Posts Tagged Federal Housing Administration

Employment requirements and FHA Loans

Logo of the Federal Housing Administration.

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With the recently high unemployment rate one question I get asked quite often is: “Have I been at my job long enough to qualify for a mortgage loan?” So here is the rundown of FHA guidelines for employment history:

The borrower should have a consecutive two (2) year history of income with the same employer. However less than two years is acceptable if changes in employers are within the same field or industry. This is common with many Union employees who may work for several contractors in a year period.

The borrower must be able to document the reason for gaps in employment of longer than 30 days.

A newly employed borrower with less than a two year history of employment can provide documentation that they were attending school or a training program for the field of work they are presently employed in. Examples of such would be an person who just got a job as an engineer and just received their degree in engineering or a mechanic that just started working for a dealership and was in specialized training for their vocation prior to their employment.

Borrowers returning to the workforce after a leave of absence must be employed by the same employer prior to their leave.

Borrowers returning to the workforce after a leave of absence and working for a different employer or field of work must wait six (6) months before they are eligible for employment.

Review your situation with your loan officer if you have any question as to whether or not you’ll qualify.

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FHA to raise monthly mortgage insurance premiums… Again.

HUD has announced that it will once again raise the FHA monthly mortgage insurance premium. As you may recall it increased last Fall from 0.55% annually of the loan amount to 0.90% annually of the loan amount for loans equal to or greater than 95% loan-to-value. The minimum down payment for FHA loans is 3.5% leaving an LTV of 96.5, so most FHA loans originated fall into this 0.90% category.

For all loans originated on or after April 18, 2011 the new FHA mortgage insurance rate will be 1.15%.

FHA monthly mortgage insurance premiums are figured like this:

Loan balance X MI rate = Annual amount / 12 months = monthly MI payment.

So:

$200,000 loan balance X 0.90% = $1,800 annually / 12 months = $150.00 a month MI payment.

With the increase the equation will look like this:

$200,000 X 1.15% = $2,300 / 12 = $191.67 a month mortgage insurance payment.

What this will effectively do is reduce the amount of loan you will qualify for by about $10,000 or so.

So, if you’re looking at buying a new home or refinancing, be sure to get your loan approval done before April 18th and save yourself some money.

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FHA allows “flipping” through 2011

Until last year FHA would not insure loans on homes that had been owned less than 90 days in an effort to thwart property inflation through flipping schemes.  However, last year in an effort to stimulate home sales and reduce the inventory of foreclosed homes on the market HUD waived the 90 day rule, allowing real estate investors to be able to sell homes that they had owned for less than 3 months to buyers utilizing FHA insured loans with only a 3.5% down payment.

HUD has announced that they are extending this waiver through 2011.  The following conditions apply to the sale of these homes:

  • It must be an arms-length transaction with no identity of interest between the buyer and seller.
  • The seller holds title to the property.
  • There are no sales of the property or multiple transfers of title within the previous 12 months.
  • The property has been marketed openly and fairly.
  • If the selling price of the property is more than 20% above the purchase price the seller must provide proof of repairs, rehabilitation and renovation costs and/or a second appraisal to substantiate the increase in value.
  • A property inspection is done and the report is provided to the buyer before they close on their loan.

This is great news for anyone looking to take advantage of the current marketplace and either looking to get a great deal on a home or for real estate investors looking to pick-up more properties this year.

As always, feel free to contact me with any questions you may have.

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