Mar 10, 2010
Contact Info:
SureFast Mortgage Corp.
Chris A Woods
Phone: 602-734-0202
Fax: 602-734-0203
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 Federal Housing Administration (FHA) Lending Programs

 

The Federal Housing Administration (FHA), which is part of the Department of Housing and Urban Development (HUD), administers various single family mortgage insurance programs. These programs operate through FHA-approved lending institutions which submit applications to have the property appraised and have the buyer's credit approved. These lenders fund the mortgage loans which the Department insures. HUD does not make direct loans to help people buy homes.

 

 

There are several notable FHA home loan programs available. 

 

What is an FHA mortgage loan? In 1965 the Department of Housing and Urban Development (HUD) was formed.  Within HUD operates the Federal Housing Administration (FHA), which has the primary responsibility for administering the government home loan insurance program. This program allows a first time home buyer who might otherwise not qualify for a home loan to obtain one because the risk is removed from the lender by FHA who insures the loan for the lender. FHA even allows co-signers qualify for the borrower, keeping the home a primary residence instead of an investment property. (FHA "Kiddie Condo" Program)

The FHA has created a rate reduction program called the Streamline Refinance. This provides a way for current FHA homeowners to lower their interest rate with little or no out-of-pocket costs. These loans can also be made faster and with less documentation than a typical loan.

 

Many people make the mistake and assume that FHA loans are only available for first time home buyers.  This is not true.  FHA loans are available to anyone, whether your first or fifth home and can be used to purchase a home or refinance a home.  If refinancing a home the current loan DOES NOT have to be an FHA loan.

There are lots of good reasons to choose an FHA loan, especially if one or more of the following apply to you:

  • You're a first-time homebuyer
  • You don't have a lot of money to put down on a house
  • You want to keep your monthly payments as low as possible
  • You're worried about your monthly payments going up
  • You're worried about qualifying for a loan
  • You don't have perfect credit
  • You're worried about what will happen if you fall behind on your payments

     

If any of these things describe you, then an FHA loan may be right for you. Why? FHA-insured loans offer many benefits and protections that you won't find in other loans including:

Lower cost: FHA loans have competitive interest rates because the Federal government insures the loans for lenders. Always compare an FHA loan with other loan types.

 

Smaller down payment: FHA loans have a low 3.5% down payment and the money can come from a family member, employer or charitable organization as a gift. Other loan programs don't allow this.

 

Easier qualification: Because FHA insures your mortgage, lenders may be more willing to give you loan terms that make it easier for you to qualify.

Less than perfect credit: You don't have to have perfect credit to get an FHA mortgage. In fact, even if you have had credit problems, such as a bankruptcy, it's easier for you to qualify for an FHA loan than a conventional loan.

 

More protection to keep your home: The FHA has been around since 1934 and will continue to be here to protect you. Should you encounter hard times after buying your home, the FHA has many options to help you keep you in your home and avoid foreclosure.

 

 

What is the purpose of FHA Mortgage?  To provide mortgage insurance for a person to purchase or refinance a principal residence. The mortgage loan is funded by a lending institution, such as a mortgage company, bank, savings and loan association and the mortgage is insured by HUD.

 

What are the eligibility requirements?  The borrower must meet standard FHA credit qualifications.

  • The borrower is eligible for approximately 96.5% financing. The borrower is able to finance the upfront mortgage insurance premium into the mortgage. The borrower will also be responsible for paying an annual premium.
  • Eligible properties are one-to-four unit structures.
  • HUD has instituted mortgage limits in each area (Maricopa County $346,250).

The most popular FHA home loan program for a first time home buyer is by far is the 203(b).  This is your standard fixed rate loan for 1-4 family owner occupied houses and only requires a minimum of 3.5% from the borrower.  This loan also permits 100% of their money needed to close to be a gift from a relative, non-profit organization, or government agency.

 

The main advantage to a FHA home loan is that the credit criteria for a first time borrower are not as strict as Conventional Loans sold to Fannie Mae (FNMA) or Freddie Mac (FHLMC). Someone who may have had a few credit problems or no traditional credit should not have a problem obtaining FHA financing. Also, FHA home loans are assumable, allowing a person to take over the mortgage without the additional cost of obtaining a new loan. In addition, the seller or lender must pay for part of the "traditional" closing costs (called non-allowable costs) while a borrower's allowable costs can partially be wrapped into the loan. The monthly mortgage insurance premium is cheaper for an FHA loan verses a conventional loan with 3.5% down.  Finally, FHA loans may require less income to qualify as they will exceed the Conventional debt ratios of 28/36% as their standard is 29/41.

 

The greatest disadvantage of FHA home loans is that FHA limits the loan size that a borrower can borrow.   Others may try and convince you that the FHA upfront mortgage insurance premium (MIP) is a disadvantage. However this amount makes just a very small increase in the borrower's monthly payment and is partially refundable. 

How do FHA loans compare to conventional loans?  Conventional loans usually require a larger down payment. And, if you have less than perfect credit you may not qualify for many conventional loans even if the interest rates and fees are comparable to FHA. The best thing to do is compare the cost of the conventional loan to an FHA loan line-by-line. What are the fees on each? What is the interest rate? How much is the mortgage insurance on each? How much down payment is required? For some borrowers, a conventional loan may be less expensive. For many others, it will be more expensive than FHA.

 

 

Do you have to buy mortgage insurance on an FHA loan?  Yes - as you will with most all of them. There is an up front mortgage insurance premium equal to 1.75% of the loan amount that is paid at settlement. In most cases, this mortgage insurance premium is included in your loan amount, so you are really paying it over the life of the loan. In addition, on loans with a term of greater than 15 years and a loan-to-value ratio of 90% or greater (meaning you are borrowing more than 90% of the value of the home), you will pay an annual mortgage insurance premium of 0.55% of the loan amount in monthly installments.

 

 

There are several notable FHA home loan programs available. 

 

 
SureFast Mortgage Corp. 4201 North 24th Street Suite 150, Phoenix, AZ 85016