Helpful Information On FHA Financing -- Q&A.
Hello All,
I am in the process of finding my first multi-family deal and and I believe FHA financing will be my best financing (owner-occupied max 4 units). I have been doing a lot of research on FHA financing and doing my best to learn all about the program and requirements. Today, I found the number and called FHA directly 1 (800) CALL-FHA.
They also sent me an email summarizing the FHA program which was very helpful. I thought some of you may benefit from having the current 2012 regulations and definitions--provided to me directly from FHA.
Here is the email they sent me:
"Thank you for contacting the FHA Resource Center, a response to your inquiry is provided below. If the information does not fully address your question, please forward this email (do not reply) to [email protected], and provide additional information so that we may better serve you. You may also speak directly to a customer service representative by calling 1-800-CALL-FHA (1-800-225-5342) or visit our online knowledge base at www.hud.gov/answers, 24 hours/7 days a week.
FAQ: How can FHA help me buy a home?
FHA insured mortgages offer many benefits and protections that only come with FHA:
Easier to Qualify: Because FHA insures your mortgage, lenders may be more willing to give you loan terms that make it easier for you to qualify.
Less than Perfect Credit: You don't have to have a perfect credit score to get an FHA mortgage. In fact, even if you have had credit problems, such as a bankruptcy, it's easier for you to qualify for an FHA loan than a conventional loan.
Low Down Payment: FHA loans have a low 3.5% downpayment and that money can come from a family member, employer or charitable organization as a gift. Other loan programs don't allow this.
Costs Less: FHA loans have competitive interest rates because the Federal government insures the loans. Always compare an FHA loan with other loan types.
Helps You Keep Your Home: The FHA has been around since 1934 and will continue to be here to protect you. Should you encounter hard times after buying your home, FHA has many options to help you keep you in your home and avoid foreclosure.
FHA does not provide direct financing nor does it set the interest rates on the mortgages it insures. For the best interest rate and terms on a mortgage, you should compare mortgages from several different lenders. In order to initiate the loan application process, please contact an FHA approved lender.
An FHA insured mortgage may be used to purchase or refinance a new or existing 1-4 family home, a condominium unit or a manufactured housing unit (provided the manufactured housing unit is on a permanent foundation).
HUD's internet site can provide additional information on FHA mortgages by going to: http://portal.hud.gov/hudportal/HUD?src=/topics/buying_a_home
You can also find an FHA approved lender in your area by going to: http://www.hud.gov/ll/code/llslcrit.html
You may also wish to contact a HUD approved housing counseling agency in your area for unbiased and free counseling on your particular situation.
You can find a list of these agencies at
http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm
or call HUD's interactive voice system at 1-800-569-4287.
There are also many local and State government programs available that use HUD and/or non-HUD funds to provide grants for the downpayment or to help pay closing costs.
To find out what programs are available in your area visit
http://www.hud.gov/buying/localbuying.cfm
FAQ: What are the basic eligibility requirements for FHA financing?
FHA insures mortgages made by approved lenders to individuals and non-profit and government agencies that are approved to participate in HUD's programs; HUD does not loan money to homebuyers.
Generally, to be eligible for an FHA loan, you must have a valid social security number and have lawful residency in the United States and be of a legal age to sign on a mortgage in your state. Lenders will verify income, assets, liabilities, and credit history for all parties on the loan.
FHA's mortgage programs do not typically have maximum income limits for qualifying, although you must have sufficient income to qualify for the mortgage payment and other debts.
Income limits may be present when qualifying for down payment assistance or other secondary financing programs (including those funded by HUD) that may be used in conjunction with an FHA loan.
Using FHA guidelines, lenders will make a credit determination based on the merits of each case. To find out if you qualify, and how much you can borrow based on your income and debts, you should contact a FHA approved lender.
