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FHA LOANS: What You Need To Know.
By Janice Mbui
First time homebuyers should do their due diligence with programs that promise them great rates for their first home. But one program that they don't have to worry about scamming them is FHA loans. Getting an FHA Loan Mortgage Rate is simple for first time homebuyers. It allows them to get into a home without worrying about credit problems
FHA(Federal Housing Authority) loans are government insured mortgage loans which are available to customers who have very little down payment and not-so-perfect credit. They may also be used for customers who wish to finance some home improvements into the home they wish to purchase. FHA loans are currently available only to homes that fit under the specified mortgage limits. In high-cost areas such as New York and Los Angeles, there is a loan limit for single family homes of $362,790, while low-cost areas such as Iowa and Kentucky have a loan limit of $200,160, according to FHA.com. FHA loans are also not credit score or FICO score driven. If you do not have the required 620-640 FICO score required on conventional conforming loans you can still get an FHA loan at the market rate. FHA loans are different. The standard for an FHA loan
is 3% of the loan for down payment. FHA loans are assumable, meaning you can transfer your loan to the new owner if you sell your house. That allows the new owner to take over your FHA loan without the additional cost of obtaining a new loan. 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. Additionally, FHA loans are used for lower income families as well as those that are purchasing their first home. VA loans are for those who have served in the army, reserves, etc. FHA loans are subject to size limits, which vary from state to state and county to county. In 2003, the basic limit was $154,896 but it ranged up to $280,749 in high-cost areas.
FHA loans are made through private lenders, but are backed by the Federal Housing Administration. This allows for greater loan stability while requiring lower credit requirements than conventional mortgages. FHA loans are often ideal mortgage products suitable for a wide range of individual customer demands and eligibility concerns. Credit, income and employment information must be verified to satisfy eligibility requirements, and FHA loans are only applicable to primary-residence properties. Even though Fha loans are not credit score driven, they will still look at your payment history. However, listen closely because people pay lots of money to learn the following secrets: there is a loophole in the FHA underwriting guidelines that allows gift money to be given to you to cover the 3% down payment, your loan closing costs, and your prepaid items (first six month´s property taxes and first year homeowner´s insurance.) This gift money can be from a relative or from a non-profit company.
Conventional loans are harder to come by, particularly in soft markets such as Cuyahoga, Lake, Lorain and Medina counties. Buyers still might get away with no-money-down deals in Summit County, which conventional lenders see as a less risky market. Conventional mortgage guidelines generally require that the borrowers have two months worth of house payments left over as a reserve or cushion after the transaction is completed, and some programs require three months reserves. The logic is that borrowers who have funds in reserve will have less difficulty making mortgage payments in a financial emergency.
Lenders are now frequently willing to approve a Fha Loan Applicant because the FHA is taking the majority of the risk by insuring that the loan will be paid. Lenders generally limit the loan amount for VA loans. Department of Veterans Affairs does not make loans, it guarantees loans made by lenders.
With an Fha Mortgage, you have Options to save your home most of which you would never get from a conventional loan. In an uncertain world, this is another excellent reason for you to get an FHA mortgage. Options include adjustable rates that range from 1 month to 10 years. The terms of the life of the mortgage can be as long as 20, 30, or 40 years.
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