Online Financial Tips

Archive for the ‘Fha Loans’ Category

FHA loans are a great way for first-time property buyers with a lower down payment fund to buy a property.

An FHA mortgage is one that is insured by the Federal Housing Association, in conjunction with the U.S. Department of Housing and Urban Development (HUD), and is open to all qualified homeowners. The FHA works to encourage the availability of housing for low- and moderate-income families, but can assist almost any moderate-priced home in the United States.

How Do FHA Mortgages Work?

FHA mortgages offer lower percentages of securing down payments than conventional mortgages, sometimes as low as 3% down. FHA loans are not home loans, but insure home loans. The government uses a Mortgage Insurance Premium (MIP) as means of insurance. MIP’s are divided into two parts: upfront and renewal. The upfront MIP is financed into the loan amount, while the renewal premium is escrowed into the monthly payment. The MIP of FHA loans are generally more than those of conventional loans, but the insurance is worth it.

An FHA loan acts as a sort of safety net for the homeowner. If you should default on (fail to pay) your payments, your lender will be paid from your insurance fund. This loan assures you will never miss a payment and cause damage to your credit or the relationship with your lender.

Pros and Cons of FHA mortgage

As with almost all mortgages and loans, FHA loans have both good and bad points. On the pro side of things, one of these loans allows you to put down less money to qualify under generous guidelines, and there is no maximum on income to qualify. On the con side though, there is a maximum on the loan amount and that maximum is not nearly as high as conventional loans. These loans are worth less because they are geared towards first-time buyers and mortgage borrowers who cannot afford high-priced homes and the higher down payment those houses would require.

Qualifying

There are different sized FHA loans to accommodate all sorts of people and financial situations, but most require a good credit history and sufficient income to qualify.

Previously, the Federal Housing Association used to qualify homeowners by a complicated residual income method. Now, for the sake of both the lender and the homeowner’s understanding and sanity, they use gross qualifying similar to that of conventional mortgages, but with higher ratios. There are two ratios the FHA primarily uses for these types of loans, (1) 29% of gross monthly income for housing expense or (2) 41% of gross monthly income for housing expense and all monthly debts with over six months to pay off.

With the technology advances of today, qualifying only takes a couple of days, whereas it used to take 30 to 45 days. Also, another important fact to remember is if you pay off your FHA loan early, part of the MIP will be refunded to you. The longer you hold onto the loan, the less you will get back.

Final Notes

So if you are considering an FHA loan, talk to your lender and see if it is the right option for you.

Right now this is a very relevant question – Can an independent net branch of a licensed FHA Lender or Broker legally originate FHA loans under HUD rules?

HUD recently answered this question with a big, “No, you can’t” in October 2007. HUD did this by focusing on brokers who are not FHA-approved brokers.

HUD reasoned as follows: “In transactions where the mortgage broker is not an FHA-approved broker, the loan origination services cannot be performed. Under these circumstances, RESPA would prohibit the payment to the non FHA-approved mortgage broker because those services, under FHA regulations, would have to be performed again by either an FHA-approved lender or loan correspondent. The payment to the unapproved broker for duplicated services amounts to an unearned fee in violation of section 8(b) of RESPA.”

So the real question really comes down to whether you are an FHA approved broker when you associate with a net branch lender? To answer this question, you need to understand the basic rule that all originators who work for an FHA approved broker must be a W2 employee of that broker.

Before we get to this rule, note that there are companies out there to consider for FHA programs. You Just need to find the right company that is well established and knows what they are doing to stay in compliance for the long term.

This means that all compensation paid to the loan originator must be in the form of commission earned from the loan and must be paid W2 (with all applicable federal and state taxes deducted) on the originator’s paycheck. No monies can be paid 1099 for FHA business.

This is where most net branches fail to meet the HUD requirement since many net branch lenders pay their loan officers on a 1099 basis to avoid paying employer payroll taxes and this is the problem with trying to net branch FHA loans. You might therefore consider getting your own FHA license or at least learning about what is required to see if now is the right time for your company to become FHA approved.

