Getting the loan funds may take between four weeks and 90 days from start to finish, but the process can take longer if there are complicating factors.
FHA loans: The ICE Mortgage Technology data shows that Federal Housing Administration loans take an average of 44 days to close. FHA loans operate on a timeline similar to conventional loans. However, they may need additional time for some parts of the process.
For borrowers who have completed a short sale, the FHA typically requires a waiting period of three years before they can qualify for a new FHA-insured mortgage loan.
You must occupy the property within 60 days of closing. An FHA inspection is required, and the inspection must report whether the property meets minimum property standards.
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.
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).
You may be denied for an FHA loan if you have declared bankruptcy but you have not had the bankruptcy discharged. You may be denied if you are delinquent on federal taxes or otherwise owe money to the federal government but without an approved payment plan.
FHA Loan: Cons
Here are some FHA home loan disadvantages: An extra cost – an upfront mortgage insurance premium (MIP) of 2.25% of the loan's value. The MIP must either be paid in cash when you get the loan or rolled into the life of the loan. Home price qualifying maximums are set by FHA.
Is it hard to get an FHA loan? Getting any type of home loan requires effort and resources, but generally, it's easier to qualify for an FHA loan than for a conventional mortgage. With the pandemic and recession, however, many lenders' FHA loan and refinance requirements have become more restrictive.
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.
However, some mortgage lenders promise speedy closing timelines, as fast as seven to 10 days in some cases. The fastest closing timelines are typically when the buyer pays cash and can skip the appraisal process.
In 2022, 9.1% of applicants were denied a home-purchase loan, according to data collected under the Home Mortgage Disclosure Act. However, some loan programs have a higher denial rate than others. Here's how it breaks down. Federal Housing Administration loans: 14.4% denial rate.
Homes must meet the following appraisal requirements, or be repaired to meet requirements, to be approved for an FHA loan: Must have an undamaged exterior, foundation and roof. Must have safe and reasonable property access. Must not contain loose wiring and exposed electrical systems.
For example, a homebuyer might ask, "Do I need to make at least $50,000 a year to get approved for an FHA loan?" The answer to this question is "no." There are no minimum income requirements for FHA loans. However there is often a maximum debt-to-income ratio (DTI) requirement that does affect your eligibility.
Some reasons a seller might refuse an FHA loan include misconceptions about longer closing times, stricter property requirements, or the belief that FHA borrowers are riskier.
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.
Common reasons for FHA loan denial include low credit scores, high debt-to-income ratios, insufficient income, insufficient funds for a down payment, and properties not meeting FHA guidelines.
Common issues that may cause a property to fail an FHA appraisal include: Significant structural problems. Peeling paint. Safety hazards like exposed wiring or lack of smoke detectors.
Can I rent out my FHA home after the first year? Yes, after fulfilling the initial one-year occupancy requirement, you can rent out your FHA home. However, if you plan to purchase another property with an FHA loan, you will need to meet specific conditions and justifications for maintaining the original FHA loan.
For instance, the minimum required down payment for an FHA loan is only 3.5% of the purchase price.
Exceptions to the Rule: When You Can Have Multiple FHA Loans
The FHA recognizes that life circumstances can necessitate having more than one FHA loan. To be eligible for a second FHA loan, you must have at least 25% equity in your home or have paid down the FHA loan balance to 75% in certain circumstances.