Monthly Archives: March 2012

FHA Home Loan Program – 6 Advantages to FHA Loan Financing!

The FHA Home Loan Program is becoming the most popular way to finance the purchase of homes across the nation. It has always been popular but have become more so in the last couple of years because of the problems in the housing market.

78454127Conventional loans are becoming harder to get and the down payment required is 20% or more. Another problem with conventional loans is that credit has tightened and you need higher credit scores. This is why the FHA Home Loan Program looks so attractive to current homebuyers.

Here are some of the advantages of a FHA Home Loan.

1. You Can Get Qualified Easier.

FHA does not directly lend money to the homebuyer, what they do is insured the mortgage. This will give lenders the incentive to give better loan terms and make it easier for you to get qualified.

2. You Do Not Have To Have Great Credit.

In today’s housing market you need to have pretty darn credit to qualify for a conventional loan. You can qualify for a FHA Home Loan with less than perfect credit scores, even as low as 585 credit score. But most lenders will want a credit score of 620 or above. If you have had a bankruptcy in the past you have a better chance of getting a mortgage with the FHA Home Loan Program than a conventional loan.

3. Low Down Payment.

This is probably is the best advantage to a FHA Loan Financing. You only need a 3.5% down payment versus 20% or more for conventional loans. You really do not have the have the down payment, it can come from a family member, employer, or charitable organization. Conventional loans do not allow this.

There is an exception to the 3.5% down payment. Currently you only need $100 for a down payment if you buy a HUD foreclosed home. You can get more information on The HUD $100 Down Payment Incentive by clicking on the links at the bottom of this article.

4. Cost Less To Have A FHA Loan.

FHA Home Loan Mortgage has very competitive interest rates because they are insured by the Federal government. You need to compare their rates with rates of conventional loans.

5. What If You Can Not Paid Your Loan?

FHA loans can be used not only to purchase existing single family homes but also new construction homes, 1-4 family homes, and manufactured homes. It is very hard to get financing for manufactured homes with conventional financing.

FHA has been around a long time, since 1934. They have programs available to you that will help you save your home if you happen to run into hard times. And there are a lot of hard times going around in today’s economical times. They can help you to avoid foreclosure.

Remember, FHA does not provide direct lending nor does it set the interest rates on the loans. You need to shop around with different FHA approved lenders for the best terms and rates. The FHA Home Loan Program may be your best and only chance to get your dream home!

FHA Loan Interest Rate – FHA Mortgage Loan Rates

At the moment, FHA mortgage rates have hit its historical low. Now is the chance for you to secure an FHA loan interest rate that will work to your advantage. Therefore, if you are thinking of buying mortgage at the lowest FHA interest rates that you can possibly have, then you can compare all down payments and closing costs and make the deal. Read on for more information on how you can secure the lowest.

78429346You might wonder why it is lower than the conventional mortgage. Truth is the mortgage interest rate is really lower when you compare it with the other conventional mortgage. The FHA or the Federal Housing Administration is a deferral agency that helps by offering federal housing loans with those who would want to have their own homes but are having a hard time doing so because they are low to moderate income families.

The FHA loan interest rate however depends on the credit score of the individual. In that way, this lowers the risk for the lenders. As a result, they offer rates that are lower than the conventional mortgage but they still protect themselves from not getting paid in the long run. The advantage is that you are given the option to buy down if you qualify for it. Let’s say in a 2-1 buy down, you can actually decrease the initial FHA mortgage interest rate by 2% during your first year. Then this becomes 1% in the following year and then 0% after that.

If you want to buy down the mortgage, then the fee through the form of discount points is also charged. The discount points are lower than your loan interest and these are treated as some kind of interest that is pre-paid. Let’s say that you wish to lower your FHA loan interest rate, you can do so on a 6% to 20 year mortgage. This would reflect that you were able to make an FHA loan interest rate that had 4% on your first year, 5% the following year, and then 6% in the years that follow.

You are also given the option to buy down your FHA loan interest rates. If you choose to do so, then the borrower pays the discounted points as well as the lower interest rates of your mortgage that has been carried over to your current loan. The loan rate does not make any difference. A permanent buy down in FHA loan interest rates is recommended if the seller wishes to pay down while the buyer is occupying the property for at least three years.

Easy FHA Loan Qualifications With No Credit Or Bad Credit

If you fall into one of these categories you should definitely consider an FHA loan.

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  • Considering a home purchase with less than perfect credit
  • Considering a home refinance with less than perfect credit
  • Considering buying a home but have not established traditional credit.
  • Currently in an ARM loan that is due to reset – and have less than perfect credit

If you have less than perfect credit or no traditional credit you may be in luck due to easy FHA loan qualifications.

Why?

FHA loan qualification guidelines are perhaps the most lenient in the mortgage world because they do not use FICO scores exclusively to assess your risk as a borrower.

