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Federal Housing Administration; established in 1934 to advance homeownership opportunities for all Americans; assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.Federal Housing Administration, or FHA, is a government agency that insures certain residential loans. The FHA is a part of the Department of Housing and Urban Development, or HUD.
FHA streamline refinances are a quick and easy way to refinance your home if you have an FHA loan.
What are the advantages to using FHA financing?
There is a low down payment requirement. The down payment is 3 percent, up to the maximum loan amount allowoable in your particular region.
The entire down payment can be gifted or borrowed from a relative (on most other loans the down payment must be sourced and seasoned).
Unlike conventional loans, there are no reserve requirements of two months' PITI payments at closing.
The interest rates are typically lower on FHA loans, than what they are on conventional fixed-rate loans.
The seller or other third party is allowed to pay part of, or all of the closing costs associated with the loan.
FHA loans are assumable, but the assuming party must qualify. Any FHA loan originated prior to December 1, 1986, are simply assumable. Meaning the purchaser does not need to formally qualify for the loan.
Loans are assumed at the note rate under which they were originally originated. The exception being on ARMs, in which case are assumed at the loan's current interest rate.
FHA loans also have no prepayment penalty.
Qualifying guidlines assist the average buyer in each particular marketplace. Some underwriting guidelines are less restrictive than those of conventional fixed-rate loans, and can vary based on the marketplace.
The lender is insured against loss for the life of the FHA loan.
It is possible to place subsequent mortgages after an FHA first mortage.
Now lookinng at the down side of the FHA loan. This type of loan can cost the seller more money in the form of non-allowables. Non-allowables are fees FHA will not allow the borrower to pay such as a processing fee etc... This may not be a deal killer by any means but it is something to take into consideration when writing the offer on the home you intend to purchase.
A FHA mortgage is when the government guarantees Federal Housing Authority loans. You can put down a smaller down payment on a FHA loan, but you will also be required to pay mortgage insurance.
For an FHA loan, your monthly housing costs should not exceed 29% of your gross monthly income. Total housing costs include mortgage principal and interest, property taxes, and insurance. Those four terms are often lumped together, and referred to as PITI.
Your total monthly costs, adding PITI and long term debt, should be no more than 41% of your gross monthly income. Long term debt includes such things as car loans and credit card balances.
Your FHA loan will also carry Private Mortgage Insurance (PMI). The PMI payment is lower than what it would be if you had a similar conventional loan scenario. Unlike conventional loans, the PMI will remain with the FHA loan for the life of the loan.
FHA loans have lower maximum loan limits compared to that of conventional mortgages. The maximum loan limits vary county by county and are adjusted every year to reflect increasing home prices.
FHA loans are not for every one in that the loan limits are too low for higher price properties and that the application process takes longer than conventional mortgages, so in a hot real estate market where houses receive multiple offers, buyers using government loan often lose out to those using convention mortgages.
For an FHA loan, your monthly housing costs should not exceed 29% of your gross monthly income
As of October 2005, FHA will now allow up to 95% LTV cash out refinances instead of 85%.
Designed to insure loans against loss through default payments and foreclosure
A properly structured FHA loan combined with a gifting program will allow most borrowers to get into a home with Zero money down.
For an FHA loan, your monthly housing costs should not exceed 29% of your gross monthly income. Total housing costs include mortgage principal and interest, property taxes, and insurance. Those four terms are often lumped together, and referred to as PITI.
Federal Housing Administration Loan. This loan is issued by the Insuring Office of the Department of Housing and Urban Development.
You should ask your mortgage broker if they work with some sort of down payment assistance program (or gifting program), such as Neighborhood Gold. There are several of these programs through out the country, just depends on your location.
FHA an be a great way for the buyer to get into a new home at a low initial, albeit sometimes at the expense of the seller being that there are fees that FHA will not let the buyer pay.
One thing that the buyer must have is a 3% down payment and 1 1/2% upfront mortgage insurance as well as .5% annual mortgage insurance (MI). The seller can pay up to 6% of the SETTLEMENT COSTS not including the mandatory 3% down payment.
In years past, the annual mortgage insurance never went away. As of January 1, 2001 typcial guidelines for non FHA mortgage insurance was enacted meaning that the MI dropped off after the homeowner reached a 78% equity position after a minimum of 5 years of paying the MI.
In order to get into a home with no money down another program like the Ameridream or Nehemiah program must be used. They are charities that provide down payment assistance to need based eligible home buyers.
Condominium's are treated differently from regular single family residences and require less mortgage insurance.
In 2006, the FHA is re-examining it's lending limits, guidelines and policies in regards to property conditions in an attempt to become a major player in the home loan market for homebuyers with little money to put down and some past credit difficulties.
Fha in the News:
| NAR Urges Congress, Administration to Approach Changing FHA Slowly (Marketwire via Yahoo! Finance) |
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WASHINGTON, DC--(Marketwire - 03/11/10) - The National Association of Realtors urged Congress and the administration to move cautiously before making changes to the Federal Housing Administration program that has served the needs of millions of American families for more than 75 years without needing a federal appropriation. FHA remains financially strong because it has taken steps to ensure ...
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| FHA considers down payment requirements (Washington Post) |
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The Federal Housing Administration has concluded that its loan volume would have dipped by 40 percent in the next fiscal year and that 300,000 first-time home buyers would have been shut out of the housing market if it had raised its down payment requirements, as critics have pressured it to do, ...
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| NAR Urges Congress, Administration to Approach Changing FHA Slowly (Marketwire) |
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WASHINGTON, DC--(Marketwire - March 11, 2010) - The National Association of Realtors ® urged Congress and the administration to move cautiously before making changes to the Federal Housing Administration program that has served the needs of millions of American families for more than 75 years without needing a federal appropriation.
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| Gov't official warns on home down payment hikes (San Francisco Chronicle) |
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The head of the Federal Housing Administration is warning that boosting the minimum down payment borrowers must provide to qualify for home loans backed by the agency could threaten the housing market. FHA commissioner David Stevens said at a House hearing... Federal Housing Administration - Loan - Down payment - Real estate economics - Mortgage
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| Market Commentary and Intraday News (INO News) |
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(AP:WASHINGTON) The head of the Federal Housing Administration is warning that boosting the minimum down payment borrowers must provide to qualify for FHA-backed home loans could threaten the housing market.
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