Using FHA Loans To Purchase Home And Eligibility Requirements
This BLOG On Using FHA Loans To Purchase Home And Eligibility Requirements Was PUBLISHED On June 3rd, 2019
Using FHA Loans to purchase home is very popular among first time home buyers and buyers with less than perfect credit.
- By using FHA Loans to purchase home only requires 3.5% down payment
- The minimum credit score to qualify using FHA Loans to purchase home is 580 FICO
- Borrowers with credit scores under 580 FICO and down to 500 credit scores can qualify in using FHA Loans To Purchase Home with 10% down payment
In this blog, we will discuss using FHA Loans to purchase home and the eligibility requirements to qualify. FHA Loans are for owner occupant home purchases and refinances. Using FHA Loans to purchase home that needs renovations can be done with FHA 203k Renovation Loans.
Buying First Home For First Time Home Buyers Using FHA Loans To Purchase Home
FHA Loans are for owner-occupant primary residences. HUD is the parent of FHA. FHA is not a lender. The role of FHA is to insure lenders who originate and fund FHA Loans in the event their borrowers’ default and the property goes into foreclosure. FHA will step in and partially insure the loss the lender takes. In order for FHA to insure the loan, the lender needs to follow HUD 4000.1 FHA Handbook Guidelines.
FHA is very popular for first time home buyers due to the following reasons:
- Low down payment requirements of 3.5% down payment
- Low credit score requirements: 580 FICO is required for 3.5% down payment home purchase FHA Loans
- Outstanding Collections and Charge Off Accounts do not have to be paid to qualify
- There is a 2-year waiting period after Chapter 7 Bankruptcy
- There is a 3-year waiting period after foreclosure, deed in lieu of foreclosure, short sale
- Manual underwriting allowed on FHA Loans
Using FHA Loans To Purchase Home Due To Job Relocation
Home buyers can use an FHA Loan buying a second home due to job relocation. They do not have to sell their exiting home even though it has an FHA Loan. HUD allows having two FHA Loans at the same time due to Job Relocation and other factors (See This Blog On Having Two FHA Loans At The Same Time)
Alex Carlucci, a senior vice president at Gustan Cho Associates, states the following:
It is definitely possible for an FHA loan applicant to own property and apply for a new FHA home loan to purchase a home. However, borrowers should keep in mind that FHA loan rules state any home purchased with an FHA mortgage must be a primary residence and not a vacation home, timeshare, bed-and-breakfast, or other “occasional occupancy” type property. At least one borrower obligated on the mortgage loan is required to use the home to be purchased with the FHA loan as the primary residence as a condition of loan approval. FHA loan rules permit the purchase of residences with as many as four living units, giving the borrower the option to rent out the unoccupied units. The FHA loan occupancy requirement applies in such transactions the same as for single-unit property.
Types Of FHA Mortgage Programs
Home buyers can purchase fixer-uppers with FHA 203k Renovation Loans. There are two types of FHA 203k Loans:
- FHA 203k Streamline: For limited cosmetic renovations with a maximum $35,000 budget and no structural changes
- Standard FHA 203k Renovation Loans: This loan program is for full-blown renovations including structural changes, room additions, and second story additions
Homeowners with a current FHA Loan can qualify for an FHA Streamline Refinance Mortgage. With an FHA Streamline Refinance Mortgage, it offers homeowners an option to refinance their current FHA Loans to a new FHA Loan with better rates and terms which offers a net tangible benefit. There is no income verification nor appraisal required on Streamlines. FHA Streamline Refinances normally take no longer two weeks from the time the loan is disclosed to closing.
For more information on this topic or other mortgage topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at [email protected]