How to Get Money with an FHA Mortgage
March 7, 2024
Some assume FHA loans are for single-unit homes or are only for financially disadvantaged borrowers, confusing the FHA home loan program with the USDA home loan program.
Both are government-backed mortgages, but you should expect those programs to differ.
FHA home loans have some options common to all government-backed mortgages and some unique features. USDA loans may not be approved for “income-producing” properties. But is that also true of FHA mortgages?
FHA Loans: Income Is Possible for Owner-Occupiers
FHA Loan 101 advice in this area includes the notion that FHA mortgages require occupancy. Many borrowers want to buy or build homes they can rent to others without living in the property themselves.
FHA loans don’t allow this, but the rules permit you to buy a home with as many as four living units and rent out the ones you don’t choose to occupy.
Pro tip: Your past landlord experience could make this option easier for the lender to approve.
FHA Loans: Cash-Out Refinancing
The FHA loan program does not have a home equity line of credit, but you can get a home equity type loan using the FHA cash-out refinance loan option.
You should expect cash back once the original loan and closing costs have been settled, and the amount of your cash back will depend on the equity you have in the home.
Pro tip: you likely won’t be considered for cash-out refinancing without at least 20% equity in the home.
FHA Loans: Reverse Mortgages for Seniors
Did you know FHA loan options include reverse mortgages? These loans tap into the property's equity and do not require a mortgage payment.
The loan becomes due when the owner dies or sells the home. Pro tip: FHA reverse mortgages are only for borrowers aged 62 or older who own or are close to owning their homes.
What to Know About FHA Loans and Cash at Closing Time
You won’t be able to get cash at closing time on an FHA purchase loan except for a refund. Borrowers cannot apply for mortgage loans larger than the amount needed to buy and close the loan. You must have a minimum amount of payments made to qualify for many types of refinancing, including FHA cash-out refinance loans.
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Both are government-backed mortgages, but you should expect those programs to differ.
FHA home loans have some options common to all government-backed mortgages and some unique features. USDA loans may not be approved for “income-producing” properties. But is that also true of FHA mortgages?
FHA Loans: Income Is Possible for Owner-Occupiers
FHA Loan 101 advice in this area includes the notion that FHA mortgages require occupancy. Many borrowers want to buy or build homes they can rent to others without living in the property themselves.
FHA loans don’t allow this, but the rules permit you to buy a home with as many as four living units and rent out the ones you don’t choose to occupy.
Pro tip: Your past landlord experience could make this option easier for the lender to approve.
FHA Loans: Cash-Out Refinancing
The FHA loan program does not have a home equity line of credit, but you can get a home equity type loan using the FHA cash-out refinance loan option.
You should expect cash back once the original loan and closing costs have been settled, and the amount of your cash back will depend on the equity you have in the home.
Pro tip: you likely won’t be considered for cash-out refinancing without at least 20% equity in the home.
FHA Loans: Reverse Mortgages for Seniors
Did you know FHA loan options include reverse mortgages? These loans tap into the property's equity and do not require a mortgage payment.
The loan becomes due when the owner dies or sells the home. Pro tip: FHA reverse mortgages are only for borrowers aged 62 or older who own or are close to owning their homes.
What to Know About FHA Loans and Cash at Closing Time
You won’t be able to get cash at closing time on an FHA purchase loan except for a refund. Borrowers cannot apply for mortgage loans larger than the amount needed to buy and close the loan. You must have a minimum amount of payments made to qualify for many types of refinancing, including FHA cash-out refinance loans.
------------------------------
RELATED VIDEOS:
Protect Yourself Against Identity Theft
A Streamline Refinance Simplifies the FHA Loan Process
Principal Payments and Your FHA Loan
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