FHA Home Loans

This guide covers the importance of understanding the minimum lending requirements on FHA home loans. It is very important to understand where you stand by fully understanding the minimum FHA loan requirements and the function of HUD and FHA. FHA loans are the most popular loan program for homebuyers.

Every lender can have different FHA home loan requirements. Each lender is allowed to have overlays on FHA loans. Some mortgage companies, like Preferred Mortgage Rates, have zero lender overlays on FHA home loans.

FHA home loans are popular for first-time homebuyers, homebuyers with a recent bankruptcy or are under a Chapter 13 Bankruptcy repayment plan, borrowers with less than perfect credit, those with higher debt-to-income ratios, and borrowers with credit scores down to 500 FICO. Many borrowers of FHA home loans get conflicting reports on FHA home loan requirements from multiple lenders. Mortgage companies do not have a uniform lending standard on FHA loans.

Property Type Guidelines on FHA Home Loans

There are several types of FHA home loans. All FHA home loans are for owner-occupant homes. HUD does not allow second homes or investment properties to be financed with an FHA loan. Only one to four-unit residentially-zoned owner-occupant primary homes are eligible for FHA loan financing.

Homebuyers can upgrade or downgrade with another home purchase after one year and purchase another home.

If the homeowner wants to keep the exiting home, they can without needing to refinance the original FHA loan. HUD allows borrowers with an FHA loan to keep the loan if they turn the home into a rental property. This holds true as long as they have lived in the home for 12 months since it closed.

What Happens If You Don’t Live In Your FHA Home?

Homebuyers can purchase a two to four-unit multi-family home with a 3.5% down payment home purchase FHA loan with a 580 credit score. The multi-family homebuyer needs to live in one of the units and can rest out the remaining units and collect rental income. HUD, the parent of FHA, requires homebuyers of owner-occupant primary homes with FHA loans to live in the home for at least 12 months before vacating another owner-occupant home.

If you decide to keep the exiting home as a rental and get another owner-occupant home after 12 months, you can keep the exiting home without needing to refinance your original FHA loan. HUD allows you to keep your FHA loan on investment homes if you use it as a primary owner-occupant home for at least 12 months.