Do FHA Loan Requirements Apply to All Borrowers?
September 22, 2021
Do FHA loan requirements apply to all borrowers? This question is complicated depending on whether you’re asking about credit requirements, appraisal rules or other areas.
One important area where all FHA borrowers are intended to get identical treatment is in the application of Fair Housing law standards. No discrimination is permitted in the FHA home loan process, and those who do experience some form of it should report the incident immediately to the FHA/HUD.
You cannot be rejected for an FHA home loan on the basis of factors that have nothing to do with your financial qualifications, employment, income, being an owner/occupier, etc. A home may not be suitable for an FHA loan, a borrower may be denied the loan because he or she doesn't intend to live in the property as the primary residence, or because of factors that affect the economic life of the property.
Where basic minimum credit standards are concerned, FHA loan rules apply for all borrowers. If you apply for a new purchase mortgage, there are basic requirements will affect your transaction including FICO score rules, down payment requirements, and the basic terms of your mortgage. But the nature of your transaction will play a role in this area, too.
For example, the basic requirements for an FHA reverse mortgage are not the same as those for a new purchase loan. The FHA reverse mortgage has a minimum age requirement which does not apply to FHA forward mortgages or refinance loans. FHA reverse mortgages are only for qualified borrowers age 62 or older.
By comparison, the only age restriction on new purchase FHA loans is that the borrower be of sufficient legal age to enter into a legally binding contract.
FHA loan standards in some cases vary depending on circumstances. Are you looking to buy a home in an area with no flood plains or natural disaster zones? Your lender in such cases may not require hazard insurance that would be a condition of loan approval in certain areas known to be flood zones.
Another good example: some FHA mortgage loans may require additional scrutiny for property damage associated with the illegal manufacture of drugs. Any home known as a former “meth house” would be subject to FHA appraisal rules governing the abatement of toxic substances in such cases.
The basic financial qualifications for an FHA mortgage are intended to apply for all borrowers in terms of FICO scores, compensating factors for marginal credit, employment and income verification, etc. But not all applicants come to the home loan process with the same types of income, jobs, etc.
Applicant's work may not be "typical" , and there are additional requirements for applicants who are seasonal workers, earn commission income, work for themselves, etc. Your lender may require additional tax documentation, profit-and-loss statements for those who own their own businesses, etc.
Speak to a loan officer if you aren’t sure how your income and other financial data should be submitted or documented for loan approval. Additional lender standards may apply above and beyond FHA loan rules.
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The Last Part of the Transaction Is the Mortgage Closing
Understand the Reasons for Private Mortgage Insurance
One important area where all FHA borrowers are intended to get identical treatment is in the application of Fair Housing law standards. No discrimination is permitted in the FHA home loan process, and those who do experience some form of it should report the incident immediately to the FHA/HUD.
You cannot be rejected for an FHA home loan on the basis of factors that have nothing to do with your financial qualifications, employment, income, being an owner/occupier, etc. A home may not be suitable for an FHA loan, a borrower may be denied the loan because he or she doesn't intend to live in the property as the primary residence, or because of factors that affect the economic life of the property.
Where basic minimum credit standards are concerned, FHA loan rules apply for all borrowers. If you apply for a new purchase mortgage, there are basic requirements will affect your transaction including FICO score rules, down payment requirements, and the basic terms of your mortgage. But the nature of your transaction will play a role in this area, too.
For example, the basic requirements for an FHA reverse mortgage are not the same as those for a new purchase loan. The FHA reverse mortgage has a minimum age requirement which does not apply to FHA forward mortgages or refinance loans. FHA reverse mortgages are only for qualified borrowers age 62 or older.
By comparison, the only age restriction on new purchase FHA loans is that the borrower be of sufficient legal age to enter into a legally binding contract.
FHA loan standards in some cases vary depending on circumstances. Are you looking to buy a home in an area with no flood plains or natural disaster zones? Your lender in such cases may not require hazard insurance that would be a condition of loan approval in certain areas known to be flood zones.
Another good example: some FHA mortgage loans may require additional scrutiny for property damage associated with the illegal manufacture of drugs. Any home known as a former “meth house” would be subject to FHA appraisal rules governing the abatement of toxic substances in such cases.
The basic financial qualifications for an FHA mortgage are intended to apply for all borrowers in terms of FICO scores, compensating factors for marginal credit, employment and income verification, etc. But not all applicants come to the home loan process with the same types of income, jobs, etc.
Applicant's work may not be "typical" , and there are additional requirements for applicants who are seasonal workers, earn commission income, work for themselves, etc. Your lender may require additional tax documentation, profit-and-loss statements for those who own their own businesses, etc.
Speak to a loan officer if you aren’t sure how your income and other financial data should be submitted or documented for loan approval. Additional lender standards may apply above and beyond FHA loan rules.
------------------------------
RELATED VIDEOS:
Get Your Questions Ready for Your Loan Officer
The Last Part of the Transaction Is the Mortgage Closing
Understand the Reasons for Private Mortgage Insurance
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