What Is An FHA Home Loan
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How Does An FHA Home Loan Work
FHA Home Loans Explained
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Refinance Your Home With an FHA Streamline Refi Loan
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Frequently Asked Questions
The maximum amount you can borrow through an FHA loan depends on where you live and the type of property you are buying.
You can click here to find the loan limit for your county, but the maximum loan amount on single-unit properties ranges from $314,827 in the lowest-cost areas of the country to $727,525 in the highest-cost areas. For four-unit properties, the maximum loan amount ranges from $605,525 to $1,397,400.
All reverse mortgages taken out through the Home Equity Conversion Mortgage (HECM) program are subject to the same $726,525 limit, no matter where you live.
There are several different types of FHA loans available, including:
- Fixed-rate or adjustable-rate loans
- Reverse mortgages through the HECM program
- Section 245(a) loans, with monthly payments that start small and increase over time, which can be helpful for people who expect their income to rise
- The Energy Efficient Mortgage program (EEM), which finances home improvements that improve your home’s energy efficiency
- 203(k) loans, which help you rehabilitate a property by financing the cost of repairs and improvements.
There is no requirement that you have to reside in your home for any amount of time and nothing the stops you from paying your FHA loan off early, so it is possible to use an FHA loan to buy a house and quickly sell it.
However, you cannot use an FHA loan to buy a property that is being resold within 90 days of the prior purchase. And if it has been 91-180 days since the prior purchase, you will need to pay for a second appraisal if the sales price is more than 100% of the price paid by the prior buyer.
In other words, you can use an FHA loan to buy a property that you want to flip, but there are restrictions around using an FHA loan to buy a property that has been flipped.
Yes, you can have a cosigner on an FHA loan. Any cosigner must either be a U.S. citizen or have a principal residence in the U.S.
Yes, you can use gift money that you from family members, employers, charities, close friends and other government programs can be used in addition with an FHA loan, as long as you meet other guidelines and provide all of the correct documentation.
However, borrowers must meet the Minimum Required Investment (MRI) by bringing in enough of their own cash to the table to cover at least 3.5% of the home’s purchase price. This money can include certain gifts, but it cannot include any money from the seller or anyone who has a financial interest in the transaction, and it cannot include money that will have to be repaid.
FHA loans are generally not available within three years of a foreclosure, though you may qualify for an exception if you can prove the foreclosure was due to circumstances beyond your control and you have worked to reestablish good credit since the foreclosure.
If you filed Chapter 7 bankruptcy, you generally won’t be eligible for an FHA loan until two years have passed since discharge. If you filed Chapter 13 bankruptcy, you will generally be eligible for an FHA loan after one year of making payments on your payment plan. In both cases, exceptions can be made if you can show that the bankruptcy was due to circumstances beyond your control.
It is commonly said that FHA is easier to qualify for, when compared to conventional or “regular” home loans. There is some truth to this. But you’ll still need to have good credit.
Some of the FHA loan requirements are
- A minimum 3.5% down payment with a credit score of 580 or above, or a minimum 10% down payment with a credit score of 500-579.
- Proof of employment and sufficient income.
- A maximum debt-to-income ratio of 43%, with some exceptions.
- The property must meet the HUD’s minimum safety standards.
- Submission of the Uniform Residential Loan Application.
The official minimum credit score for this program is 500, according to HUD. But mortgage lenders have the final say, and most won’t go that low when approving borrowers. Recent data suggest that 580-and-up is a good score for FHA.
An interest rate lock means that you’re guaranteed today’s mortgage interest rate for some predetermined period, typically 30 to 60 days. If interest rates have been trending upward, it’s generally a good idea to lock in your rate. While the prevailing mortgage rate doesn’t usually make a big move in a month or two, it’s certainly possible.
You can purchase a second home with an FHA loan, but only with substantial documentation that you meet a strict set of requirements. Those requirements include the lack of any other second homes, verification that it will not be used as a vacation home and proof that the commute to work from your primary home is an undue hardship and that there are not affordable rental opportunities within 100 miles of your workplace.
FHA loans are not allowed for investment properties. However, you can take out an FHA loan on certain 2-4 unit properties, so it is possible to rent out some of the units on your property.
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