The government of the United States of America has over the years been able to provide for the country’s citizens, specifically as it relates to housing. Various housing options have been made available for veterans and ordinary citizens alike, however the Federal Housing Administration has opened up the opportunity through FHA home loans for residents of the United States to own a home which they only dreamed of owning before. FHA home loans are federal assistance mortgage loans extended to lower income Americans for the purpose of purchasing a home. The loans have made it possible for many people in the United States to own a piece of the country they have lived in all their lives.

The Federal Housing Administration (FHA) is a US government agency designed to help improve housing standards and conditions in the country. They are geared at providing adequate home financing for Americans through insurance of mortgage loans. It should therefore stand to reason that they are guaranteed by the government to provide loans and housing options for the citizens of the country.

FHA home loans offer much lower interest rates than standard loans. In addition, there are lower down payments, depending on various factors. One of those factors is the cost of the house that the applicant is interested in buying. The limits loaned to an individual depend on the type of housing as well as the state or county it is located in. In very real cases, a specific type of property in one state can allow an applicant to borrow much more than for the same sized property in another state.

FHA home loans are not only available for buying a new home. Applicants for this loan can also acquire it if they need to repair the home or make it more energy efficient.

Your qualification is tied in with your credit history and having a good credit history will give you a better chance of being approved for an FHA loan. In terms of FHA loan requirements, there is quite a bit of information that needs to be provided by the applicant to get the process started. This includes:

o The applicant’s social security information
o Past employer information for the past two years
o Current gross salary per month
o Information about savings and checking accounts
o Current address information
o Details of existing loans
o Details of real estate owned
o Total value of personal property
o Certificate of eligibility and DD-214 (for veterans only)
o Check stubs and W-2 forms the last two years
o Personal tax returns, balance sheet and income statement for the last two years for self-employed people

You will also need to pay for a credit report as well as an appraisal of the property you are interested in purchasing.

Applying for FHA home loans can be the difference between forever living in a rented or leased apartment and having something you can call your own. If you are a lower income earner, your best bet to owning your own home would be to check out what is available through the FHA loan options.

Lots of people prefer to take loans through the Federal Housing Administration due to more advantageous conditions offered. An FHA home finance loan is insured against default. If the borrower fails with the payments, the FHA can pay; this makes lenders much more flexible with the loans, within the sense which they give larger amounts.

An excellent part of having an FHA home finance loan would be that the income does not matter, because it is not really a criteria for qualifying. Nonetheless, the income influences the amount you can borrow. The sum rely on the property prices in your community where you live, and in general, the money is fixed to a relatively small mortgage.

The credit record and also the debt to income ratio would be the elements that truly influence your qualifying for the FHA home finance loan. In terms of credit, your history doesn’t need to be the best, a significant situation is going to do to satisfy certain requirements. In case you speak with a financial consultant, he/she can clarify every aspect for you here.

Here are some more benefits of an FHA home loan:

-You can make an advance payment under 3% of the property’s value;
-You don’t have to pay any penalty price if you pay the loan before established by contract;
-You can also enjoy leniency in the event you face financial trouble;
-You can use other fha programs to pay for home improvement.

Additionally, there are some cons you need to be aware of prior to obtaining an fha home mortgage:

-The amount of money it is possible to borrow could prove insufficient to pay for the price of the home;
-You need to pay a monthly insurance premium and also a constant fee that’ll be used to pay your debt regarding default;
-There could possibly be other competitive offers that beat fha home finance loan programs.

Should you have a good credit history and a decent income, it is worth evaluating your options before choosing a mortgage loan program in particular.

Speak with a financial advisor to view what possibilities you can find in your case. Make comparisons between your various offers, and only then decide on the proper solution. It can be so essential to have a larger down-payment when possible. This is the time for you to use personal savings, money gifts from family so that you can decrease your debt as much as possible.

