FHA Mortgage Question

[amberxo]

What is the name of your state (only U.S. law)? Iowa

Hello everyone!

I just had a few FHA mortgage questions that I am hoping someone can clear up for me! First time homebuyer, so I am a little confused on some things!

A little background:

1. Purchase price of house is 169k with 2k in closing costs paid for buy seller.
2. Appraisal came back at 170k.
3. One of our pre-approval conditions was that the home must appraise for more than the purchase price (which I believe is fairly standard?)
4. My boyfriend and I are purchasing the house together, but he is the only one on the loan (We were originally going to do a USDA loan which we would exceed the income guidelines, so everything was just done in his name). I am contributing to down payment, mortgage, etc. as we have a joint bank account.

Questions:
1. FHA guidelines require a 3.5% down payment, with a 96.5% LTV. That makes sense to me, however I am wondering if the upfront MIP is included in the LTV?
2. I have found sources that state a max FHA LTV is 110% (on a real estate forum) and the HUD handbook stated 96.5%, but it was very confusing the way it was worded. So I am wondering which it really is?
3. In order to protect myself if things go south with my boyfriend, or in the event of his death (I don't think they will, but it could happen) I am wanting to draw up some kind of document that would protect myself and my interests. Would you advise speaking to a lawyer, or would a document we draft together and both sign and date be sufficient? He verbally stated that he would give me back half the down payment and mortgage payments...but I know how hard that can be to prove.

Basically what it boils down to is that we are fine with our original down payment (5900$) if they either: include the upfront MIP (I believe it is 1.75% of the purchase price) in the LTV if the max LTV is 96.5%, or if it is 110% LTV. Otherwise based on their appraisal (which we felt was low for the area, age of home, and features of home and based on the comps- our relator also felt it was low) if it truly is 96.5 and not including the upfront MIP then we have to come up with about another 1904$. Which is fine, but we don't want to completely wipe out our savings if we don't have to.

I have been getting conflicting information from online sources, and I have noticed that a lot of you are very knowledgeable. I just want to be as informed as possible, since this is a huge investment!

Thanks in advance!

 

[HUD-1]

Some thoughts:

1. Purchase price = $169,000, your minimum required investment is therefore $5,915. 99% of FHA buyers finance the UFMIP. It will be added on to the loan amount.

2. max ltv, forgetting ufmip and forgetting appraiser required repairs, will be 96.5% of lower of purchase price or appraisal. in the end, you will have to come up with the $5,915 PLUS the closing costs and prepaids that are not paid by the seller. The loan officer should be giving you this info. ask them for these estimates and make him/her earn their fee.

3. regarding your investment, the lender will require you to either sign a gift letter, gifting funds to the borrower and/or state that the funds in the joint account are available to him for the purchase. if you are not on the loan, you have no ownership interest. you may want to consider becoming a co-borrower. otherwise you have no way to recoup any of the funds that go into the home. then day after closing, you could break up with him and have no way to recoup whatever portion of the funds that you contributed. you cannot have any side agreements with him that the lender does not know about regarding the funds you contribute.

 

[amberxo]

Some thoughts:

1. Purchase price = $169,000, your minimum required investment is therefore $5,915. 99% of FHA buyers finance the UFMIP. It will be added on to the loan amount.

2. max ltv, forgetting ufmip and forgetting appraiser required repairs, will be 96.5% of lower of purchase price or appraisal. in the end, you will have to come up with the $5,915 PLUS the closing costs and prepaids that are not paid by the seller. The loan officer should be giving you this info. ask them for these estimates and make him/her earn their fee.

3. regarding your investment, the lender will require you to either sign a gift letter, gifting funds to the borrower and/or state that the funds in the joint account are available to him for the purchase. if you are not on the loan, you have no ownership interest. you may want to consider becoming a co-borrower. otherwise you have no way to recoup any of the funds that go into the home. then day after closing, you could break up with him and have no way to recoup whatever portion of the funds that you contributed. you cannot have any side agreements with him that the lender does not know about regarding the funds you contribute.

Thank you very much! Someone on Zillow advised me to "protect my interests" but I didn't think that would be allowed because of the joint account and having to have 100% access type of thing. The lender did give their estimate...we were just confused because the LTV fell below that 96.5% (97.5 I think with the appraisal if you had to count the MIP), but I understand that just means you put 3.5% down as long as it appraises more than the purchase price. I just was not sure about the UFMIP counting towards the LTV. It also keeps changing because the lender is 3 hours away and apparently closing costs are a lot higher here...example, she can sign the closing papers for free and an attorney down here costs 500$ to do so. Whereas if we closed at the bank, she could just do it and not charge us. So it's been very confusing all around!

Thank you again!

 

[STEPHAN]

My boyfriend and I are purchasing the house together, but he is the only one on the loan ...

Don't do it. You have been warned.

 

[amberxo]

Don't do it. You have been warned.

Is there some other way to protect myself other than being on the loan itself?

 

[OK-LL]

Is there some other way to protect myself other than being on the loan itself?

It's not the loan you want to be on so much as the deed. Ask yourself, how am I going to recover any money I have put into the house if we break up or he gets hit by a truck? Don't expect unofficial spouses to be reasonable and considerate when the informal arrangement goes awry -- it may happen that the parties are friendly and agreeable, but that's not something I'd bet my investment on.

 

[amberxo]

It's not the loan you want to be on so much as the deed. Ask yourself, how am I going to recover any money I have put into the house if we break up or he gets hit by a truck? Don't expect unofficial spouses to be reasonable and considerate when the informal arrangement goes awry -- it may happen that the parties are friendly and agreeable, but that's not something I'd bet my investment on.

Getting myself put on the deed was what I figured would have to happen, after reading through some other posts on here. Is that something I would do before or after close? And how would I go about that? From what I can understand that seems like it might be the easiest thing to do.

Thanks!

 

[amberxo]

Actually, I think I understand now...that is what a QuitClaim is, correct?

 

[Zigner]

Getting myself put on the deed was what I figured would have to happen, after reading through some other posts on here. Is that something I would do before or after close? And how would I go about that? From what I can understand that seems like it might be the easiest thing to do.

Thanks!

You would do it as a part of the escrow process (at closing). In case you missed it, what you are proposing is a monumentally stupid thing to do...but it's your life to screw up.

 

[single317dad]

The finance company may have something to say about both parties being named on the deed and only one on the mortgage. They absolutely would not let my brother do it. Your experience may vary.

 

[amberxo]

Thanks to everyone for their input. I appreciate it. That will be something to speak with the bank about. I know with my car loan they were okay with one person on the loan two on the title for insurance purposes, but this is a much larger purchase so we will see!