2nd Home / 2nd FHA Question

[movinonup79]

I was wondering what my options are here and I want to plan ahead for them.  I bought my first condo a couple of months ago and am currently working full time and attending college.  I plan to move back east (Philadelphia) to finish my degree in Finance and either do my masters in Finance or go directly to law school (evening law school as it is not offered here and I will continue to work full time).  I would like to buy a 2nd home there.  I am saving approx. $1000 a month and by that time my credit should be in the 700's (it is around 660-680 now).  Is it possible to get another FHA loan as I am transferring for school?  Or do I need to go conventional?  I'm going to try and save the 20% needed if I have to go conventional if need be.  Anyone offer any suggestions?

Also, on my current mortgage I set up the biweekly payment plan paying 200 extra per month.

Thanks!

[movinonup79]

Also, I forgot to add - I previously lived in Philly and could most likely go back to my own employer making approx. 15K more per year.  So I'm not sure how to go about this and keep both places.

Thanks!

[movinonup79]

Anyone?  I was reading a bit on the relocation scenario for a second FHA loan.  Would this work in my situation?

[Anonymous]

HUD seeks public comment on FHA initiatives

WASHINGTON – July 16, 2010 – Federal Housing Administration (FHA) Commissioner David Stevens unveiled three specific policy changes that he says will strengthen FHA’s capital reserves while still allowing the agency to fulfill its mission. As part of the process leading to acceptance of the new rules, the U.S. Department of Housing and Urban Development (HUD) published a notice in the Federal Register.

For the next 30 days, HUD will accept public comments on the proposed FHA changes. Those changes include:

• Update the combination of credit and downpayment requirements for new borrowers. New borrowers seeking FHA-insured financing would need a minimum FICO score of 580 to qualify for FHA’s flagship 3.5 percent downpayment program. New borrowers with credit scores less than 580 would need a downpayment of at least 10 percent. Borrowers with credit scores less than 500 will no longer qualify for an FHA mortgage.

• Reduce allowable seller concessions from six to three percent. FHA says that allowing sellers to contribute up to six percent of a home’s sales price exposes FHA to excess risk by potentially driving the cost of the home beyond its appraised value. Reducing seller concessions to three percent brings FHA into conformity with industry standards.

• Tighten underwriting standards for manually underwritten loans. When using compensating factors in the underwriting process, lenders would be required to consider the factors that best predict loan performance, such as the borrower’s credit history, loan-to-value (LTV) percentage, debt-to income ratio and cash reserves.

All comments on the proposed FHA regulations must include the docket number and the title: Federal Housing Administration Risk Management Initiatives:

• Docket No. FR–5404–N–01 • Federal Housing Administration Risk Management Initiatives: Reduction of Seller Concessions and New Loan-to- Value and Credit Score Requirements Comments should be mailed to: Regulations Division Office of General Counsel Department of Housing and Urban Development 451 7th Street, SW., Room 10276 Washington, DC 20410-0500

[ShanetheMortgageMan]

Sorry for the delay to your response, been really busy this week.

I assume you purchased your condo with FHA financing, if so, FHA requires you to occupy the home for at least 1 year.  Not sure when you were planning to move back to Philly but just giving you a heads up.

FHA does permit you to own two homes with FHA financing under a few different circumstances.  The situation that would apply to you would be that you are relocating for work, and the existing home would not be within commuting distance of your new job.  You have to qualify for both mortgage payments, and if by somehow you have 25% equity in your condo when you buy then you can rent it out and use that rental income to help offset it's mortgage payment.  Conventional requires 30% equity in order to count that rental income.

In order to use the income from the new job to qualify you'll either need a non-revocable employment contract with all employment requirements being met, or you'll need to start on the job and receive a paycheck reflecting 30 days of pay.  If that type of employment contract is going to be difficult, perhaps you could stay with family/friends until you have received the paycheck and close on a home at that time.

[movinonup79]

Thanks Shane!  Yeah, I will hopefully go back to my prior employer and I could definitely wait the 30 days.  I just wanted to know how to appropriately plan for this if it does happen.

[ShanetheMortgageMan]

Welcome, sounds like you'll be good.  You'd want to speak with a loan officer to go over all of the figures (income, debt ratio, sales prices, etc.) to make sure you'd be able to be approved before you move.

[movinonup79]

One more question Shane... so I don't have to have 25% equity to qualify for another FHA loan, that is just the amount of equity required to be able to count rental income?  I kind of want to keep the same situation that I have now - rent out one of the rooms and keep the house as my 2nd home.  I don't have much debt other than my car, so with the salary increase I would likely receive going back east I shouldn't have a problem with both mortgages. 

Also, since I am paying bi-weekly and an extra 200 per month on my mortgage I should be a bit more ahead.  Could I do a streamline refinance on my condo to lower that payment a bit when I am ready to leave for philly?

Thanks!!

[ShanetheMortgageMan]

There are two 25% requirements - one pertaining to using rental income and one pertaining to obtaining more than 1 FHA mortgage.

You can only have more than 1 FHA mortgages if either you are being relocated, an increase in family size, vacating a jointly owned property (such as in divorce), or are a non-occupying co-borrower on someone else's FHA mortgages.  You only need the 25% equity if you are getting a 2nd FHA mortgage in the same area as your current FHA mortgage'd home is in & it no longer can accommodate your family size.

If you are trying to use rental income to help offset the payment on the home you are vacating (primary-residence-turned-rental), you either need to be relocating for work or have 25% equity in the home being vacated.

Remember FHA's occupancy guidelines require you live in the home for 1 year from the date of the note, however it's a little known fact that FHA also permits streamline refinances on FHA mortgage'd homes that have been turned into rentals.  There is a slightly higher interest rate when it's an investment property, and not all lenders do it, but if you were planning on doing a streamline refinance and then moving out shortly afterwards then that would be the appropriate occupancy type to do it under.

[Anonymous]

We are having a new home built by Shea. We went through the pre-approval process and were initially given approval for an FHA under both mine and my husband's name. Underwriting came back AFTER we signed a contract and gave our earnest to said that he COULDN't be on the loan because of the existing FHA he has from the 2 br. townhouse he bought almost 8 years ago. This is in his name alone. Since the original purchase he has never missed a payment much less an HOA due, has gotten married, had a baby and is still being turned down for a second FHA! The townhome is worth only half of what it was purchased for ($150K now=$75K and we owe $130K). We can't refinance here and have been turned down for HAMP due to our credit scores and income. Thank god my credit and income is good enough to qualify for the new home loan... or so they say! We won't close until November. We can't use any credit card we hold jointly. I have a lot of trepidation ... this hasn't been a great experience! We have some friends who got the same run around but they backed out of the sale. 

Why does our change in family status not qualify with FHA?