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FHA help!

Hopefully I can explain this clearly! My husband has an FHA loan for our current home, his mother is the co-signer on the loan. We live in Michigan and like everyone else we are underwater on our loan. We would like to move into a larger house because of our family size so we thought we would refinance our FHA to remove my husbands name and my mother in-law would rent our house. But we have run into many problems. We didn't know that FHA requires the borrowers to have the property as their primary address. My mother in-law has her own home, she is not going to move here. So the problem is how to get my husband off the current loan so he can qualify for another loan so we can purchase a new home. The mortgage on our current home WILL be continued to be paid, there are no plans of obtaining a new loan and walking away from the other. But we are being told that we are pretty much stuck. I have a hard time accepting that we will have to pay off the remainder of our loan (21years) or sell the house (which there is no way we will ever get what we owe!) HOW CAN WE MOVE ON? HELP!!!!!! by online_424_190 from Flushing, Michigan. Nov 20th 2012 Reply


Jim Papatheodore (LoanJim)
#15 ranked lender in Michigan - 14 contributions

Hello. The only way besides selling your current home is to qualify for a new home while owning your current home. The debt ratio is the potential issue that you will run into. Has anyone checked your debt ratio?Jim PapatheodoreMichigan United Mortgage, LLC.NMLS ID 131478Jim@LoanJim.com

Nov 20th 2012
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Bert Carpenter (BertCarpenter)
#38 ranked lender in Arizona - 1,815 contributions

Your options are limited. The only way to refinance an FHA loan that is underwater is through the streamline method. This requires that all of borrowers on the existing loan be on the new loan. There are certain exceptions, such as the death of one of the borrower, but that doesn't appear to be the issue here. This means that your husband is going to be on the new loan, unless you sell. If you short sale on an FHA loan, the borrower's will be ineligible for three years. It sounds like you have tried but don't qualify for a new loan in addition to the one you have. Another option may take some time, but can achieve your goal. If you streamline now to get the best possible rate and lowest payment, a couple of month's down the road move out and rent it, show the rental information on your 2013 tax return, allowing you to use the rental income to qualify for the new home. This is a strategy that you need to work out ahead of time to make sure the numbers play out so you can accomplish the new purchase. Work with a local Mortgage Banker/Broker and not one of the big banks. ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ Licensed in California and Arizona ~ www.LoansA2z.com 888-889-9950

Nov 20th 2012
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William J Acres (William_Acres)
#1 ranked lender in Arizona - 8,486 contributions

You can refinance through FHA's streamline, however your husband cannot be removed from the loan if your mother in law is not willing to make this her primary residence.. (Even if you state that, the lender will be very suspicious)... Lenders are very wary of the "buy and bail" strategy, and because of such, they will look at every scenario such as yours with deep suspicions... FHA does allow you to rent out that home... and you can purchase a new home, however you will have to have enough income to support both mortgage payments, since they will not allow the projected rental income to be included because you have not received any rent yet.. And the lender could also require you have substantial reserves in place as well.. If he cannot qualify for both loans, then he will have to continue to stay put until his income rises, or the property value rises to where it can be sold without a deficit.. But again, you can refinance... Once you graduate in 2014, and you get a job in your field of study, your income will be considered once you have been employed 30 days, and its possible then to purchase a new home.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Nov 20th 2012
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Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 3,811 contributions

Generally speaking on an FHA loan, at least one of the "owners" needs to occupy the house. With that said, you CAN refinance with FHA on a house that WAS owner occupied, and is now a rental. Dropping one person isn't generally an issue if the second person fully credit qualifies. With that said, you can buy a new home and retain the old house as long as you qualify. Talk to a local NON-BANK Licensed loan officer. Give them a full application, and let them review your options. I don't have all the details, but I don't think you are stuck. Good luck!

Nov 20th 2012
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Thank you to both of you. Unfortunately my husband will not qualify for another loan with his name on the existing loan. His debt would be too high with the existing loan. And I am a college student and won't graduate until May 2014 before I can contribute. It is incredibly frustrating for us. We live in an 820sqft 2bdrm home with 2 small children. We didn't realize we were going to be "stuck", we were unaware of the limits of this loan and refinancing!

Nov 20th 2012
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Danial Aziz (DazizIHL)
#482 ranked lender in California - 4 contributions

One Option whould be to go through a streamline and quictclaim your husband off the property as long as your mother in law can qualify soly as the primary title holder.

Nov 20th 2012
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Carri Goldring (CarriGoldring)
#38 ranked lender in Michigan - 10 contributions

Have you looked into seeing if you qualify for a new mortgage with that mortgage as debt to you? cgoldring@thefsb.com

Nov 26th 2012
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Carri Goldring (CarriGoldring)
#38 ranked lender in Michigan - 10 contributions

Have you looked into seeing if you qualify with your husband for a new mortgage and also with the debt for your current mortgage? cgoldring@thefsb.com

Nov 26th 2012
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