Eleanor Thorne, Mortgage Loan Specialist in HUD homes.
Qualifying for an FHA Loan is simple - in fact there are far fewer restrictions than you would find on other government programs like VA Mortgage Loans or USDA Home Loans.
Maximum Loan Amounts:
Maximum FHA Loan Limits vary per County, and are subject to change each October. Congress has said that they will be lowering the High Cost Area FHA loans that are currently available in areas like Washington, DC and San Francisco in October of 2011.
There's an indication that the maximum FHA Loan Limit for Homes in Raleigh will change at that time too. The 2010 FHA Maximum Loan limit for Wake County is $295,000 - the estimated October 1, 2011 limit, could go down to $271,050.
FHA Qualifying Income Requirements:
FHA is flexible with income used to qualify buyers. When you are qualifying for a loan, FHA will use your gross income ( all the money you earn before taxes, including overtime, commissions, dividends and any other sources - such as part time income, contracts, child support, alimony, etc) as long as you can show a steady two year history for these sources.
For the most part it's also important to remember that when starting a new job, you will probably need to receive your first full paycheck before you can close on your new home.
Ratios for FHA Loans:
In General, FHA Underwriters take your Gross Income (Before taxes come out), and divide that by 12. Then they multiply that number by 28% to find your maximum monthly housing payment can be. (We've seen people who did not have a tremendous amount of debt qualify for more than this number, that's why we have you talk to a Lender!)
They take the Gross Monthly Income and multiply it by 41% to find out what your TOTAL monthly obligations can be (meaning house payment, insurance, taxes, car, credit cards - etc).
Although we know it's a big expense for many families - FHA does not count Child Care in your qualifying ratios (and they don't count cell bills, or insurance either!)
FHA Down Payment Requirements:
If you are purchasing a "regular" house (not a foreclosure or short sale home), FHA requires a 3.5% down payment.
The down payment can be a gift, it can be from the sale of an asset (we had one client sell a bass boat so he could buy a house), savings and, if you qualify for NC Housing Finance Agency money, up to $8000 of this can be given to you by the Government (with a few strings attached of course).
FHA 203K Loans:
FHA has a program for home renovation. If you purchase a home for $100,000 (for instance) and you want to put in new appliances and carpet, you can do it with this program!
Let's say the TOTAL amount of repairs you wanted to make to the house is $15,000. As long as the property will appraise for at least $115,000, you would make a down payment based on that "fixed up" value of $115,000. So 3.5% of $115,000 is $4025! Sweet!
The maximum amount they will loan for renovation under this Streamline program is $35,000. The process of working with a contractor is a little complicated - but our specialized loan officers can walk you through it!
HUD Homes with $100 Down Payments:
If you are purchasing a HUD foreclosed Home, HUD will allow you to get an FHA mortgage on that property with a $100 down payment. HUD will also contribute to your closing costs.
To qualify the buyer must be an "owner occupant" (meaning you live in the home you buy - as opposed to an investor who lives elsewhere), and they must offer full price. You must also be willing to live in the property for a year. You cannot combine this program with a FHA 203K.
FHA Good Neighbor Next Door:
If you are purchasing a HUD Home in a qualifying "Revitalization" area, HUD allows Teachers, Firemen, Police Officers, and qualifying EMT's to purchase the home at 50% of the asking price. Buyers must be willing to Owner Occupy the home for 3 years and cannot have owned residential real estate for 12 months prior to the offer.
FHA PMI Charges:
FHA Charges a 1% upfront mortgage premium on all loans, in addition to collecting PMI (mortgage insurance premiums) each month. These premiums may be tax deductible. They serve to insure the lender and FHA against defaults and foreclosures.
FHA Appraisal Requirements:
With a HUD Foreclosed Home there's already an appraisal that has been done. If the appraisal is more than 6 months old, our specialized HUD loan officers can request a new one, and that's what we would base our offer on.
ALL FHA appraisals are done by an FHA Approved Appraiser. While they do not have the strict property guidelines that USDA Home Loans do, the house still needs to be in fairly good condition, the heat has to work, no broken windows, or torn up floors.
FHA is highly concerned about lead paint. If a shed that is not attached to the home (for instance) looks like it has not been painted in 20 years - they could require that it be painted.
FHA and Condos:
FHA's made some pretty significant changes to its Condo Approval process. Now, all Condo projects must be RE-Approved every 2 years.
Additionally, 50% of the condos units must be owner occupied or sold to owners who will live in the unit. At least half (50%) of all units must be sold before FHA will issue a mortgage on one. Here's a search site of condominium projects that are already FHA approved.