For additional information on FHA mortgages go to: http://portal.hud.gov/portal/page/portal/HUD/topics/buying_a_home
To locate a FHA approved lender go to
http://www.hud.gov/ll/code/llplcrit.html
If you wish to contact a HUD approved housing counseling agency please visit
http://www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm
Many local and State government programs are available that provide grants for the down payment or to help pay closing costs.
To find out what programs are available in your area visit http://www.hud.gov/buying/localbuying.cfm
FAQ: What is the minimum downpayment requirement for FHA?
Generally, the borrower must make a cash investment of at least 3.5 percent of the contract sales price as required by the Housing and Economic Recovery Act of 2008. Detailed instructions for determining the minimum investment for an FHA insured mortgage are available in Handbook 4155.1.
The downpayment for purchase of a HUD homes may be as low as $100 ( may be available for certain properties located within the HUD Atlanta Homeownership Center jurisdiction (Alabama, Florida, Georgia, Kentucky, Illinois, Indiana, Mississippi, North Carolina, South Carolina, and Tennessee)
For more information about buying a HUD home please visit http://www.HUD.GOV/HUDHomes
FAQ: If I am an Authorized Agent, can I insure loans for my Principal under the Lender Insurance program?
1) If the Authorized Agent and the Principal both have Lender Insurance authority, the authorized agent may review and submit the loan for insurance endorsement on behalf of the Principal.
2) If the Principal has Lender Insurance authority and the Authorized Agent does not have this authority, the Principal will be required to review and insure their own loans using this authority.
3) If the Authorized Agent has Lender Insurance Authority and the Principal does not have this authority, the Authorized Agent will be required to submit a paper case binder to the applicable HOC for review and insurance endorsement.
Handbook 4155.2: 8.B.4.b,8.C.3.a
For more information on the Lender Insurance program go to the LI website at: http://www.hud.gov/offices/hsg/sfh/lender/lendins.cfm
And the Lender Insurance Final Rule (effective 02/24/2012)
http://www.gpo.gov/fdsys/pkg/FR-2012-01-25/pdf/2012-1508.pdf
FAQ: How does FHA define principal residence?
A principal residence is a property that will be occupied by the borrower for the majority of the calendar year. At least one borrower must occupy the property and sign the security instrument and the mortgage note for the property to be considered owner-occupied.
Handbook 4155.1: 4.B.2.a-b
FAQ: How does FHA define owner occupant?
FHA's security instruments require a borrower to establish bona fide owner occupancy of the home as the borrower's principal residence within 60 days after signing the security instrument with continued occupancy for at least one year.
Handbook 4155.1: 4.B.2.b
FAQ: What interest rate and closing costs can be charged to a borrower for a FHA loan?
FHA does not regulate or set the interest rate, discount points, or closing costs that a lender may charge. The rate, points and other fees are negotiated between the borrower and the lender.
For a forward mortgage, the lender can collect those customary and reasonable closing costs necessary to close the mortgage.
For loans originated through December 31, 2009, the origination fee may not exceed one percent.
For loans originated on or after January 1, 2010, the one percent origination fee cap was removed. However, borrowers may not pay a tax service fee.
This includes the FHA 203(k) Rehabilitation loan program; however, the guidance for the 203(k) supplemental origination fee did not change and remains the same.
The elimination of the origination fee cap for FHA standard forward mortgage programs DOES NOT apply to the FHA HECM (reverse mortgage).
Aggregate closing costs charged to a borrower may not violate the FHA tiered pricing rules which prohibit a lender from charging higher prices for low balance loans than the lender charges for higher balance loans. A lender's ‘mortgage charge rate' (discount points, origination and other fees) may not provide for a variation of more than two percent on its FHA mortgages within a geographic area; and any such variation must be based on actual variations in fees or costs to the lender to make the loan.
Additional information regarding pricing, and closing costs for forward mortgages may be found in
Handbooks 4155.2: 6.A.3, 4240.4
MLs 11-18, 09-53, 06-04, 94-16
DISCLAIMER: All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document."