions allowed are due to hardship or extenuating circumstances.
• 3-4 unit properties require an Occupancy Declaration to be signed by all borrowers. See FHA 4155 handbook section 2 for additional requirements. NOTE: 3-4 units have to debt service and are not eligible
for cash out.
2nd Homes
Not eligible.
Investment Properties
Not eligible.
Retaining Current Residence
For borrowers who are purchasing a new primary residence and will be retaining their current residence, the following requirements apply:
• The borrower must be able to qualify with both housing payments and may not use rental income to offset the Mortgage on the home being retained, unless one of the following applies:
o
Borrower is relocating or employment is being transferred: New employment must be an unreasonable commute distance from the property being retained.o
Borrowers have at least 25% equity in the property being retained. This is to be determined by a recent appraisal or 2055.Eligible Borrowers
Eligible borrowers must provide evidence of a valid Social Security number on all FHA loans. Evidence includes a copy of the borrower’s:
•
Social Security card. Tax Identification numbers (TINs) are not allowed.•
Paystub, W2 or other government-issued card that includes the borrower’s Social Security number. In addition, FHA requires validation of Social Security numbers for consistency with the borrower’s name and date of birth through FHA Connections and ECHO systems or its equivalent.•
Military Personnel: Military Personnel stationed elsewhere are considered occupant-borrowers and are eligible for maximum financing provided a member of the immediate family will occupy the property as a principal residence.•
Permanent resident aliens•
Non-permanent resident aliens are eligible provided they:o
Occupy the property as a principal residenceo
Have a valid Social Security numbero
Are eligible to work in the United States•
Non-Occupant BorrowersWhen there are two or more borrowers, but one or more will not occupy the property as a principal residence, the maximum mortgage is limited to 75% LTV. However, maximum financing is available for borrowers related by blood, marriage or law (family), or for unrelated individuals that can document evidence of a family-type, longstanding and substantial relationship not arising out of the loan transaction.
All borrowers, regardless of occupancy status, must sign the security instrument and mortgage note. If a parent is selling to a child, the parent cannot be the co-borrower with the child on the new mortgage unless the LTV is 75% or less. See the FHA Handbook 4155.1 Section 2 for additional details and requirements.
Loans with LTVs greater than 75% are limited to one-unit properties.
Non-occupant co-borrowers or co-signors may not be added to the Note on a refinance transaction to meet FHA credit underwriting guidelines
Identity of Interest, A.K.A. Non-Arm’s Length Transactions
Identity-of-Interest transactions on principal residences are restricted to a maximum LTV ratio of 85%.
Maximum financing above 85% LTV is allowed under the following circumstances:
• A family member purchasing another family member’s principal residence.
•
An employee of a builder purchasing one of the builder’s new homes or models as a principal residence.•
A current tenant purchasing the property that the tenant has rented for at least six months predating the sales contract. A lease or other written evidence must be submitted verifying occupancy.• Sales by corporations that transfer employees out of an area, purchase the transferred employee’s home and then resell to another employee.