Loans - Buying a Home using a FHA Loan
The FHA loan program was created to help increase homeownership.
The FHA program makes buying a home easier and less expensive
than conventional home loan programs. Some highlights of the
FHA loan program are:
Down Payment and Closing Costs.
payment as low as 3% of Sales Price
for down payment and closing costs allowed.
regulated closing costs.
can credit up to 6% of sales price towards buyers costs.
Credit Qualifying Guidelines such as:
FICO score or credit score requirements.
will allow a home purchase two years after a Bankruptcy.
will allow a home purchase three years after a Foreclosure.
Debt Ratio & Job Requirement Guidelines such as:
Debt Ratio's than other home loan programs.
than two years on the job is allowed.
advantages of the FHA loan program has made it one of the
best options for most first time home buyers as well as move-up
not have to be a first time buyer to obtain a FHA loan, anyone
may use a FHA loan as long as you do not have more than one
FHA insured loan at any one time
203K rehab loans
loans can ease the mortgage squeeze
The federal agency may aid those with little equity or cash
for a down payment.
March 23, 2008 - Kathy
Kristof - LA Times
FHA Loan Information
and FHA Loan Reforms
With the housing downturn and credit crunch in full force,
it might be time for home buyers and homeowners to learn more
about a federal mortgage program launched during the Great
insured by the Federal Housing Administration fell out of
popularity in recent years as sub-prime mortgages and other
alternative financing became readily available and as home
prices zoomed past the program's limits.
mortgages now much harder to get and the maximum FHA loan
size sharply increased by recently passed economic stimulus
legislation, the program is enjoying a revival.
especially true in areas with high housing costs, where FHA
loan limits have nearly doubled. And for buyers with little
money for a down payment -- or owners who want to refinance
but have little equity -- FHA loans may be the only financing
renaissance time for the FHA," said Allen Jones, government
lending executive for Bank of America Corp. in Washington.
FHA loans? How do they differ from other mortgages? Would
you be eligible? Here are some answers.
an FHA loan?
mortgage insured by the Federal Housing Administration. It
can be a fixed-rate loan or an adjustable. However, the FHA
does not insure nontraditional loans such as "payment
option" adjustable-rate loans. The agency also requires
verification of your income and assets and a full home appraisal
to make a loan.
most lenders require verification of income and full appraisals?
did -- and are increasingly demanding them now. But, for many
years, many lenders offered "low doc" and "no
doc" loans, meaning that instead of full documentation
they essentially took your word that you had enough income
to make your payments. The FHA requires tax returns and pay
stubs to verify income.
appraisals, a lender making an FHA-insured loan must use an
FHA-certified appraiser who will walk through the house, taking
notes and measurements, before estimating its value.
doesn't accept "drive by" appraisals (the appraiser
just photographs the exterior) or fully automated appraisals
(a computer estimates the value based on sales of comparable
homes in the neighborhood).
bright side, the FHA doesn't discount the value the appraiser
comes up with to account for a declining price environment,
as many other lenders are now doing, said Jeff Lazerson, president
of Mortgage Grader, a Web-based loan shopping service.
about down payments?
were originally intended to help first-time home buyers, so
the down payment requirements are very flexible. The buyer
can put as little as 3% down, and it's OK if you get that
money from a relative.
ago, non-FHA loans were easy to get with a low down payment
-- or even no down payment. But now lenders are generally
requiring at least 10% down and may try to ensure that you're
using your own money for the down payment.
lenders are requiring extra money upfront in areas where home
prices are declining.
FHA loans may be the only game in town for people who have
relatively small down payments, Lazerson said.
if you don't have great credit?
takes your credit history into account but is willing to consider
"cry letters" explaining the negatives on your credit
report, Lazerson said. If your credit woes were caused by
reasonable, one-time events -- such as a divorce, medical
problem or a temporary job loss -- it won't necessarily disqualify
a borrower, he said. However, people with recent bankruptcies
or who can't verify their incomes are unlikely to qualify
for an FHA loan.
the largest FHA loan available?
areas such as Los Angeles, New York and San Francisco, the
maximum FHA loan amount is $729,750. The maximum is less in
cheaper areas. To find the limit in your area, go to https://entp.hud.gov/idapp/html/hicostlook.cfm
and plug in your city and state.
shouldn't consider an FHA loan?
who are borrowing less than 80% of their home's value can
probably get a better rate outside of the FHA program. That's
because rates are a touch higher on FHA loans than non-FHA
loans. Plus, FHA borrowers must pay for mortgage insurance.
much more costly?
rate on an FHA loan is likely to be about one-eighth of a
percentage point higher than the market rate on a comparable
during the early years of the loan a half-point fee is added
to your interest rate to pay for mortgage insurance. And you
must pay a fee of 1.5% of the loan amount upfront, also for