Title Insurance for FHA and VA loans
FHA loans and VA loans are an alternative to conventional financing designed for buyers who may not meet the requirements of a traditional loan. Government agencies back FHA and VA mortgages to mitigate lender risk.
- The Federal Housing Administration insures loans designed for borrowers with higher debt to income ratios or low credit scores.
- VA loans are a benefit offered to Veterans, military service members and their spouses insured by the U.S. Department of Veterans Affairs.
This federal backing is not guaranteed. The burden is on the lender to ensure the property qualifies and is free from title issues. Title work for FHA and VA loans needs to be high-quality and cost-effective.
Title Insurance Requirements
There is no requirement made by the VA or FHA for borrowers to obtain title insurance. It is up to the lender to determine how to ensure that the title is free from conditions that significantly affect the property and its marketability.
The FHA will not guarantee a loan with any of the following title defects:
- Unpaid property taxes
- Unpaid Homeowners Association (HOA)/Condominium fees
- Unpaid utility bills/assessments
- Unresolved manufactured housing title issues
Also, the FHA has guidelines regarding closing costs and documentation. A title agency needs to be both detailed and cost-effective to fall within the FHA loan requirements.
Due to the number of predatory lenders and refinancing scams, there is a detailed documentation process for all VA guaranteed home loans.
- The documentation requirements for a VA loan are strict, and approved property types are detailed at length in the Federal laws and rules governing these type of loans.
- In Florida, there are additional local requirements regarding manufactured homes and leasehold estates. The VA permits very few title exceptions.
Complex FHA and VA Condominium Transactions
It isn't easy to secure an FHA or VA backed loan on a condominium. There are many requirements that must be met and specifications that must be followed. VA and FHA approved lenders and buyers can miss out on real estate opportunities if they can't access proper financing on time.
Homeowners Association Documentation Required by the FHA and VA include:
- All past financial documents
- Current budget with allocations for maintenance and capital projects
- A disclosure of all pending legal action
The condominium must also not have any limitations on owner occupation or rental potential.
- Under 38 CFR 36.4358(c)(6), there can be no restrictions on a unit owner's right to lease his unit.
- No mandatory rental pools that restrict the owner's ability to occupy the unit are permitted.
While these rules eliminate most Condominium Hotels or "Condotels," there are units that meet the terms and conditions of FHA and VA loans. Upland Title Agency professionals are well versed with condominium projects, homeowner’s associations, and other development projects.
Contact Upland Title Agency
Upland Title Agency serves Florida real estate professionals looking for a high-quality alternative to the standard title agency. We are equipped to handle complex, high-volume, and time-sensitive title work at a competitive price point. Contact us at: 786-687-3295 - firstname.lastname@example.org to discover how working with Upland Title Agency can improve the way you close deals.