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FHA Loans

The Federal Housing Authority (FHA) insures certain loans provided by mortgage bankers, credit unions and banks.  The FHA does not provide the money to purchase homes; they provide insurance to the lender in the event the loan is not repaid.  FHA sets out guidelines and rules regarding loan qualifications and the approval process.  Lenders that are registered with FHA and in good standing can offer these types of loans to borrowers.

FHA mortgage loans have slightly relaxed standards in regards to credit files when compared to conventional loans.  This type of mortgage also allows for compensating factors to help people qualify for a loan in the absence of traditional credit.

The rates for an FHA loan are very similar to conventional mortgage rates.  This allows borrowers to obtain financing at an affordable rate and attractive terms.  In addition the private mortgage insurance rate is low which keeps the payments low for most borrowers.

FHA Purchase

FHA requires a down payment of 3.5% of the purchase price of the home.  This money can come from the borrower’s own funds such as checking, savings and retirement accounts.  The money can also be a gift from family or friends.  Loan terms are offered in 15 year, 20 year, and 30 year fixed as well as a 1 year and 5 year Adjustable Rate Mortgage (ARM).  FHA also charges an upfront fee that can be added to the loan amount.

FHA Rate and Term Refinance

For borrowers that are paying on a mortgage with an interest rate higher than current market rates, a rate and term refinance can help lower monthly payments and save interest.  This type of loan is designed to take advantage of better rates without getting cash back for other purposes.  The costs are kept in check by FHA rules and the credit requirements are slightly relaxed in comparison to other types of mortgages.

FHA Streamline Refinance

This loan is designed to make refinancing to a better rate extremely simple.  Borrowers that currently have an FHA mortgage that has been paid on time for the past 12 months can refinance to a lower rate without the need for a new appraisal or a full credit report.

FHA Cash Out Refinance

FHA rules allow homeowners to borrow up to 85% of the property’s value in order to get cash.  The cash can be used to pay off other loans or the borrower may wish to combine their existing 1st mortgage and 2nd mortgage into one payment.

FHA Reverse Mortgage

Borrowers that are at least 62 years old and have a paid off home or nearly paid off can utilize the FHA reverse mortgage to increase their monthly cash flow.  Homeowners will receive a set monthly amount based on the mortgage loan.  Borrowers do not have to repay the loan so long as they continue to live in the home.

FHA 203k Rehab

The 203k loan is designed to finance improvements to a home.  This can be accomplished in one of three manners

  • Current homeowners can use the 203k loan to make necessary improvements to the home.
  • Current homeowners can refinance their existing loan and combine the necessary funds for home improvement so that the borrower only has one mortgage.
  • Potential home buyers can purchase a home and get the money to make needed renovations all with one mortgage.
Additional Resources
FHA Loan Limits
FHA Mortgage Insurance

 

 

 

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