Government and non-profit organizations can purchase homes with FHA-insured mortgages under the criteria specified below.
A non-profit agency may receive FHA-insured financing on a property that is intended for sale or lease to low-income and moderate-income individuals (i.e. those who earn less than 115% of the median income). The agency’s eligibility for FHA programs and
Any property that is occupied by a borrower beyond his or her principal residence is considered a secondary residence.
Homeowners seeking refinance are only allowed to have secondary residences under the following conditions:
The FHA provides insurance for mortgages on detached or semi-detached property dwellings, as well as row homes and townhouses, and individual units in condominium projects that meet FHA approval.
Because FHA only insures owner-occupied principal residences, this means that mortgages on commercial properties (including hotels, boarding houses, bed-and-breakfasts, private clubs, and university fraternity/sorority houses) are not eligible for assistance.
A property that is occupied by the borrower for most of the calendar year is considered a principal residence.
To be defined as owner-occupied, the borrower must live in the property continually for one year, and have his or her signature on the security instrument and mortgage note. After the security instrument is signed, the borrower must take up bona fide residence in the home within 60 days.
In general, the FHA insures no more than one mortgage per borrower in order to prevent any flouting of regulations for investment gains. A borrower who owns a home covered by an FHA-insured mortgage in which ownership is maintained cannot acquire a second principal residence with FHA insurance except in cases below.
Homes that were previously purchased as investment properties are not bound by these restrictions. However, if the FHA determines that the transaction was an attempt to use FHA insurance for acquiring investment properties, the mortgage will not qualify for insurance, even though it may be the only property the applicant owns.
When a borrower takes out a new mortgage on his or her current property to repay an existing real estate debt, this transaction is considered a refinance. All a borrower needs to be eligible to refinance is possession of legal title.
The maximum mortgage that FHA insures will be equal to the home’s sale price or to the appraised value (if lower than the sale price) multiplied by a loan-to-value (LTV) ratio. The borrower will be responsible for having a cash investment equal to the difference in value between the sales price and the determined maximum mortgage amount. The minimum investment is 3.5%. Therefore, the maximum LTV for a purchase is 96.5%.