FHA FAQ's
Mortgages can be confusing. Just the
terminology alone can be confusing. Here are
a few questions regarding FHA loans to help
you along the way. Feel free to contact one
of our mortgage specialists if you need a
little more help!
Is there a minimum credit score for FHA
loans?
There is no minimum score, each loan is
viewed separately.
Are there different documentation types for
FHA?
All FHA loans require full income
verification, which include paystubs, W-2’s
and/or tax returns.
Does an FHA loan take longer to get
cleared to close than a conventional loan?
No, not at all.
What is the maximum loan amount?
The maximum loan amount varies by state and
county. Please refer to
https://entp.hud.gov/idapp/html/hicostlook.cfm
to view your state and county.
What types of properties are eligible?
1-4 family homes and condos, as long as they
are owner occupied.
Can a borrower have more than one FHA
loan?
Yes, under the following circumstances: The
existing FHA loan must be on the current
primary residence, the new property must be
the borrower’s new primary, the
loan-to-value ratio on the existing loan
must be 75% or less (you may need a drive by
appraisal), the borrower is moving to a
larger home due to an increase in family
size, the borrower is being relocated for
work or if the borrower co-signed for
someone else and they were listed as a
non-occupying co-borrower.
Can multiple people be added to the loan
to help income qualify?
Yes, family members can be added to the loan
to help qualify, even if they do not reside
in the property.
What is the maximum seller’s concession?
6% of the sales price.
What is the maximum loan-to-value ratio
(LTV for a purchase and refinance?
97% LTV for purchase and refinance, assuming
it is a rate and term loan. For a cash-out /
debt consolidation refinance it is 95% LTV.
Are FHA loans assumable if the borrower
sells the home?
Yes, under certain conditions.
What percentage of rental income can be
used as income?
85% of the lesser of the leases or the
rental income as per the appraisal, for the
subject property.
How long does a borrower need to be out
of foreclosure?
The standard is four years; exceptions can
be made after 2 years with extenuating
circumstances.
How long does a borrower need to be out
of Chapter 7 bankruptcy?
The standard is four years; exception can be
made after 2 years with extenuating
circumstances.
How long does a borrower need to be out
of Chapter 13 bankruptcy and can someone in
chapter 13 now refinance?
There is no standard time frame; it depends
on the payment history. Someone currently in
Chapter 13 now can refinance under certain
circumstances, including approval from the
Trustee and a perfect payment history for
the Chapter 13.
Does a borrower in credit counseling
qualify for an FHA loan?
No. If currently in credit counseling,
program must be paid off through transaction
Can collection accounts judgments and
charge-off’s be left open?
Only Medical collection accounts totaling
less than $2,500.00 may be left open. This
is at the discretion of the underwriter. All
other accounts must be paid.
Does FHA ever require more than one
appraisal?
No, but the underwriter may require a
separate review of the appraisal.
Is there a minimum square footage
requirement?
No
Can a borrower close if the mortgage is
past due?
No, all mortgages must be current at the
time of closing.
Are there minimum trade-line
requirements?
No, limited credit is ok and alternate
trade-lines can be used to qualify.
Can gift funds be used to cover the 3% down
payment and closing costs?
Yes, but they must be fully sourced.
Do the borrowers own funds to close on
purchases have to be sourced & seasoned?
Yes.
Are escrows required on FHA loans?
Yes.
Is Mortgage Insurance (MI) required on
FHA loans above 80% LTV?
Yes, there is a 1.5% MI premium due at
closing (can be financed into loan amount) +
a monthly premium for an estimated 5 years.
These MI charges are applicable on ALL
LOANS.
Are there Prepayment Penalty’s on FHA
loans?
No, FHA loans do not have pre-payment
penalties
Are there special licensing requirements
for FHA appraisers?
Yes, appraisers must have an FHA license #.
Are mortgage/rental lates in the last 12
months ok?
Generally, no but this is case-by-case and
based on under underwriter discretion.
Helpful Links
FHA vs
Conventional
Types of FHA Loans
What is an FHA Loan
Click Here to Apply
Now for Our FHA ADVANTAGE Program.
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