7b. Pros and cons of FHA financing
7c. FHA-rehabilitation loans
7d. Other FHA loan options
7e. Buyer requirements for FHA loans
7f. Property requirements for FHA loans
7g. FHA loan checklist
Read the full Chapter Seven in one page
Buyer Residency Requirements
Quite a few eligibility requirements must be met when applying for FHA financing on HUD homes. Buyers must meet certain buyer requirements to be eligible for this loan. First, buyers must meet certain residency requirements. While eligibility does not require citizenship in the United States, certain guidelines do apply.
Permanent Resident Aliens may qualify for FHA insured mortgages with the same terms and conditions as those offered to U.S. citizens. However, borrowers must have their own social security number to qualify.
The FHA will insure mortgages for Non-Permanent Resident Aliens as well. The property must be occupied as the principal residence, the borrower must be eligible to legally work in the United States and a social security number is required.
Occupancy Requirements for FHA Financing
FHA financing comes with certain occupancy requirements as well. Owner occupant purchasers alone may obtain FHA financing. Paperwork is required, certifying that buyers intend to occupy the property as their principal residence. Those purchasing HUD homes will be required to file separate paperwork regarding the 12-month residence requirement for purchasing HUD homes. Beware of misrepresentation, since misrepresentation may come with serious legal consequences, such as incarceration and large fines.
If buyers use a co-borrower on their loan application, the co-borrower does not have to occupy the property. However, they are required to have a United States principal residence.
Buyer Income Requirements
Buyers need to meet certain income requirements to qualify for FHA financing for HUD government foreclosures. Acceptable income must be shown, such as income from a job. In some cases, miscellaneous income, such as alimony or child support may be used to meet income requirements.
To meet FHA financing income requirements, presenting appropriate documentation is essential. Requirements include recent pay stubs and verification of employment. In some cases, submitting pay stubs for 30 days as well as two years of IRS W-2 forms may be used to help document income. Lenders verify current employers by telephone as well.
Some buyers receive self-employment income, which requires documentation as well. Borrowers may use self-employment income if they have been self-employed for at least two years.
Certain types of fixed income may help buyers qualify for FHA financing. Non-taxable income may be grossed up, although this does not include child support. Rental income is acceptable, but proper documentation for rental income will be required.