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.
