Colorado FHA Mortgage Overview
This series of pages is designed to provide a detailed overview of Colorado FHA mortgages.
Basic Eligibility Requirements*:
Borrowers must have social security numbers to be eligible for an FHA mortgage.
Property must be owner occupied by the borrowers. The exception to this rule is the "kiddie condo" provision with FHA, which allows for non-occupying co-borrowers (meaning parents can help, but don't have to live with the kids).
The Loan Amount cannot exceed FHA's maximum loan amount for the county where the property is located. To look up the limit for the county you are planning to buy in, go to FHA's mortgage limits lookup page.
The "kiddie condo" rule can be applied for children who are currently in school (and may have no source of income) the same as with children who are in the workforce. Debt-to-income ratios are calculated utilizing the income and debts of all borrowers. Despite the name, this solution does not require that the property be a condominium and the age of the "kid" does not matter. In fact, this solution can be utilized for a child borrowing up to the FHA maximum mortgage.
Property must conform to FHA's guidelines: The process of confirming whether the property complies with FHA's guidelines happens with the appraisal. During the appraisal, the value of the home is established (must be the same or greater than the purchase price, or the buyer doesn't have to complete the purchase transaction). The condition of the property, especially from a health and safety standpoint, is evaluated. As a rule of thumb, homes that are purchased with the intent of fixing up (meaning the home needs major work to be livable) do not make good candidates for an FHA mortgage. Condominium and townhome projects must be FHA approved (more than 51% of the units must be owner occupied) to be eligible for FHA financing. For more information about acceptable property, property approvals, appraisals, and using FHA mortgages with new construction, check here.
Multiple FHA loans are allowable, but only under certain circumstances. Talk with your mortgage consultant for clarification for your circumstances.
Income must come from acceptable sources to be considered effective income by FHA. Effective income is income that can be used for qualifying for an FHA mortgage. Visit a discussion of debt-to-income ratios, and qualifying for a mortgage. Some examples of effective income:
- Salary or hourly wages (number of hours worked can be supported by a historical average, or guaranteed hours).
- Overtime/bonus income (may be considered effective with a sufficient history, there is no set rule for length of time for commission/bonus income. Please talk with your mortgage consultant to understand how your situation might be viewed under FHA's guidelines).
- Self-employment income (typically a two year history is needed. Again, it's worth talking with your mortgage consultant to learn how your situation might be viewed).
- Military, retirement or social security income, and government assistance (all options, must be able to prove that income will continue for at least three years).
- Alimony, child support, or maintenance income (must continue for three years, as well as provide proof of receipt for previous year).
* Information regarding FHA is summarized from the HUD Handbook for Lenders 4155.1 (underwriting guidelines for FHA mortgages). You may also visit FHA's web site.
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