REFINANCE YOUR RENT TO OWN HOME WITH AN FHA LOAN
Rent to own contacts take place between a tenant and landlord. Often times, when someone moves to our area with a short sale in their background, or previous forced foreclosure, had to move for a job and have credit issues in their past they will rent a home with an option to purchase agreement until their “waiting period” is over. FHA mortgage lenders provide the most flexible financing option for rent to own buyers. Learn how you can purchase a rent to own home with an FHA mortgage loan!
RENT TO OWN FHA MORTGAGE LENDERS APPROVALS WITH MINIMAL DOWN PAYMENT AND CLOSING FEES:
- Down payment only 3.5% of the purchase price.
- Gifts from family or FHA Grants for down payment assistance and closing costs OK!
- Sellers can credit the buyer’s up to 6% of sales price towards buyers costs and pre-paid.
- No reserves or future payments in account required.
- FHA regulated closing costs.
- Read more about buying a home with an FHA mortgage Bad Credit –No Credit – Investment –Second Home –Multi Family –
RENT TO OWN FHA MORTGAGE LENDERS MAKE QUALIFYING EASIER BECAUSE YOU CAN PURCHASE:
- 12 months after a chapter 13 Bankruptcy FHA mortgage Lender approvals!
- 24 months after a chapter 7 Bankruptcy FHA mortgage Lender approvals!
- 3 years after a Foreclosure FHA mortgage Lender approvals!
- No Credit Score FHA mortgage Lender approvals!
- 580 required for 96.5% financing or 3.5% down payment FHA mortgage Lender approvals.
- 500 required for 90% financing or 10% down payment FHA mortgage Lender approvals.
- Bad Credit with minimum 500 FICO credit score with 10% Down Payment FHA. For FHA mortgage applicants with credit scores between 500 and 579 must make down payments of at least 10% down!
- Read more about FHA Qualifying Qualification Summary – Manual Underwrite – Collections-Judgement’s – Bankruptcy or Foreclosure – Compensating Factors –
RENT TO OWN FHA MORTGAGE LENDERS ALLOW HIGHER DEBT TO INCOME & EASIER JOB QUALIFYING
- FHA allows higher debt ratio’s than any conventional mortgage loan programs.
- Less than two years on the same job is OK!
- Self-employed buyers can also qualify with FHA Mortgage Lenders.
- Read More about Gifts For Down Payment – Documents Checklist – Debt To Income – Student Loans –
CONTACT AN FHA MORTGAGE LENDER BEFORE YOU ENTER A RENT TO OWN AGREEMENT- The rent to own agreement must be approved by the FHA mortgage lender. We recommend that if you are going into a “Rent to Own” scenario, you should call an FHA Mortgage Lender before entering into a rent to own or lease option contact.
FHA MORTGAGE RENT TO OWN GUIDELINES- If you are in a rent to own or a lease option contact, and plan on buying a home it’s important to know that there are different rules for different types of FHA mortgage loans and there are different laws that are state specific.
FHA Underwriters follow the FHA Mortgage Loan Guidelines for all Government home loan approvals in a rent to own or lease to own situation.
We often see Lease Option and Rent to Own situations when one partner has good income, but not great credit and the other occupant has good credit, but not very much income.
In most “Lease Option or Rent To Own” situations we see the renter is paying a higher than normal rent, and that “extra” amount is suppose to go towards the down payment when you are ready to formally buy the home. The Landlord is acting like a savings account for you.
When you apply for am FHA mortgage, we will order an FHA appraisal from through the FHA lenders list of approved appraisers. The appraiser will calculate the fair market rent for the property. Any money paid above and beyond the fair market rent will be used as a credit towards a future down payment. So, if the appraiser says the fair value rent for the home is $1000, and you pay $1500 a month then you will receive $500 for each month you paid that could be paid by the Seller as Down payment for you at closing!
What if the Appraiser doesn’t agree with the dollar amount you and the landlord negotiate as your “market rent” payment? That’s part of the problem.
If you are related to the owner there are additional considerations. The loan to value restriction is 85% if the parties are related, and it’s been a relatively short period of time you’ve been renting. FHA Mortgage Loans allow a gift so there’s really no benefit for doing this type of arrangement for a family member, simply have them give it to you as a gift?? However, if you go down the gift route, you must have rented for more than 6 months for the additional money you paid in rent to be count towards the down payment.
For NON related rent to own, lease option sales agreements, meaning you don’t have any relationship with the owner of the house except that you rent from them FHA mortgage lenders require that make a minimum down payment of 3.5% and not have to have a minimum rental period.
With an FHA mortgage you are required to verify that you make enough income to qualify for the FHA mortgage payments. This is very specific with the new Frank Dodd law requirements. For example, in some cases where FHA mortgage applicants are self employed, and write off all of their income it can make it difficult to qualify. That’s not to say we can not approve self employed self employed borrowers just bring us all of your documentation, and we will figure out a way to make it work. We can often times use a non-owner occupied co-borrower in those cases.
If you’ve been renting for the last few years you might qualify for the First Time Home Buyer County Grant Program that offers rent to own tenants a down payment. They also have Mortgage Tax Credits available for those who meet the income restrictions and credit score requirements. In general, you will need a minimum 580 credit score to refinance your rent to own home with an FHA loan.
FHA RENT TO OWN INFORMATIONAL LINKS
- Can I rent or “rent-to-own” a HUD home? HUD does not have a rent-to-own program and does not generally rent homes. HUD homes are sold through the regular HUD real estate owned (REO) process to persons and families interested in buying a home. For more information please visit.
