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When you purchase a home with an FHA mortgage, are you already contemplating when you might sell or refinance? It may sound premature to some, but for those who prefer long-term financial planning a strategy for home ownership makes sense.

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News and Updates for Homeowners

Long-Term Planning and Your FHA Home Loan

Long-Term Planning and Your FHA Home Loan
December 5, 2018 - When you purchase a home with an FHA mortgage, are you already contemplating when you might sell or refinance? It may sound premature to some, but for those who prefer long-term financial planning a strategy for home ownership makes sense.

There are borrowers who don’t plan to stay in their homes very long when purchasing, especially if it’s a first-time home buyer who anticipates needing a larger home in the future for family planning, extra space for hobbies or guest rooms, etc.

What do the FHA home loan rules say about restrictions on an FHA borrower’s ability to freely sell, transfer, or refinance the home purchased with an FHA mortgage?

FHA Home Loan Rules Are Borrower-Friendly

In general, FHA mortgage loan rules are designed to allow the borrower to freely sell or transfer the property as she sees fit. That is one reason why there are certain rules in place for condo loans and suburban (or other) properties that may have homeowners’ association or condo owners’ association agreements.

Any such agreement that restricts the borrower’s ability to sell the home when they choose would not be acceptable for the purposes of an FHA single-family home loan.
Borrowers cannot get FHA loan approval if they are required to agree to Right Of First Refusal bylaws giving the owner’s association the right to approve or deny the sale.

Time Restrictions on Resale?

The only restriction in this area applies more for the borrower than the seller-a seller may choose to put the home they buy with an FHA loan back on the market quickly (FHA rehab loans for fixer-upper properties, for example, may have the borrower fixing a home and reselling it shortly thereafter).

But sellers who put a home back on the market fewer than 90 days after purchasing will find that borrowers are ineligible for FHA loans on such properties. Homes that go on sale 180 days or less after purchase are not restricted in this manner, but do require a new appraisal.

Additional lender requirements and state law in these situations may apply. Having an FHA home loan assumed-giving another person the rights and responsibilities for the mortgage and title with the lender’s approval-is also subject to lender standards.

Check with your loan officer to see how soon after purchasing an FHA loan assumption is possible at that financial institution if you need to consider that option.

FHA Refinance Loan Rules: Minimum Payment Requirements Before Refinancing

In general you may find a refinance loan is possible after a specific number of mortgage payments. For example, FHA Cash-Out refinance loans are possible if the borrower is current on the mortgage and has made 12 on-time mortgage payments.

Refinance loans with no cash out may require as few as six months of on-time payments, but these are FHA loan minimums and may not reflect lender requirements. Ask a lender what may be needed for a refi loan at that financial institution.

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