When you purchase a home you are required to pay mortgage insurance on top of the monthly mortgage payment. This is the case whether you use traditional financing options or whether you go through the Federal Housing Administration programs. The insurance is necessary unless you put at least twenty percent down on the house, giving you instant equity. In today’s real estate market, more than half of all approved loans are insured through the Federal housing Administration, which means there is a good chance you will need FHA insurance on your loan. Many of these loans are acquired through special programs that have been put into place to help those people who don’t necessarily fit the standard mold for a home loan.
House Loans for Designated Areas
When you think of the FHA, more often than not your thoughts turn to loans on single family homes for buyers with a poor financial history. While this is indeed the case, there are plenty of special cases where people can benefit using the government’s FHA insurance programs.
We’ll start with the loans for disaster victims. You’ve probably seen the pictures of major disasters such as hurricanes or earthquakes that leave cities nearly decimated. Land is flooded, homes are destroyed, and people are left destitute. While home insurance does cover some of the financial loss, these homes still have to be rebuilt; this can’t happen without more house loans. Disaster loans are there for people that live in areas that have been designated by the president as a disaster area, meaning it qualifies for government assistance to be rebuilt. If you end up in this situation, you can apply for a new loan within one year after the president has declared the area. Before approval on the loan, you would have to prove that the home was sufficiently damaged or completely destroyed. One hundred percent financing is available, a down payment is not required, and the loan can be pushed through the system more quickly than a standard federal loan. You will still need to pay closing costs, MIP, and any other fees required by the lender.
If you live on an Indian reservation or a restricted land, you may be able to qualify for a loan specific to your situation. Typical Federal Housing Administration requirements do have to be met for qualification. In addition, because the home will be located on tribe lands, the building of a property or the sale of the property to a new owner (you) will have to be approved by the tribe. The details of this type of loan are best discussed with a lender as they can help you navigate the steps necessary for approval.
FHA Insurance Programs Improving your Quality of Life
Another program you can take advantage of is the program geared toward rehabilitation. There are loans specifically designed for the fixer upper property or the updating of an already established home. These loans are known as 203k loans. They offer low cost financing to people who want to turn the house they live in into a home they love. These can even be used to make the home energy saving, making it more environmentally friendly.
Senior citizens are the next group of people who can take advantage of federal programs. Typically, when you buy a home you take out a loan, get a mortgage, and spend the next thirty years or so paying it off. For a senior citizen, rather than strapping yourself into a loan you can take out a reverse mortgage on an existing property through the federal HECM program. FHA insurance will still be required, but with this type of mortgage you can live in the home without making mortgage payments on the property. Instead, you borrow equity from the home and pay it back later, sometimes when the property is sold and sometimes after the owner has passed away.
While the situations mentioned above are the area’s most commonly taken advantage of, they are by no means a comprehensive list of the financing available through the federal programs. For a complete list of loans that have federal insurance, you can visit www.fha.gov. If you find that a different scenario other than what was mentioned fits your situation better, be sure to discuss it with your lender to determine whether or not you can qualify for the loan. The end goal is to get you in a good home with a decent mortgage that won’t leave you cash strapped in the end.