Using Your Self Directed IRA for a Mortgage Investment

Having an Individual Retirement Account is a very good savings plan. There are several IRA options these days. One of them is the the self directed ira.

This is an IRA that requires the account owner to make investment decisions and investments on behalf of the retirement plan. IRS regulations require that either a qualified trustee, or custodian hold the IRA assets on behalf of the IRA owner.

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Generally the trustee/custodian will maintain the assets and all transaction and other records pertaining to them. The custodian usually offers a selection of standard asset types that the account owner can select to invest in, such as stocks, bonds, and mutual funds. In addition, most custodians will also permit the account owner to make other types of investments.

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There are ways to use a self directed IRA. You can purchase real estate that you own or use or real estate that is owned by a family member of lineal descent, such as your father. Also, it can be used for issuing a mortgage on a relative’s new residence purchased by a family member who is a disqualified person as listed above.

Real estate may include residential and commercial properties, farmland, raw land, new construction, property renovation, development, and passive rental income. Real estate purchased in a self-directed IRA can have a mortgage placed against the property, thus lowering the amount of total cash needed for a purchase; however, neither the IRA nor the account owner of the IRA can have personal liability on the mortgage.

FHA or Federal Housing Administration is a government agency whose primary purpose is to insure residential mortgage loans.

The FHA is introducing new guidelines on loan to value ratios and the minimum credit score required for FHA borrowers. In a detailed Mortgagee Letter from the Department of Housing and Urban Development (HUD), effective October 4, 2010, to be eligible for maximum financing, borrowers will need a minimum 580 credit score fha mortgage.

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