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FHA loans have been helping people become
homeowners since 1934.
Some benefits of FHA loans are:
• Low down payments
• Low closing costs
• Easy credit qualifying
What does FHA have for you?
Buying your first home?
FHA might be just what you need. Your down payment can be as
low as 3.5% of the purchase price, and most of your closing
costs and fees can be included in the loan. Available on 1-4
unit properties.
Want a fixer-upper?
FHA has a loan that allows you to buy a home, fix it up, and
include all the costs in one loan. Or, if you own a home
that you want to re-model or repair, you can refinance what
you owe and add the cost of repairs - all in one loan.
Financial help for seniors
Are you 62 or older? Do you live in your home? Do you own it
outright or have a low loan balance? If you can answer "yes"
to all of these questions, then the FHA Reverse Mortgage
might be right for you. It lets you convert a portion of
your equity into cash.
Want to make your home more energy efficient?
You can include the costs of energy improvements into an FHA
Energy-Efficient Mortgage.
How about manufactured housing and mobile homes?
Yes, FHA has financing for mobile homes and factory-built
housing. There are two loan products – one for those who own
the land that the home is on and another for mobile homes
that are - or will be - located in mobile home parks.
FHA mortgages are home loans that are insured by the Federal
Government. This insurance protects the lender from losses
suffered if the home goes into foreclosure. It is not the
same as hazard insurance or insurances that pay in the event
the borrower dies or becomes disabled.
FHA allows a buyer to purchase a home with as little as 3.5%
down. They tend to be more lenient on areas such as credit,
funds to close and coborrowers.
Most loans use a method of analyzing credit called credit
scoring in the underwriting process. Studies have
demonstrated a direct relationship between low credit scores
and higher mortgage delinquency rates. As a result many
lenders have established minimum credit scores at which they
will accept loans. Unfortunately, a lack of credit, old
delinquencies or incorrect information on the credit report
can cause a low credit score. FHA does not have specific
credit score requirements. Although a high credit score may
assist in getting the mortgage approved, a low score is not
automatically cause for denial. If the credit scores are
low, then it is up to the borrower to demonstrate his/her
ability and willingness to pay the loan back. This allows
the borrower to explain the circumstances surrounding the
credit difficulties and have that explanation considered in
the underwriting process.
The underwriter on an FHA loan will review the credit and
payment history of a customer concentrating on the most
recent 12 to 24 months. If the customer has had a good
payment record over the past 12 to 24 months they can often
get approved for a mortgage even when Conventional financing
has turned them down. An experienced loan officer can help
the customer clearly tell their story and will often make
suggestions as to how to make the file more acceptable to
FHA. Because of FHA's leniency, some borrowers with past
credit problems elect to use FHA for loans when they have a
substantial down payment rather than getting a higher
interest rate conventional loan. FHA tends to be more
flexible than Conventional financing in the money needed to
purchase the home.
In an FHA mortgage the customer must put at least 3% of the
sales price into the transaction. Some of this money may be
used for down payment and the rest for closing costs . Keep
in mind, however, that the total cost to close on an FHA is
commonly over the 3%. With the down payment, closing costs,
money to establish escrows for taxes and insurance plus
interest to finish out the month of closing, the total costs
can be closer to 6 or 8% of the sales price.
The interest rate that you select will also have a bearing
on the total costs. If you select a lower rate so that you
can reduce your payment, you may end up paying additional
money towards "points". At the same time if you are
comfortable with a slightly higher payment you may find a
lender that is willing to reduce the costs to close in favor
of a higher interest rate. FHA allows the borrower to get
the funds necessary to close from several sources. They
include such areas as personal savings, gifts, grants, loans
from retirement accounts and seller contributions. |
