FHA Mortgage Loans
The FHA’s mission driven organization encourages home ownership and provides affordable housing opportunities with low down payment and flexible credit requirements.
Since 1934, the FHA has insured millions of home mortgages with a market share of 30% in 2010 vs 3% in 2007. In 2009, FHA programs insured nearly 2 million loans, which included 750,000 first-time home buyers.
According To Wikipedia:
The Federal Housing Administration (FHA) was created out of the National Housing Act of 1934, and was established to increase home construction, reduce unemployment and insure government loan programs.
FHA loans have historically allowed lower income Americans to borrow money for the purchase of a home that they would not otherwise be able to afford. The program originated during the Great Depression of the 1930s, when the rates of foreclosures and defaults rose sharply, and the program was intended to provide lenders with sufficient insurance.
Some FHA programs were subsidized by the government, but the goal was to make it self-supporting, based on insurance premiums paid by borrowers.
While most people believe that the FHA lends money directly to borrowers, it actually just insures a certain type of loan that is financed by traditional banks and mortgage lenders.
Four of the most visible single family housing programs that FHA offers are, Section 203(b), Section 234(c), Section 203(k) and Home Equity Conversion Mortgages (HECM) – Reverse Mortgages.
FHA Loan Type Highlights:
- largest of FHA’s single family programs
- 1-4 unit properties are eligible
- flexible credit requirements
- 3.5% down payment allowed
- down payment may be a gift from specific sources
- provides mortgage insurance for individual condominium units
- credit, down payment and limits of 203(b) apply
- in 2010, condominium complexes must be approved through HRAP/DELRAP to be eligible for FHA insurance
- primary program for property rehabilitation
- encourages community and neighborhood revitalization
- only 1 mortgage loan is used for both the acquisition and the renovation
- 1-4 unit properties including condominiums are eligible; check with your lender for manufactured housing eligibility
- required improvements include cost effective energy conservation standards and smoke detectors
- consultancy may be required
HECM – Reverse Mortgages
- FHA was the first to promote reverse mortgages nationally
- allows access to equity in property with flexible terms
- lump sum, monthly payments, line of credit or a combination available
- limited to homeowners 62 years of age and older
FHA programs go beyond the scope of the previously listed programs. They offer a Streamline Refinance as well as a Streamline 203(k) for limited repairs. Also, recent legislation has helped FHA offer special programs with incentives to lenders for modifying and refinancing existing mortgages like with the “Making Home Affordable Program.”
When looking for a loan program to fit your specific needs, take a close look at FHA as their programs have become more attractive to both lenders and consumers.
With favorable loan terms, higher loan limits, 30 year fixed repayment terms and flexible down payment options, FHA will continue to encourage home ownership, provide liquidity and stability to the mortgage market.
Frequently Asked FHA Questions:
Q. What are the credit requirements for most FHA lenders?
As of 2010, the majority of lenders are leaning toward a mid credit score of 640.
Q. How much can I afford?
By providing your mortgage professional the required documentation, a detailed analysis will be provided that includes your maximum loan amount
Q. How will I know if the condo/townhome I wan to buy is eligible for FHA financing?
The following link will allow you to enter your zip code for a list of eligible properties: CLICK HERE
Benefits of an FHA Loan
The federal government insures FHA Home Loans so that mortgage lenders can offer funding to those who traditionally struggle to find home financing. That means our loans have less stringent qualifications, and we can offer more opportunities for homeowners and homebuyers, whether they need a home purchase loan, or are refinancing their home mortgage.
FHA Home Loan: Buy a Home without a Huge Down Payment
Government insured FHA Home Loans are a popular loan for first time homebuyers because you do not need to have a significant amount of money for a down payment to secure a first time mortgage. Typically, buyers can put as little as 3 percent down, and there are less stringent debt ratios and job requirements. Other benefits include:
- Lower FICO credit scores allowed
- Lower monthly mortgage insurance
- Lower closing costs
- Improve or upgrade your home
- Can use gifts toward the home down payment
FHA Refinance Loan
I can help you refinance your home with an FHA loan, even if you have less than perfect credit. Many homeowners who have difficulty paying their mortgage often move from a conventional to an FHA Loan, which can lower your interest rate and monthly payments. Other uses for an FHA Loan include:
- Improve or upgrade your home. You can use an FHA 203(k) Home Improvement Loan to pull money out for home improvements and repairs.
- Avoid foreclosure. Facing a foreclosure is hard. I can help you save your home by refinancing to a low interest, low-monthly payment FHA Loan.
- Pull cash out from the equity in your home. There are many reasons that you may need a cash out refinance. We can help you get the money you need without having to use high-interest credit cards or loans.
As an FHA Direct Endorsement (DE) and Government Approved Lender, I can offer you a wide variety of FHA loans. Even if you have a history of credit problems, I may still be able to help you qualify for many types of mortgages such as:
- FHA 30 Year Fixed Rate Loan: A fixed rate loan with low interest rates and monthly payments that generally requires a small down payment, and can be obtained by buyers with low credit scores.
- FHA 15 Year Fixed Rate Loan: Similar to the 30 Year Fixed Rate Loan, in that it offers the benefit of a stable monthly mortgage payment, except that the interest you pay over the life of the loan is significantly less because the loan is expected to be paid in half the time.
- FHA 5/1 Adjustable Rate Mortgage: The initial interest rate is valid for the first five years; after that, your rate is determined by market values. This loan is good for buyers who plan to own the home for a short time because introductory interest rates are typically very low.
- FHA 203(k) 30 Year Fixed Rate Loan:The 203(k) loan program allows borrowers special financing to buy a fixer-upper with enough extra money to complete necessary renovations.
- FHA Streamline 5/1 Adjustable Rate Mortgage (Refinance): FHA Streamline refinance loans traditionally require less documentation than a traditional loan. In addition, there is no appraisal required. The FHA 5/1 ARM establishes low initial interest rate for the first five years; after that, your interest rates will fluctuate depending on market interest rates. Adjustable Rate Mortgages typically have the lowest rates and can be useful if you plan on selling the home in the near future.
- FHA Streamline 30 Year Fixed Rate Loan (Refinance):Designed to either lower your payment by lowering your current interest rate or to convert an FHA Adjustable Rate Mortgage into a fixed rate mortgage. Again, the FHA Streamline requires less documentation than a traditional loan and there is no appraisal required. Generally, this loan is easy to apply for and may not require qualifying debt ratios or income verification.
- FHA 203(k) Streamline 30 Year Fixed Rate Loan (Refinance): The FHA 203(k) allows borrowers to pull out up to $35,000 in equity to pay for home improvements or renovations.