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What happens after you get the loan?

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Trons
New Contributor

What happens after you get the loan?

We see a lot of threads about obtaining a mortgage, but it appears, once that has happened, nobody really talks about their current mortgage.  While there are probably other boards that people go to for that information, because they aren't related to credit score, I thought I would post some information about different loan types.  This is information I think people need when trying to decide what type of loan to obtain.

 

Fix vs ARM:  Adjustable Rate Mortgages are good, if you're going to stay in the house for a few short years then move.  Be very careful when accepting an ARM loan because once the rate starts changing, it's very easy for the payments to get beyond your means to pay it.

 

If you have a fixed rate, your payment may still change if there is an escrow account associated with your mortgage.  This is the account that pays your home owners insurance and taxes.  If either of those change, your payment will change, usually on an annual basis, but can be sooner then that.  The increase in payment may be different then the change in taxes or insurance because of something called a shortage.  Your lender can give you more information, but remember, it's not their fault your taxes or insurance increased.

 

Conventional Loans:  A very common loan type.  Very few restrictions (you'll see the restrictions on other loan types a little further down).  The nicest thing about Conventional loans is if you want to flip it or rent it, there are usually no restrictions.  Investors for these loans are going to vary and the most common are Freddy Mac (FHLMC) and Fanny Mae (FNMA).  The biggest problem with Conventional loans is there are fewer options if you start struggling with the loan.

 

Government Loans  VA; FHA; USDA, ect:  These loans have certain restrictions on them, when it comes to servicing (after the loan is originated).  They must be escrowed (the servicer will pay your insurance and taxes).  They must be owner occupied.  They can carry prepayment penalties, ect.  The investor in these loans is Ginny Mae (GNMA).  The servicer will tell you that it's GNMA's requirements, but if you call them (say you're trying to remove your escrow account), they will tell you that it's a servicer requirement.  The truth?  The truth is that all restrictions about these loans:  Must remained escrowed, must be owner occupied, must not be sold in "x" period of time, are requirements the servicer put on "at the recommendation, not requirement" of the investor.  The investor will deny this.  The servicer can not change these things, because if they do, they may lose the right to service these loan types.  This is just part of having this type of loan.

 

These loan types also have different default resolution options then conventional. 

 

High Risk Loans:  I don't think this is the official term for these, but these loans are the type that do not have a standard investor as mentioned above.  The interest rates will always be higher, much higher, then prime.  The terms of the loan can be different then normal loans.  Too many to list here.

 

The bottom line.  When you purchase a home, regardless of what loan type you accept, you sign a mortgage.  The mortgage, and any addendum's that go with it, spell out the terms of that loan and your servicer will treat those terms as seriously as they treat you making the monthly payment.  If you move out of a FHA loan home and try to rent it, and your servicer finds out, they can call the loan due in full.  If you have any specific questions, please contact your servicer and ask them if there are any restrictions.

Starting: EQ 590 (LP 8/12) TU 589 (LP 8/12) EX 612 (LP 8/12)
Current: EQ 650(LP 9/12/12) TU 667 (LP 9/12/12) EX 676 (LP 9/12/12)
Goal: 620 (for VA Mortgage)
Goal Reached. Pre-qualified for VA loan, 9/12/12

My Jeep is like my wife. Cleans up nice, but a lot more fun when she's dirty.
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Walt_K
Senior Contributor

Re: What happens after you get the loan?

I think what you are saying about the restriction on renting out FHA financed homes is overbroad.  FHA financed homes have to be owner occupied within 60 days of purchase, and I believe you are supposed to use it as your primary residence for at least the first year.  After the first year, I think you are allowed to rent out an FHA financed home.   


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


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Message 2 of 6
StartingOver10
Moderator Emerita

Re: What happens after you get the loan?


@Walt_K wrote:

I think what you are saying about the restriction on renting out FHA financed homes is overbroad.  FHA financed homes have to be owner occupied within 60 days of purchase, and I believe you are supposed to use it as your primary residence for at least the first year.  After the first year, I think you are allowed to rent out an FHA financed home.   


^^^Exactly.

Message 3 of 6
Trons
New Contributor

Re: What happens after you get the loan?


@Walt_K wrote:

I think what you are saying about the restriction on renting out FHA financed homes is overbroad.  FHA financed homes have to be owner occupied within 60 days of purchase, and I believe you are supposed to use it as your primary residence for at least the first year.  After the first year, I think you are allowed to rent out an FHA financed home.   


You're actually incorrect.  Most loans, even conventional, will have a 1 year stipulation in the mortgage document it's self.  This is called a Deed of Trust in some states.  In addition to that, you may have an addendum.  Depending on the loan type depends on the addendum.  If you don't believe me, call a servicer up.  Ask them if you can have a vacancy insurance policy (Fire policy, ect) on an FHA loan.  This is the type of policy you'd have if you were renting the property.

 

Now, if you don't change your insurance, they may never know.  Depending on the servicer will depend on if they bat an eye if you try to change your address.  With most things done online, you could switch to paperless billing and it would take your servicer quite a while to find out you had vacated the property.

 

Starting: EQ 590 (LP 8/12) TU 589 (LP 8/12) EX 612 (LP 8/12)
Current: EQ 650(LP 9/12/12) TU 667 (LP 9/12/12) EX 676 (LP 9/12/12)
Goal: 620 (for VA Mortgage)
Goal Reached. Pre-qualified for VA loan, 9/12/12

My Jeep is like my wife. Cleans up nice, but a lot more fun when she's dirty.
Message 4 of 6
StartingOver10
Moderator Emerita

Re: What happens after you get the loan?

This is not correct. You don't get a vacancy policy to rent out the property.

 

You get a landlord tenant policy.

 

I don't know who you spoke to, but the terms and conditions in writing for the note and mortgage that the borrower signs at closing is the "contract" that the borrower must adhere to - not the servicing agreement. The servicing agreement is between the lender and the servicer and can not over ride the terms the borrower has agreed to with the loan origination.

Message 5 of 6
Walt_K
Senior Contributor

Re: What happens after you get the loan?

The Affidavit of Occupancy I signed when I recently purchased my home through FHA stated that I was to occupy the home for the first year of ownership. 

 

The following is from HUD 4155.1:

 

2.  Eligibility Requirements for Principal Residences

 

4155.1 4.B.2.b FHA Requirement for Establishing Owner Occupancy

 

At least one borrower must occupy the property and sign the security instrument and the mortgage note in order for the property to be considered owner-occupied.

 

FHA security nstruments require a borrower to establish bona fide occupancy in a home as the borrower's principal residence within 60 days of signing the security instrument, with continued occupancy for at least one year.

 

ETA: There are lots of different sites talking about this as well.  A quick google search turns up:

 

http://homeguides.sfgate.com/can-rent-fha-loan-3231.html

 

http://budgeting.thenest.com/can-rent-out-home-fha-mortgage-20446.html

 

These are just some examples.

 

 


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


Take the FICO Fitness Challenge
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