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FHA/VA Loans PDF Print

What is an FHA Loan?(under construction)

FHA loans are intended for lower to middle income families as well as those that are purchasing their first home. Over the years FHA has helped many Americans become homeowners who would not otherwise have qualified for home loans by private lenders. According to HUD, "250,000 families will be eligible to buy or refinance a home using FHA-insured mortgages, thanks to President Bush’s economic growth package. HUD's Federal Housing Administration (FHA) is now temporarily increasing its loan limits, which means it can insure larger mortgages at a more affordable prices in high-cost areas of the country."

FHA does not make loans or guarantee loans. It insures loans. The insurance removes or minimizes the default risk lenders face when buyers put down less than 20 percent. Without further approval from FHA, its approved lenders are authorized to:

  • Take loan applications
  • Process loan applications
  • Underwrite and close the loan

First time home buyers constitute a large share of the lending market. However, many do not have established credit histories or a substantial amount of money to put down for a downpayment. As of now, FHA loans require a 3% downpayment to obtain financing and have different loan limits in different states. FHA loans are the easiest type of real estate mortgage loan to qualify for. The FHA guidelines for loan qualification are the most flexible of all mortgage loans. For first time home buyers the time has never been better to finance your home through the FHA loan program. In light of the downturn in the subprime loan market, many first time buyers are now looking for other options. FHA loans can be the answer.

Advantages of FHA loans vs. Conventional loans:

FHA Loans have many advantages over conventional loans, including lower down payments and more relaxed qualifying guidelines in terms of your overall credit score. The federal government created FHA loan programs to encourage homeownership throughout the country. The FHA can help people to obtain a loan with little or no down payment.

Challenged Credit History:

If your credit is less than ideal, FHA can still work for you. You may qualify for an FHA loan even if you've had financial problems in the past.

 

  • FICO/credit scores do not apply.
  • Bankruptcy: You can obtain an FHA loan two years from the date of your bankruptcy discharge, so long as you've maintained good credit since your debts were discharged.
  • Foreclosure: If you have maintained your credit in excellent shape since a foreclosure, an FHA loan will be available to you two years from the final date of your foreclosure.

Competitive Rates & Terms:

  • There is little or no adjustment to the interest rate for an FHA loan, as the rates vary within .125 percent of a conventional loan.
  • Mortgage insurance is funded into the loan, meaning a premium of 1.5% is added to the loan balance instead of being paid out-of-pocket. In addition, a small portion for the mortgage insurance premium is added to the monthly payment, but it is far less than private mortgage insurance premiums.
  • Borrowers can finance 97% of the purchase price and put down 3 percent. In some instances, when combined with other types of loans, the down payment can be zero.
  • Allowable debt ratios are higher than the debt-ratio limits imposed for conventional loans.

Fewer Required Repairs:

Today the requirements for home repairs are far more reasonable than they were in the past.

  • Defective roofs that leak still need to be replaced but an older roof does not require replacement so long as it doesn't leak.
  • Windows that stick upon opening or have cracked panes do not require replacement.
  • FHA appraisals do not take the place of a home inspection. Buyers should still obtain a professional home inspection.

FHA loans are available to anybody but are used most often by first-time home buyers and lower to middle income buyers.

 
 
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