With mortgage rates being at record lows, many people are ready to purchase a home or refinance their existing mortgage. If you are one of the many Americans who want to take advantage of one of the best times in many generations to buy or refinance, you are probably weighing the loan options that are available to you.

If you are a first-time home buyer or have not thought about your existing mortgage in years, it may be hard to tell which loan type will be the best for your situation.

Two of the most common loans right now are conventional, fixed-rate mortgages & the government-backed FHA loan. Each loan offers unique features that benefit different situations. Knowing some of the advantages and drawbacks of both loans will help make your decision easier:

Similarities between Conventional & FHA loans

* Both loans currently offer some of the lowest rates in history. 15-year conventional fixed-rate mortgage rates are at an all-time record low. FHA rates are slightly higher but in general, rates are competitive and comparable.

* The most popular FHA & conventional loans are fixed-rate mortgages. That means the interest rates won’t change for the life of your loan.

* However, both conventional & FHA offer ARMs (adjustable rate mortgages).
Advantages of an FHA Loan over a Conventional Loan

* Credit qualifying criteria not as strict – Credit scores as low as 580 now qualify for an FHA loan. Additionally, your allowable debt-to-income ratio is higher on an FHA. Meaning, if the amount of debt you carry is relatively high compared to your income you may still qualify for an FHA loan.

* Low down payment required – FHA loans generally require as little as 3.5% down on the purchase of a home. Government requirements also feature some of the lowest amounts needed to close a loan, potentially leaving more money in your pocket at closing.

* Easy Refinancing – Refinance up to 97.75% of your home’s value. FHA also offers an FHA Streamline which allows you refinance with no appraisal and minimal credit requirements.
Benefits of a Conventional Loan vs an FHA Loan

* Most competitive mortgage rates – Due to the FHA approving loans for borrowers with lower credit, there is a greater risk associated with those types of loans, meaning the rates are generally slightly higher. Good credit requirements for conventional loans offer borrowers lower rates when compared to FHA loans.

* No MIP at closing – FHA loans come with mortgage insurance premiums (MIP) that are built in over the course of the loan. When you close, there’s also a one-time upfront mortgage insurance premium due – currently 2.25% of the total loan amount. Conventional loans do not require this upfront premium.

* Flexible terms – Conventional loans offer several repayment period terms. Different repayment terms offer different, more competitive mortgage rates. The faster your term, the lower your rate. Choose between 10-, 15-, 20-, 25- or 30-year repayment periods. FHA loans generally do not offer as many options.

If you have less than perfect credit and don’t have enough for the standard 5-20% down payment, an FHA loan may be the better option for you. If you have good credit, a stable job and a sizable down payment – you could save more money over the life of your loan by going with a conventional option.

VA and FHA Loans are both great federal backed mortgage programs. When comparing the two federal home loan programs, it’s only natural to wonder which one might be right for you. There are obvious distinctions between military and FHA mortgages. Loan limits, qualifying requirements, down payments and fees can all vary between the two programs. Determining whether VA or FHA is the appropriate loan for a specific situation involves weighing the advantages of both.

Because there is an eligibility requirement with VA loans, some borrowers can rule out this option early if they cannot obtain the Certificate of Eligibility necessary to participate in the VA Home Loan Program. Veterans and active military personnel need to have served for a certain number of days in order to be considered eligible. The Certificate shows how much (if any) entitlement a person has with the VA Loan Guaranty Program. Entitlement is the portion of mortgage that the VA will guarantee for each service person. Loan seekers who do not have entitlement are not VA eligible, and should consider an FHA loan.

Non-VA-eligibility could mean that a person is not affiliated with the military, has not accumulated enough service time, has been dishonorably discharged, or is using full entitlement that has not been restored, or is using partial entitlement that has not been restored and does not have enough entitlement left over for another VA Loan. Whichever the case, FHA can provide an excellent alternative government backed loan program for your mortgage needs.

Some advantages to choosing an FHA loan over a conventional loan may be: