FHA MORTGAGES
FHA mortgages are back. An FHA mortgage loan is insured by the Federal Housing Administration, an agency within the U.S. Department of Housing and Urban Development.
Borrowers who have FHA mortgage loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan. Because of this mortgage insurance, lenders offer FHA mortgage loans at very attractive interest rates and are less stringent and much more flexible about qualifications and other requirements.
LESS THAN PERFECT CREDIT IS OKAY
As of September 2010, minimum credit scores for FHA mortgage loans depend on the type of loan the borrower needs, according to the FHA, but scores should be 580 or better. Borrowers with credit scores between 500 and 579 are limited to borrowing 90 % loan to value.
MINIMUM DOWN PAYMENT IS 3.5%
The FHA requires a down payment of just 3.5% of the purchase price of the home.
CLOSING COSTS MAY BE COVERED
The FHA will allow home sellers, builders and lenders to pay for some of the borrowers closing costs, such as an appraisal, credit report, title expenses, etc.
THE LENDER MUST BE FHA APPROVED
The FHA is an insurance fund, not a lender, so borrowers need to get their mortgage loan through an FHA approved lender, and not directly from the FHA. Not all FHA approved lenders offer the same interest rate and costs, even on the same mortgage loan.
MORTGAGE INSURANCE IS REQUIRED ON ALL FHA MORTGAGE LOANS
There are two mortgage insurance premiums required on all FHA mortgage loans. The upfront premium is 1.75% of the loan amount and is paid when the borrower gets the loan. This portion can be financed as part of the loan amount. The second premium is an annual premium, which varies based on the length of the mortgage loan, the amount borrowed and the initial loan to value ratio (LTV).
EXTRA CASH CAN BE AVAILABLE FOR REPAIRS, ETC
The FHA has special mortgage loan products for borrowers who will need extra cash to make necessary repairs to their homes. Talk to an FHA lender of this.
FINANCIAL HARDSHIP RELIEF IS ALLOWED
Mortgage loan servicers can offer some relief to borrowers who have an FHA mortgage loan, have suffered a serious financial hardship and are struggling to make their payments.