In 1965 the Department of Housing and Urban Development (HUD) was formed. Within HUD operatesthe Federal Housing Administration (FHA), which has the primary responsibility for administering the government home loan insurance program. This program allows a First Time Home buyer who might otherwise not qualify for a home loan to obtain one because the risk is removed fromthe lender by FHA who insures the loan for the lender.
The most popular FHA home loan program for a first time home buyer is by the the 203(b). This is your standard fixed rate loan for 1-4 family owner occupied houses and only requires a minimun of 3.5% from the borrower. This loan also permits 100% of their money needed to close to be a gift from a relative, non-profit organization, or government agency.
The main advantage to a FHA home loan is that the credit criteria for a first time borrower are not as strict as Conventional Loans sold to Fannie Mae (FNMA) or Freddie Mac (FHLMC). Someone who may have had a few credit problems or no traditional credit should not have a problem obtaining FHA financing. Also, FHA home loans are assumable, allowing a person to take over the mortgage without the additional cost of obtaining a new
the Negoicators
FHA in Simple Terms!
Well as Simple as I could make it....
Lets Face it Loans are Complicated!
loan. In addition, the seller or lender must pay for part of the 'traditional' closing costs (called non-allowable costs) while a borrower's allowable costs can partially be wrapped into the loan. The monthly mortgage insurance premium is cheaper for an FHA loan verses conventional loan with 5% down. Finanly, FHA loans may, may require less income to qualify as they will exceed the Conventional debt ratios of 28/36% as their standard is 29/41%.
Many people making the mistake and assume that FHA loans are only available for first time home buyers. This is not true. FHA loans are available to anyone, whether your first or fifth home and can be used to purchase a home or refinance a home. If refinancing a home the current loan DOES NOT have to be an FHA loan.
The greatest disadvantage of FHA home loans is that FHA limits the loan size that a borrower can borrow. Please see the link for FHA Loan Limits in your area. Others may try and convince you that the FHA upfront mortgage insurance premium (MIP) is a disadvantage However this amont makes just a very small increase in the borrower's monthly payment and is partially refundable in certain cases. See the section on MIP Refunds for more information.
There are several notable FHA home loan programs available as characerized below.
Click on the title to learn more about that program:
FHA Fixed Rate Loan (FHA 203b)
Rehab Loan (FHA 203k)
Condominium Loans (FHA 234c)
FHA adjustable rate mortgage (FHA 251)
FHA Hybrid Adjustable Rate Loans
FHA 2-1 buydown (FHA 203b, Not Allowed on FHA 251)
Energy Efficient Mortgages Program
Reverse Mortgages for Seniors
DRE #01221986
