FHA Occupancy Requirements
The FHA also requires that the buyer moves into the property within 60 days of closing on their home. These requirements are intended to prevent investors from profiting off the government loan program's affordable rates and less stringent lending guidelines.
In order to rent out an FHA home, you first have to move into the property within 60 days of closing on the home. Then you have to live in the property for one year before you can start renting it out. The one-year time limit begins when you move into the property.
FHA Appraisal Issues Connected With Resale Dates
The sale of real estate 91 days after purchase (up to 180 days after purchase) requires a new appraisal if the resale price is 100% or more above the original cost of the property.
It takes around 47 days to close on an FHA mortgage loan. FHA refinances are faster and take around 32 days to close on average. FHA loans generally close in a very similar timeframe to conventional loans but may require additional time at specific points in the process.
Timing Requirements – The “3/7/3 Rule”
The initial Truth in Lending Statement must be delivered to the consumer within 3 business days of the receipt of the loan application by the lender. The TILA statement is presumed to be delivered to the consumer 3 business days after it is mailed.
A cash deal might close in as few as two weeks because you can skip the lengthy mortgage and appraisal process. Closing day — when you sign your final paperwork and buy the home — usually takes one to two hours if everything goes smoothly.
The FHA flipping rule requires investors to hold properties for at least 90 days before selling to FHA buyers. This rule impacts property flipping plans by imposing additional scrutiny on sales within 91-180 days. Investors need to factor these timelines into their investment strategies.
These loans are known as FHA jumbo loans. But there are a few things to understand before you go this route. No cash back — Some buyers may wonder if it's possible to apply for a loan that's greater than the value of the home and get the remainder in cash at closing. Cash back isn't allowed with FHA purchase loans.
FHA First Mortgage
Borrower must have owned property for 12 months AND if encumbered by a mortgage made payments for the last 12 months within the month due. Otherwise limited to 85% LTV. Standard 31/43 ratios, may be exceeded with compensating factor(s).
FHA loan rules do not permit rentals of living units in the home purchased with an FHA mortgage if those rentals are for less than 30 days. The Airbnb business model is not acceptable under FHA loan rules, which means that if you purchase with an FHA mortgage, Airbnb operations are a violation of the FHA loan rules.
Over the course of homeownership, you can certainly take out more than one FHA loan. But you can't have more than one FHA loan at a time unless you meet the FHA's qualifying circumstances. Luckily, there are plenty of financing and refinancing options for borrowers who don't qualify for more than one FHA loan at once.
FHA-specifics
If you can show proof that you have now been employed for at least a six-month period before requesting a FHA loan, AND that before any employment gap you worked for two-years straight or longer, you have the potential to get approved.
Closing on a house can typically take 30 – 60 days. According to ICE Mortgage Technology, as of August 2024, the average time to close on a home purchase was 43 days.
If you're currently in the market looking to buy a triplex or fourplex with FHA financing, you need to see if the property's rents pass the Self-Sufficiency Test. To be “self-sufficient” means that 75% of the property's rents need to cover the monthly payments.
Unfortunately, sellers often perceive the FHA loan approval process as risky because of the FHA's relatively lenient financial requirements and stricter appraisal and property standards.
Since your home must meet FHA property minimums, the appraisal process may include more requirements than a conventional home loan. The appraisal is required to be performed by an FHA approved appraiser and may have additional inspections which could result in a higher appraisal cost.
FHA Loan Down Payments
The minimum down payment you're required to make on an FHA loan is directly linked to your credit score. Your credit score is a number ranging from 300 – 850 that's used to indicate your creditworthiness. An FHA loan requires a minimum 3.5% down payment for credit scores of 580 and higher.
In Los Angeles (California), it is 3 years 6 months because of high demand. In Chicago (Illinois), it is 2 years because of some accessible properties.
There are, however, some exceptions to the FHA 90-day flip rule and they are as follows: A builder who has built a new house, or who is selling to a borrower with FHA-insured financing. If the seller inherited the property. If the property is a resale by the HUD or its REO (real estate owned) program.
Some buyers may be able to negotiate an immediate possession date. This means as soon as the transaction is closed and the deed is recorded, the buyer can move in. A few other common buyer possession dates may be 15 days, 30 days, 60 days, or even 90 days after closing, depending on how much time the seller needs.
Your lender will need an insurance binder from your insurance company 10 days before closing. Check in with your lender to determine if they need any additional information from you. Get a change of address package from the U.S. Postal Service and begin the change of address notification process.
Usually the sellers sign first but really it doesn't matter. They don't get any money until they sign everything so technically nothing has changed since you signed yesterday.