FHA explained
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FHA INSURED MORTGAGES
The Federal Housing Administration (FHA) insures private loans that are issued for new and existing housing, and loans that are approved for home repairs. It was created by congress in 1934.
Today the mission of the FHA includes helping borrowers get amounts for which they qualify and assisting lenders by reducing their risk in issuing loans.
BENEFITS OF AN FHA INSURED LOAN
Lower cost:
FHA insured loans have competitive interest rates because the Federal government insures the loans for lenders. Always compare an FHA insured loan with other loan types.
Smaller down payment:
FHA insured loans have a low 3% 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 insured mortgage. In fact, even if you have had credit problems, such as a bankruptcy, it is easier for you to qualify for an FHA insured loan than a conventional loan.
More protection to keep your home:
The FHA is now under U.S. government conservatorship. This protects you as an individual borrower and the entire money-loan system in our country. Should you personally encounter hard times after buying your home, the FHA has many options to help you keep you in your home and avoid foreclosure.
If one or more of the following situations apply, then an FHA insured loan may be right for you:
* You are a first-time home buyer.
* You do not have 20% down payment.
* You want your monthly payments as low as possible.
* You are concerned for your monthly payments going up.
* You fear you might not qualify for a loan.
* You do not have perfect credit.
* You are concerned over the outcome if you fall behind on your payments.
SEVERAL OTHER FEATURES OF AN FHA INSURED MORTGAGE WORTH KNOWING
Adjustable Rate Mortgages - Section 251
The FHA adjustable rate mortgage is a HUD mortgage specifically designed for low and moderate-income families that are trying to make the transition into home ownership.
Fixed Rate Mortgages - Section 203(b)
An FHA loan benefits those who would like to purchase a home but haven't been able to put money away for the purchase. Some examples are recent college graduates, newlyweds, and those who are trying to complete their education.
Energy Efficient Mortgages
The Energy Efficient Mortgage program (EEM) helps current or potential homeowners significantly lower their monthly utility bills. It allows them to incorporate the cost of energy efficient improvements into their new FHA home loan or FHA refinancing loan.
Graduated Payment Mortgages - Section 245
Graduated Payment Mortgages are FHA loans for home buyers who currently have low to moderate incomes but expect their income to increase substantially over the next five to ten years.
Mortgages for Condominium Units - Section 234(c)
FHA Condominium Loans are specifically designed toward the purchase of condos.
Growing Equity Mortgages - Section 245(a)
FHA Section 245(a) is a mortgage with payments that start small and increase gradually in amount over time. This loan is for home buyers who currently have a limited income but expect their monthly earnings to increase in the future.
WHAT IS FHA MORTGAGE INSURANCE?
Mortgage insurance is a policy that protects lenders against losses that result from defaults on home mortgages. FHA loans require mortgage insurance primarily for borrowers making a down payment of less than 20 percent.
Mortgage insurance is charged to the homeowner each month at the rate of .5 percent per year of the total loan amount. FHA also charges an up front mortgage insurance premium of 1.5 percent.
FHA monthly mortgage insurance payments will be automatically terminated when these conditions occur:
* For mortgages with terms 15 years and less and with Loan-to-Value ratios 90 percent and greater, annual premiums will be canceled when the Loan-to-Value ratio reaches 78 percent regardless of the amount of time the mortgagor has paid the premiums.
* For mortgages with terms more than 15 years, the annual mortgage insurance premiums will be canceled when the Loan-to-Value ratio reaches 78 percent, provided the mortgagor has paid the annual premium for at least 5 years.
* Mortgages with terms 15 years and less and with Loan-to-Value ratios of 89.99 percent and less will not be charged annual mortgage insurance premiums.
The FHA website:
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