What is the 100 mile rule for FHA?

What is the 100 mile rule for FHA?

The 100 mile rule for FHA loans is a noteworthy guideline that can impact potential borrowers. It is specifically related to the distance between a borrower's new home and their current place of employment. This rule aims to ensure that borrowers are not taking on excessive commuting distances, which could potentially impact their ability to make mortgage payments.

So, what exactly is this 100 mile rule for FHA loans?

The 100 mile rule states that if the borrower's new home is located within 100 miles of their current place of employment, they are still eligible for an FHA loan. This applies even if the borrower will be changing jobs or employers during the home buying process.

For example, let's say a borrower currently lives in Los Angeles and works in downtown Los Angeles. They decide to purchase a new home in Orange County, which is less than 100 miles away from their current place of employment. According to the 100 mile rule, they would still be eligible for an FHA loan, even if they switch jobs during the home buying process.

However, it is important to note that the 100 mile rule does not apply in all cases. There are certain circumstances in which the borrower may not be eligible for an FHA loan, even if their new home is within 100 miles of their current place of employment.

Here are a few exceptions to the 100 mile rule:

1. If the borrower is relocating to a new area due to a job transfer or job change and the new commute exceeds 100 miles, they may not be eligible for an FHA loan.

2. If the borrower is facing a significant increase in commuting distance due to the home purchase, such as moving from a rural area to an urban center, they may not be eligible for an FHA loan.

3. If the borrower is actively seeking new employment and there is no clear indication of a new job within a reasonable commuting distance, they may not be eligible for an FHA loan.

It is crucial for borrowers to consult with their mortgage lender or loan officer to determine their eligibility under the 100 mile rule and any associated exceptions.

Why does the 100 mile rule exist?

The purpose of the 100 mile rule is to prevent borrowers from taking on excessive commuting distances that could potentially impact their ability to make mortgage payments. The Federal Housing Administration wants to ensure that borrowers have a reasonable and sustainable commute to their place of employment.

In conclusion, the 100 mile rule for FHA loans can have a significant impact on borrowers' eligibility. While it allows borrowers to purchase homes within a reasonable commuting distance of their current employment, there are exceptions to consider. It is crucial for borrowers to consult with their lender and thoroughly understand the specific rules and requirements related to the 100 mile rule to ensure a smooth home buying process.

Frequently Asked Questions

The 100 mile rule for FHA refers to a policy that allows borrowers to purchase a home using an FHA loan even if they live within 100 miles of their current residence.

Yes, the 100 mile rule applies to all FHA loans. It is a standard policy that provides flexibility for borrowers who need to relocate for employment or other reasons.

Yes, you can rent out your current home if you use the 100 mile rule to purchase a new home with an FHA loan. This rule allows you to keep your existing property as an investment while buying a new primary residence.

No, there is no specific time limit for moving within 100 miles using an FHA loan. As long as you meet the other eligibility criteria for the loan, you can purchase a new home whenever it is convenient for you.

No, you do not need to provide proof of relocation to use the 100 mile rule. The policy is based on the premise that borrowers may need to move within 100 miles for various reasons, and it does not require specific documentation of the relocation.