Many With Low FICO Scores Qualify for FHA Loans

FHA makes it’s decision on whether or not to grant you a loan based on your total credit profile. For example, your credit score may have taken a dip because of some isolated events in the past, job lay-off, illness, divorce etc…Fortunately FHA lenders look at your bill paying history over the last 2 years to determine if you qualify or not, your low FICO score will not disqualify you from receiving an FHA loan.

FHA Looks at Overall Credit Profile

FHA’s philosophy is that the majority of borrowers overcome these financial setbacks. You are truly NOT the high risk your FICO score indicates; even though your credit score may indicate sub-prime status.

FHA will assess your income, recent payback status with current lenders as well your current debt-to-income ratio giving borrowers a chance to purchase or refinance a home.

Non Traditional Credit Qualifies

What if you have no established credit? You may have never used credit cards, had a car loan, student loan, or mortgage. These are considered traditional means of credit which are recorded with the 3 major credit bureaus.

FHA qualifications consider non traditional credit references as proof of responsible money management. Payments like rent, utility bills, cell phone, personal loans, and even regular deposits into a savings account as proof of “credit worthiness”

So if you thought that your bad credit or non credit disqualified you from purchasing a home – think again – an FHA loan may be the answer.

FHA Loan Mortgage Notes

FHA loans are usually easier to get than the traditional kind that most lenders offer. This is because the requirements are tailored made for those people with middle income or low income as well as those people who are having financial troubles and low credit scores specifically because of unforeseeable causes such as the economic downfall of the country. The government agency known as the FHA or the Federal Housing Administration is overseen by the Housing and Urban Development. Its main goal is to help U.S. citizens in financial troubles who need help getting a mortgage loan to buy a house.

78186327For those who are interested in this, one of the first questions that come to mind is “what are the income requirements and other details that the FHA requires from those who apply?” Here is the answer. The FHA does not impose a minimum regarding the gross income of those who apply for the loan. However, one must show that one has at least had steady income before, preferably within three straight years.

This will give them confidence that you will be able to pay all your monthly bills regularly and punctually. What exactly counts as income for the FHA? Unemployment compensation, child support, VA benefits, seasonal pay, retirement pension payments, alimony, military pay, Social Security income, and rent payments are all valid sources of income counted by the Federal Housing Authority. There are also others such as part-time pay, bonus pay, and overtime pay, just if these things are all regularly gained by the borrower.

There is another big requirement that those who want to get into the FHA program will need to consider. This other major requirement is the DTIR or the debt to income ratio.

One must always remember that the Federal Housing Administration only allows the borrower to spend 29% of their gross monthly income for the payment of the housing fees as well as a combined overall amount of 41% of the other housing costs such as mortgages. In a traditional loan, banks and lender will just give the borrower up to 28% and 36% respective values. There is definitely no question that FHA loan mortgage is a better deal for the value of the borrower’s money.

And that is not all. Even if you exceed the percentages given above for just a bit there, it is still a possible. The down payment that is asked of the borrower is also considerably lower than the traditional mortgage. The high down payment of traditional loans is the only consideration that one will have to think about. Traditionally, the borrower will also have to show the lender that he or she has enough amount of cash in his or her bank account to prove that he or she can pay for the mortgage and make the monthly payments. With an FHA loan mortgage, there will be no need for this. Also, the down payment is only as low as 3% to 5% of the total amount.

The Steps to a Successful FHA Loan Application

I’ll bet that if you are reading this, you are ready to look into a home loan. Well to begin, congratulations. There is nothing like buying a new home and taking that first step into the wonderful unknown future ahead. Building a family, and having the comforts that come with owning your own home is truly a heartwarming experience. So really, all that is left is for you to properly go about filing your application for an FHA loan.

77991996The great thing about FHA loans, unlike many other government involved benefits, is that the Federal Housing Administration actually insures these loans given for new and existing homes. They also can help cover loans for home repair. They don’t actually make the loan to the buyer, it is just insured to allow protection to the mortgage lender. In turn this lowers the capital needed to buy the home and offers more flexible payment options.

So what do you need to prepare for your FHA loan application? For starters some background information will definitely be required. This includes detailed listing of all the addresses you have resided in, all of your employers names and addresses, all of your Tax forms, and all of your IRS tax return documentation for the previous two years. Along with that you must provide proof of your monthly gross income. It is highly recommended to get all this in order before you even make an attempt at the application as it will slow the process down and have unnecessary delays.

It is this kind of loan that has helped so many people get the home of their dreams, even in these trying times we are experiencing now. It will save you a lot of money in the end and ultimately will help protect everyone involved in the home loan process. Just make sure your application information is accurate and founded so you don’t run into any snags along the way. Good luck with buying your new home.

Mortgage companies that specialize in FHA loans are the ones you want to go with. The FHA process can be difficult if you aren’t assisted by an experienced mortgage lender. FHA loans, VA loans, Vet loans are all similar but have different aspects to them. FHA loans are best for refinancing your current home. FHA loans are the best and easiest loans to use in today’s market with the current home loan rates.