Home buyer should follow the lead of their lender. The lender reviews all the documents the borrower is required to give the lender will then give the borrower loan program options. Some borrowers will have only one option. Borrowers that have several options are sometimes more difficult to work with than those without any.
The agent had already pre-screened the client when she referred him to me, they were in the process of looking for a property. The client was looking for a property that he could buy cheaply and use the FHA Renovation loan. He was aware that by using this loan, he would get the money to purchase the property and renovate the property all in one loan.
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It was refreshing to find someone who knew about the loan and had enough understanding of how the mortgage loan processed worked. As it turned out, my client was an investor and had several properties on his credit report. His loan was going to be a challenge because the FHA Renovation Loan Program is for home owners only. Investors are not allowed to use the FHA Renovation Loan Program only the FANNIE MAE Renovation Loan Program.
My client insisted he was going to use the house for his primary residence, another problem we had with him was that one of the houses that he currently owned was in Georgia. In order for him to be able to get the loan, we had to make sure the commute to his job was 50 miles or more apart and he had to have a valid verifiable reason for the purchase. We were in luck, his commute was more than 50 miles and he was active military and his duty station had been transferred.
The next challenged we faced was that FHA had just instituted a new guideline and that was the current mortgage had to be included in the borrower's debt to income ratio. Although he was going to rent his current home, we could not use that rent as income to qualify him for the loan therefore it could not be off set.
When the agent started working with him she had taken into consideration, the rent for the current property. This was a major set back, we had to look at the tax returns. Most investors and self-employed borrowers write off a lot on the tax returns so that they can reduce the amount of the taxes they pay, and this was the case with our client.
We had to figure out a way to make the loan work, the borrower was so sure of his loan closing that he had paid a non-refundable deposit to order the new kitchen cabinets so the renovation could move quickly once the loan closed.
FHA allows for a non occupant co-buyer to go on the loan. The non-occupant co-buyer must be family or a close friend such as a fiancee'. The client contacted his mother to see if she would go on the loan with him and she agreed. We were very close to closing so the papers that she needed to sign were sent to her overnight and she returned them quickly. The loan closed on time.
When you are using the FHA Renovation Loan Program make sure you are educated. This loan allows you to purchase and renovate a property all with one mortgage loan.
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