FHA Loans and You: A Program for Every Circumstance

The Federal Housing Administration was created in the 30’s to help bring homeownership to a wide range of people in varying circumstances. They accomplish this by insuring each mortgage so that lenders are able to offer less stringent requirements. Families can qualify for a loan with low down payments, low closing costs and a lower credit score. The homeowner pays for this insurance upfront and in monthly installments, and the proceeds are poured back into the program, funding future mortgages. Now that you know the basics of how FHA loans work, let’s take a look at the different loan options and what they can do for you.

FHA Assistance: Programs to Meet Your Needs

If you are buying your first home, FHA loans are a great option for several reasons. For a family just starting out, the greatest benefit is a down payment as low as 3.5% of your loan. For a $100,000 home that’s only $3500! Most of your closing costs and fees can be financed into the loan, meaning less money needed upfront to get you into your new home! These options are available for properties of one to four units.

FHA assistance is also useful for those who are purchasing a home to fix it up. All costs may be included with the purchase price of the home in one loan, making it quick and easy to bring it back to beautiful. The total loan amount will also include a contingency reserve to cover any extra work that may crop up after closing. This is typically ten to twenty percent of the proposed remodeling costs. FHA loans also provide for those who own a home that needs to be remodeled or repaired by simply refinancing the original mortgage to include expenses.

Seniors who are 62 years of age or older, are living in their home and own it outright or have a low loan balance can qualify for a reverse mortgage, also called a Home Equity Conversion Mortgage (HECM). This allows them to receive income or a line of credit based on the value in the home. According to FHA regulations, no payment is required until the borrowers no longer live in the home as a principal residence or fail to meet the requirements of the mortgage. No income or credit qualifications are required for this action, but an appraisal will be needed to establish current value of the property.

HomeAn Energy-Efficient mortgage is an option that allows borrowers to include the costs of improving their homes energy efficiency into their loan. This can be used for existing and new homes. Total cost for improvements must be lower than the potential dollar value of energy saved during the life of the loan. For energy improvement to homes that do not also require purchasing or refinancing, there is the option of a Title I Home Improvement Loan.

If you want to purchase a mobile home or manufactured housing, the FHA has programs for that too! One type is for those who own the land that their home will be located on and another is for housing that already does or will reside in a mobile home park. Financing and underwriting requirements for these loans are different from other federal mortgages. The most important rule is that the home must be secured to a fixed foundation, allowing it to be considered “real property” and not something that’s free to move about. There are very specific requirements regarding this foundation that must be met to qualify for the loan.

Standard Qualification for FHA Loans

The Federal Housing Administration provides mortgage insurance to approved lenders for single and multi-family homes. It has insured tens of millions of properties since its creation, making it the largest mortgage insurer in the world. Because it is essential to the program, borrowers must pay insurance to procure this type of loan, both upfront and in monthly payments. There are also limits to how large the loan can be. These are determined by housing type and the state and county the property is located in.

Depending on the type of mortgage you are applying for, a credit report and/or property appraisal may be required, which has an associated fee. Closing costs are kept to a minimum but their exact amount is determined by each loan office.

This program is designed to help families improve their quality of life, not bury themselves in debt. Therefore, there is an allowable debt-to-income ratio that must be met in order to proceed with your mortgage. As the loan applicant, you must also have a history of good credit performance. Have you made payments on debt with promptness and consistency? If you have a solid track record, you will be an excellent candidate.

With a wide variety of options for families who want to buy, refinance or improve a home, FHA loans conform to your individual needs and the circumstances of your life. They make it easier to own your home, so that you and your family can get back to living in it!

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