How do I document assets in an investment account for an FHA Home loan?
FHA an FHA loan Assets such as IRAs, thrift savings plans, and 401(k)s, etc., may be included in the underwriting analysis up to only 60 percent of value unless the borrower provides conclusive evidence that a higher percentage may be withdrawn after subtracting any federal income tax and any withdrawal penalties. Evidence of redemption is required. For loans scored through FHA TOTAL Scorecard, only 60% of the vested amount of the account may be used. The FHA mortgage lender must document the existence of the account with the most recent depository or brokerage account statement. In addition, evidence must be provided that the retirement account allows for withdrawals for conditions other than in connection with the FHA mortgage applicants employment termination, retirement, or death. If withdrawals can only be made under these circumstances, the retirement account may not be included as cash reserves. If any of these funds are also to be used for loan settlement, that amount must be subtracted from the amount included as cash reserves. Additional information regarding documentation requirements for loans scored through FHA TOTAL Scorecard may be found in the FHA TOTAL Scorecard User Guide, available as a attachment to Mortgagee Letter 04-47.
Handbook 4155.1: 5.B.3.a
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Other FHA loan Advantages Include:
Minimal Down Payment and Closing Costs.
Down payment less than 3.5% of Sales Price Gift for down payment and closing costs allowed. No reserves or required. FHA regulated closing costs. Seller can credit up to 6% of sales price towards buyers costs.
Easier Credit Qualifying Guidelines such as:
Minimum FICO credit score of 540. FHA will allow a home purchase 2 years after a Bankruptcy. FHA will allow a home purchase 3 years after a Foreclosure.
Easier Debt Ratio & Job Requirement Guidelines such as:
Higher Debt Ratio’s than other home loan programs. Less than two years on the job is allowed. Self-Employed individuals o.k.