About FHA Loans

What is the Federal Housing Administration?
The Federal Housing Administration, generally known as "FHA", provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family, multifamily, manufactured homes and hospitals. It is the largest insurer of mortgages in the world; insuring over 34 million properties since its inception in 1934.

What are FHA loans?
A Federal Housing Authority loan provides low-cost insured home mortgage loans that suit a variety of purchasing options. Whether you're buying a home or want or refinance your mortgage, FHA Mortgage Loans might be right for you. If you're unsure about your credit rating, or have concerns about a down payment, ENG Lending's FHA Loans can give you piece of mind with super low closing costs and flexible payment options. Let ENG show you why we rank among the top FHA home mortgage lenders.

Why choose an FHA loan?
There are lots of good reasons to choose an FHA Loan, especially if one or more of the following apply to you:

• You don't have perfect credit
• You don't have a lot of money to put down on a house
• You want to keep your monthly payments as low as possible
• You're worried about your monthly payments going up
• You're worried about qualifying for a loan
• You're worried about what will happen if you fall behind on your payments
• You're a first-time home buyer

If any of these things describe you, then an FHA Loan may be right for you. Why? FHA-insured loans offer many benefits and protections that you won't find in other loans including:

Credit Flexible
HUD FHA design guidelines are not score driven. Instead, they are written in a way that provides the borrower the benefit of the doubt that there had been, at some point in their past, circumstances beyond their control, and as long as the borrower has recovered from those circumstances in a reasonable manner, they're generally going to be credit-eligible for an FHA loan.

Great Rates and Low Monthly Mortgage Insurance
A distinct advantage of an FHA insured loan, as compared to a conforming loan, is great interest rates and lower monthly mortgage insurance (MI). Depending on the program, standard FHA loan interest rates are usually better than a conforming 30-Year Fixed loan.

Smaller Down Payment
FHA 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.

Variety of Property Types Allowed
While FHA DE Underwriting Guidelines do require that the property be Owner Occupied (OO), they do allow you to purchase an hud fha approved condo, planned unit developments, manufactured homes, and 1—4 family residences, in which the borrower intends to occupy one part of the multi-unit residence. Please contact us for more information about hud fha appraisal requirements.

Streamlined Refinance and Assumable Loans
One of the most important advantages of an FHA loan is the ability for the loan to be assumed. This gives the buyer a significant advantage in a high interest rate market. FHA loans are eligible for streamlined refinance, a program HUD offers that allows the borrower to easily refinance the loan to reduce their interest rate and lower their monthly payment.

More Protection to Keep Your Home
The FHA has been around since 1934 and will continue to be here to protect you. Should you encounter hard times after buying your home, the FHA has many options to help you keep you in your home and avoid foreclosure.

What factors determine if I am eligible for an FHA loan?
To decide if you qualify for an FHA Loan, we will look at:

• Your income
• Your other monthly expenses
• Your credit history (this is important, but FHA's credit standards are very flexible)
• Your overall pattern rather than to individual problems you may have had.

To be eligible for FHA loans, your monthly housing costs (mortgage principal and interest, property taxes, and insurance) must meet a specified percentage of your gross monthly income. Your credit background will be fairly considered. You must be able to make a down payment, cover closing costs and have enough income to pay your monthly debt. Contact us to discuss your FHA loan eligibility.

Additionally, to be eligible for an FHA loan, you must:

• Have a valid Social Security Number (SSN)
• Be legal resident of the United States
• Be of a legal age to sign on a mortgage in your state. There is no maximum age limit for a borrower.

Even if you are a U.S. citizen, you must have a valid Social Security Number (SSN). An individual Tax Identification Number (ITIN) is not an acceptable substitute for a SSN.

U.S. citizenship is not required for eligibility. When you indicate on your loan application that you hold something other than U.S. citizenship, the lender must determine your residency status from the documentation you provide. If you are a permanent resident alien, you must provide evidence of lawful permanent residency issued by the Department of Homeland Security, Bureau of Citizenship and Immigration Services (BCIS), formerly the Immigration and Naturalization Service (INS).. If you are a non-permanent resident alien, you must show that you are eligible to work in the U.S. by producing an Employment Authorization Document (EAD) issued by BCIS.