- What is acceptable for developing a borrower’s non-traditional credit history in a Home Equity Conversion Mortgage (HECM) for purchase?, appliance, or specialty stores); rent-to-own (for example, furniture, appliances); payment of that part of medical bills not covered by insurance; a documented 12-month history of savings evidenced by regular deposits resulting.
- Where can I find policy governing rent credit?rent towards the Borrower’s Minimum Required Investment (MRI). The Mortgagee must obtain: • the rent with option to purchase agreement, • the appraiser’s estimate of market rent.
- Is a borrower eligible for FHA insured financing if he or she does not have any credit history?such services school tuition; retail store credit cards (department, furniture, appliance stores); rent-to-own (e.g., furniture, appliances); medical bill payments not covered by insurance.
- What are the requirements for considering rental income from other real estate?. History of Net Rental Income The Mortgagee must calculate the net Rental Income by averaging the amount shown on the Schedule E provided the Borrower continues to own all Properties included on the Schedule E. Depreciation shown.
- How is rental income from the subject property calculated when analyzing borrower qualifying ratios?, Operating Income Statement, showing fair market rent and, if available, the prospective lease. History of Rental Income Total Scorecard: Verify and document the existing.
- What options are available if I need rental assistance?HUD’s rental assistance programs provide rental assistance in several ways: through privately owned subsidized housing (Multifamily housing), through public housing administered by public housing agencies, and through the Housing Choice Voucher.
- How do I calculate Rental Income from other real estate for a HECM borrower?been owned for less than two years, the lender must annualize the rental income for the length of time the property has been owned. For properties with less than two years of rental income history, the lender must document the date.
- How do I calculate Rental Income from the subject property for a HECM borrower? Depreciation, mortgage interest, taxes, insurance and any HOA dues shown on Schedule E may be added back to the net income or loss. If the property has been owned for less than two years, the lender must annualize the rental income for the length.
- What are the investor ownership requirements for condominium projects?For all existing or non-gut rehabilitation projects, any investor/entity (single or multiple owner entities) may own up to 50 percent of the total units at the time of project approval if at least 50 percent of the total units in the project have.
- How do I make my rental property available for Section 8 tenants?People who receive Section 8 vouchers find their own rental housing and use the vouchers they receive from their housing agency to help pay the rent. The voucher allows the Federal Government to pay a specific portion of the total rental amount.
- How can I obtain a rental assistance voucher that can be used anywhere?Housing Choice Vouchers (formerly called Section 8) let you find your own place to rent, using the voucher to pay for all or part of the rent. You must meet certain income limits for eligibility. To view a list of Public Housing.
- Does FHA allow cash out refinances?agencies and instrumentalities of government are not eligible for cash-out refinances. Cash-out refinance transactions are only permitted on owner-occupied Principal Residences. The property securing the cash-out refinance must have been owned.
- When can the Mortgagee initiate foreclosure on a delinquent mortgage?Property is not the Borrower’s Principal Residence and it is occupied by tenants who are paying rent, but the Rental Income is not being applied to the mortgage debt. The Property is owned by a corporation or partnership.
- When do I need the Hotel/Transient Use form?The Mortgagee must obtain the borrower’s agreement that investment properties using FHA-insured financing will not be used for hotel or transient purposes, or otherwise rented for periods of less than 30 days.
- Are loan amounts restricted when the purchase involves an identity of interest?transactions under the following circumstances: FAMILY MEMBER TRANSACTIONS • the principal residence of another family member; or • a property owned by another family member in which the borrower has been a tenant.
- What is Mortgage Insurance for Disaster Victims (Section 203h)?be assigned within one year of the PDMDA, unless an additional period of eligibility is provided The previous house (owned or rented) must have been located in a PDMDA and destroyed or damaged to such an extent that reconstruction or replacement.
- Does FHA insure mortgages for three- or four-unit properties?A three- to four-unit property is a Single Family residential property with three to four individual dwellings. The Mortgagee must determine the Net Self-Sufficiency Rental Income and obtain a completed form HUD-92561.
- How do I appraise properties secured by a leasehold estate?on properties under similar Ground Rent terms (or be adjusted to similar Ground Rent terms). In the sales comparison analysis, the comparable sales must be adjusted for their lack of similarity to the subject in the “Ownership Rights.
- How should lenders evaluate a Home Equity Conversion Mortgage (HECM) borrower’s credit history?. For borrowers who indicate they are living mortgage or rent-free, the lender must obtain verification through the title report or other information, or if they are not the owner, from the property owner where they are residing, that the borrower has been living.
- Is a verification of rent or mortgage required?months’ housing history. For Borrowers who indicate they are living rent-free, the Mortgagee must obtain verification from the property owner where they are residing that the Borrower has been living rent-free and the amount of time.
- How can I find a property that provides below market rents?The government provides funds directly to apartment owners, who lower the rents they charge low-income tenants. You can find low-rent housing for senior citizens and people with disabilities, as well as for families and individuals. You must meet.
- Can nonprofit entities participate in the Section 203(k) Rehabilitation loan program?agency’s homeownership or long-term rental program; current audited financial statements with an unqualified opinion from a Certified Public Accountant (CPA) for the prior three years; a listing of all Properties currently owned.
- How can I apply for a public housing unit?, visit http://portal.hud.gov/hudportal/HUD?src=/topics/rental_assistance or call the Public and Indian Housing (PIH) Information and Resource Center at 1-800.