| FHA Mortgage loans- WHEN YOU ALREADY OWN | | | | •Relocations: The homebuyer is relocating with a |
| A HOME. | | | | new employer, or being transferred by the current |
| IMPORTANT - EFFECTIVE WITH CASE | | | | employer to an area not within reasonable and locally |
| NUMBERS PULLED ON OR AFTER 9-19-08 | | | | recognized commuting distance. A properly executed |
| DID YOU KNOW? | | | | lease agreement (i.e., a lease signed by the homebuyer |
| Recently, FHA and others in the mortgage industry | | | | and the lessee) of at least one year’s duration |
| have observed an increasing number of homeowners | | | | after the loan is closed is required. FHA recommends |
| who have chosen to vacate their existing principal | | | | that underwriters also obtain evidence of the security |
| residence and purchase a new residence. This has | | | | deposit and/or evidence the first month’s rent was |
| been occurring as some homeowners, given the rising | | | | paid to the homeowner. |
| price of fuel, are relocating to homes nearer their | | | | •Sufficient Equity in Vacated Property: The |
| employment, or are taking advantage of other home | | | | homebuyer has a loan-to-value ratio of 75 percent or |
| buying opportunities arising in the marketplace. Due to | | | | less, as determined by either a current (no more than |
| FHA’s concern that some homebuyers in these | | | | six months old) residential appraisal or by comparing |
| transactions may attempt to provide misleading | | | | the unpaid principal balance to the original sales price of |
| information regarding the rental income of the property | | | | the property. The appraisal, in addition to using forms |
| being vacated to qualify for the new mortgage, FHA is | | | | Fannie Mae1004/Freddie Mac 70, may be an |
| instituting underwriting guidance designed to assure that | | | | exterior-only appraisal using form Fannie Mae/Freddie |
| the homebuyer can make payments on the full debt | | | | Mac 2055, and for condominium units, form Fannie |
| service of both mortgages. Consequently, beginning | | | | Mae1075/Freddie Mac 466. |
| with case number assignments on or after 9-19-08 and | | | | Advantages to Using an FHA loan to purchase your |
| until further notice, the underwriting analysis may not | | | | next home include: |
| consider any rental income from the property being | | | | Florida home buyers should know the many |
| vacated except under circumstances described in this | | | | advantages of the FHA mortgage loan programs. |
| Mortgagee Letter. The exclusion of rental income from | | | | FHA home loans were created to help increase |
| property being vacated is being instituted on a | | | | home ownership. For the Florida home buyer the FHA |
| temporary basis while FHA further analyzes this | | | | program can simplify the purchase of a home, making |
| situation to determine whether permanent measures | | | | financing easier and less expensive than a |
| may need to be taken. This will assure that a | | | | conventional mortgage loan product. Some highlights of |
| homeowner either has sufficient income to make both | | | | the Florida FHA loan program include: |
| mortgage payments without any rental income or has | | | | Minimal Down Payment and Closing costs. |
| an equity position not likely to result in defaulting on the | | | | - Down payment less than 3% of Sales Price Gifts |
| mortgage on the property being vacated. In either | | | | are allowed |
| case, this guidance is directed to preventing the | | | | - Seller can credit up to 6% of sales price towards |
| practice known as “buy and bail” where the | | | | closing and prepaid costs. |
| homebuyer purchases, for example, a more affordable | | | | - 100% Financing available |
| dwelling with the intention to cease making payments | | | | - No reserves required. |
| on the previous mortgage. Although the property being | | | | - FHA regulated closing costs. |
| vacated will not have a mortgage insured by FHA, | | | | |
| surrounding properties may and, thus, FHA may be | | | | Easier Credit Qualifying Guidelines such as: |
| indirectly negatively affected should that property | | | | - No minimum FICO score or credit score |
| result in a foreclosure. | | | | requirements. |
| Exceptions: | | | | - FHA will allow a home purchase 1 year after a |
| Rental income on the property being vacated, reduced | | | | Bankruptcy. |
| by the appropriate vacancy factor may be considered | | | | - FHA will allow a home purchase2 years after a |
| in the underwriting analysis under the following | | | | Foreclosure. |
| circumstances: | | | | |