What is the maximum amount that I can borrow?
The maximum loan amount for an FHA Loan is determined by:

Maximum loan amount: By law, FHA cannot insure loans that exceed certain amounts based on the metropolitan area or county in which you live. The highest maximum FHA mortgage right now is $729,750. The lowest maximum amount available in any county is $271,050. To see what the limit is in the county in which you're interested, visit the following site https://entp.hud.gov/idapp/html/hicostlook.cfm. This site lists U.S. territories as well as states.

Maximum financing: Depending on the state where the property is located, the maximum FHA financing will be either 98.75% or 97.75% of the lower of the purchase price, the appraised value of the home or the amount you are refinancing plus closing costs. If you are refinancing and taking cash out, the loan will be limited to either 95% or 85% of the appraised value, depending upon your qualifications.

What kinds of loans does FHA offer?
Fixed rate loans - Most FHA loans are fixed-rate mortgages (loans). In a fixed rate mortgage, your interest rate stays the same during the whole loan period, normally 30 years. The advantage of a fixed-rate mortgage is that you always know exactly how much your monthly payment will be, and you can plan for it.

Adjustable rate loans - Most first-time home buyers are a little stretched financially, so they want payments as low as possible at the beginning. With FHA's adjustable rate mortgage (ARM), the initial interest rate and monthly payments are low, but these may change during the life of the loan. FHA uses the 1-Year Constant Maturity Treasury Index (1 Yr CMT the most widely used index, to calculate the changes in interest rates. An index is a measure of interest rate changes that determine how much the interest rate on an ARM will change over time.

The maximum amount that the interest rate on your loan may increase or decrease in any one year is 1 or 2 percentage points, depending upon the type of ARM you choose. Over the life of the loan, the maximum interest rate change is 5 or 6 percentage points from the initial rate, again depending upon the type of ARM you choose. The advantage of an ARM is that you may be able to afford more house because your initial interest rate will be lower, as will your payment.

Purchase/rehabilitation loans - Sometimes you might see a home you'd like to buy, but it needs a lot of work. FHA has a loan for rehabilitating and repairing single-family properties called the SF Rehabilitation Loan program (203k). You can get just one mortgage loan which includes the mortgage and the cost of repairs combined. The mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work. The advantage of this loan is that you can buy a home that needs a lot of work, but you still have only one mortgage payment, and you can complete the repairs after buying the home.

Can I use FHA loans for home repairs?
Yes! Simple home improvements can be financed with a Federal Housing Authority loan from ENG Lending. Roof repair, disability accessibility improvements, flooring refurbishment, or the purchase of new appliances are just a few eligible improvements you could make with FHA loans. Ask our experts if your project qualifies for an FHA loan.

How do FHA loans compare to conventional loans?
Conventional loans usually require a larger down payment. And, if you have less than perfect credit you may not qualify for many conventional loans and find yourself being offered loans with higher interest rates and/or fees than you expected. The best thing to do is compare the cost of the conventional loan to an FHA loan line-by-line. What are the fees on each? What is the interest rate? How much is the mortgage insurance on each? How much down payment is required? For some borrowers, a conventional loan may be less expensive. For many others, it will be more expensive than FHA.

Do you have to buy mortgage insurance on an FHA loan?
Yes - as you will with most all of them. There is an up front mortgage insurance premium equal to 1.5% of the loan amount that is paid at settlement. In most cases, this mortgage insurance premium is included in your loan amount, so you are really paying it over the life of the loan. In addition, on loans with a term of greater than 15 years and a loan-to-value ratio of 90% or greater (meaning you are borrowing more than 90% of the value of the home), you will pay an annual mortgage insurance premium of 0.5% of the loan amount in monthly installments.

Most loans require mortgage insurance when your down payment is less than 20% of the sales price. On conventional and sub prime loans, mortgage insurance is provided by private companies. Whether private mortgage insurance is less than, equal to, or more than FHA loan insurance will depend upon the loan program and your qualifications.

Compare the cost of FHA over the life of your loan and how much it costs monthly to sub prime and conventional types of loans. With the protection you get with FHA - it's a very good deal.

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