One Click to Find My Dream Home
Receive email alerts of hot deals,
new properties & foreclosures.
Connie's Real Estate Trends Blog
69°F
FHA Tips and Information
Gift for down payment: Buyer must have a minimum of 3.5% down; however, it can all come from a gift. Idea: Maybe a young couple can get 1.75% from one parent/or grandparent – and 1.75% from another parent/grandparent.
Non-Occupant Co-borrowers: For FHA loans the buyer may have a non occupying co-borrower (normally a parent co-sign) to help strengthen the file by adding additional income to the loan scenario. By adding a co-borrowers income to the total file it can assist in lowering the overall debt ratio, therefore helping the buyer to qualify.
Formula to roll in closing costs: Whatever the final negotiated price is....multiply that number by 106%. This will increase your purchase price so that the seller can pay 6% towards your buyers closing costs. On FHA a seller is allowed to pay up to 6%.
Example: Final negotiated sales price = $100,000. Take $100,000 x 106% = $106,000. Write up contract with a sales price of $106,000 asking the seller to pay 6% towards buyer’s pre-paids and closing costs.
Mortgage insurance premium vs. private mortgage insurance: On conventional loans you must have a 10% down-payment and a credit score greater than 720 to be approved for mortgage insurance from a private insurer before a lender will approve a conventional loan. On an FHA loan a buyer only needs 3.5% down and a credit score greater than 640 to qualify for FHA mortgage insurance premium. The monthly cost is also much lower on FHA mortgage insurance keeping the borrower’s monthly payment lower – therefore making it easier to qualify for.
Reserves: For most conventional loans the buyer must have two months reserves (2 months piti in savings to qualify). On an FHA loan no reserve requirements are required.
Appliances: Appliances are not necessary to finance a home using FHA. However, an underwriter will use discretion to be sure buyer has enough funds to purchase them, or has a family member who will buy them for the buyer.
Flooring: Can not be cement floors. Must have some sort of floor covering that has at least a two year life span remaining.
Septic and well: Inspections are not necessary unless the appraiser notates a problem on the appraisal.
Pest Inspection: SunTrust does not “require” a pest inspection unless the appraiser notates an area of concern.
No income restrictions: There are no income restrictions preventing a borrower from obtaining an FHA loan.
Maximum Loan in Lee County: Extended through 2010 is $356,250. (After 2010 it may revert back to $271,050.)
Must be Primary Residence: Second homes and investment homes are not eligible. (Primary home can be a 1-4 unit home, however borrower must qualify carrying debt without using proposed rental income.
Flipping: If a property has been purchased within the past 90 days…the seller may not enter into a sales agreement until the 91st day. If the sales price is higher than the original purchase agreement explanations, and documentation are must be notated in file. (Except when properties have taken back by the lender (foreclosure)…and are bank owned.)
FHA Rider: A purchase agreement must have an FHA “Rider” attached to the purchase agreement, and dated the same day as the purchase agreement.
Insurance: The premium for both the hazard and flood insurance if necessary can be collected for at the time of closing and paid for by the seller.
Taxes: SunTrust will use the prior year’s tax bill (The March figure) to qualify a new applicant and prorate the settlement charges at closing.
Collections: Collections are looked at on a case by case basis – and underwriter discretion prevails. Sometimes an underwriter will allow a loan to close without paying off collections- and other times they will call for collections to be paid off “prior to – or at closing”. Mostly they look to see if the collection was caused from circumstances beyond a borrowers control such as medical, etc.
Bankruptcy: Must be discharged for a minimum of 2 years for a Chapter 7 prior to applying for a new mortgage. Documentation and explanations are necessary. For a Chapter 13 borrower must have had one year from the pay-out period and document payments have been made timely.
Short Sale/or Deed in Lieu of Foreclosure: Must have minimum of 3 years prior to the application date applying for a new mortgage.
Condos: Must be listed on the FHA Approved list of Condo’s. Click here for a list of condo’s in our area
If the condo is not listed on the above list of FHA Approved Condo’s – the lender must perform a FULL REVIEW to see if the condominium meets FHA requirements. In order to obtain a full review:
- A condo questionnaire must be completed.
- Adequate insurance carried.
- Condo project must have more than 51% of units “owner-occupied” (for FHA 2nd homes do not
count as owner occupied). - Lender must obtain all recorded Condo Docs (Articles of In-corporation, By-Laws, Declarations & Amendments).
- Lender needs most recent Budget.
- Appraisal is performed.
- Borrower must obtain an HO-6 insurance policy.
Maximum total debt ratio: Is determined when the file is run through either DU or LP’s automated underwriting system, but FHA likes to see 31% housing and 43% total debt ratios.
CAIVRS - (Credit Altert Interactive Voice Response System): is a HUD maintained computer information system which enables participating lenders to learn when an applicant has previously defaulted on a federally assisted loan. The system provides instant credit information.