FHA Home Loan

FHA Home Loan

What are FHA Home Loans?

FHA stands for Federal Housing Authority. 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 home loans might be right for you.

Why choose an FHA Home Loan?
There are lots of good reasons to choose an FHA home 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 home 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
While FHA home loans aren't specifically driven off of your credit scores. At least A 640 FICO credit score is usually required to obtain an FHA approval through most lenders.

Low Mortgage Insurance Rates and Low Interest Rates
FHA Home Loans carry low mortgage insurance rates and the Interest rates are usually better than other mortgage programs.

Smaller Down Payment
FHA loan requirements 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.

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 are the FHA Loan Requirements?
To decide if you qualify for an FHA Home Loan, your lender will look at:

Your income

Your other monthly expenses

Your credit history

To meet current FHA loan requirements, 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.

Additionally, to meet current FHA loan requirements 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 amount for an FHA Home 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 home loan 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 97.75% of the appraised value of the home or its selling price, whichever is lower.

What kinds of loans does FHA offer?
Fixed rate loans - Most FHA Home Loans are fixed-rate mortgages. In a fixed rate mortgage, your interest rate stays the same for the entire loan period. With a fixed rate FHA Home Loan, you always know exactly how much your monthly payment will be.

Adjustable rate loans - 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.

The maximum amount that the interest rate that an Adjustable FHA Home Loan may increase or decrease in any one year is 1 or 2 percentage points, depending upon the type of ARM that is chosen. Over the life of the loan, the maximum interest rate change is 5 or 6 percentage points over the initial interest rate.

Additional lender offers.

FHA Refinance Loan Programs

Rate/Term Refinance (No Cash Out)
The FHA Rate/Term Refinance is for borrowers who currently have a conventional fixed rate or ARM mortgage and wish to refinance into an FHA Mortgage. This program helps borrowers who wish to have a stable, FHA insured fixed rate mortgage.

FHA Cash-Out Refinance
A FHA Cash Out Refinance Loan is perfect for the homeowner who wants to access the equity that they have built up in their home. This program is beneficial to homeowners whose property has increased in value since it was purchased.

FHA Streamline Refinance
The FHA Streamline Refinance is designed to lower the interest rate on a current FHA mortgage or convert a current FHA adjustable rate mortgage into a fixed rate. An Streamline FHA Refinance Loan can be performed quickly and easily. It requires much less hassle and paperwork than a normal refinance including no credit check, no appraisal, no qualifying debt ratios and no income verification.

FHA Refinance Loan FAQ's

Are there any out of pocket expenses for an FHA Refinance Loan?
Generally, there are no out-of-pocket expenses incurred with an FHA Home Refinance, other than the appraisal fee. FHA Refinance Guidelines allow all other closing costs, including lender fees, to be included in the new loan amount, provided that the home will appraise for that amount.

Can I take cash out of my home with an FHA Refinance?
Yes, with an FHA Cash Out Refinance, the home owner obtains a new FHA Mortgage Refinance for more than the amount owed on their current mortgage; meaning the homeowner pays off the current mortgage and then has additional cash to use however they want. They maximum loan amount for an FHA Cash Out Refinance is 85% of the homes current appraised value.

What are the guidelines for an FHA Refinance Loan?
If the borrower wishes to take cash out of the property, then the maximum FHA Home Loan Refinance amount is 85% of the current appraised value. If the borrower does not take cash out then the maximum financing will be 97.75% of the appraised value of the home or the amount you are refinancing plus closing costs, whichever is lower.

Why should I consider refinancing into a FHA-insured mortgage?
FHA Refinance Loans do not come with prepayment penalties, have no teaser rates nor balloon payments. They are offered at market rate with terms up to 30 years and are fully amortized, meaning that you pay towards principal and interest every month.

What if I have a prepayment penalty and other refinancing costs and there isn’t enough equity in my home to refinance?
If you do not have sufficient equity in your home to add your prepayment penalty and/or other refinancing costs into your new FHA Mortgage Loan Refinance, then you should ask your lender to consider a second mortgage to pay the difference or a short payoff on your existing loan. Offering either of these options is at the discretion of the lender.

Does it matter that the value of my home is now less than what I still owe?
The mortgage lender considering the refinance will have to be willing to accept a short payoff on the existing loan OR to hold a second mortgage to make up the difference needed to pay off the existing mortgage and the home’s value.