Monthly Archives: July 2012

FHA Loans Offer Advantages For Real Estate Investors

Many people think FHA loans are only for homeowners, but real estate investors can also take advantage of this government home buying program. Certain requirements must be met.

88558862Real estate investors can use these loans if they live in the residence as their primary home for one year. Another key advantage of this style loan: You can use the income you will generate from multi-unit investment properties to help qualify for an FHA loan. Plus, real estate investors can also buy FHA homes that are in foreclosure.

What Is An FHA Loan?

The U.S. government is in the home buying business. These loans are still one of the most popular ways to buy a home for buyers with blemished credit or with a small down payment.

An FHA loan is mortgage backed by the Federal Housing Administration. The government agency was created as part of the National Housing Act of 1934 following the Great Depression.

Today, it has provided financing for millions of Americans to buy homes. Unlike some government programs, FHA loans are available for everyone.

The amount of these loans varies by state.

Generally, the loans are popular because they are one of the most affordable ways for homeowners and even real estate investors to purchase homes. You can own a home for just 3.5 percent down. Your down payment doesn’t have to come from your own earnings, but can be a gift, grant or sweat equity.

FHA loans allow sellers to pay up to 6 percent of your closing costs, which means more money in your pocket. Plus, there are generally fewer credit requirements than a traditional mortgage loan.

Requirements For An FHA Loan

  • A loan requires two years of documented work history. You can’t just say you’ve worked, you’ve got to prove it with tax returns. It’s helpful if you’ve spent two years in the same profession.
  • FHA requires a minimum 620 FICO credit score. You can even purchase a home with an FHA mortgage if you’ve had a Chapter 13 bankruptcy, as long as you have a 12-month track record of on-time payments. Your bankruptcy must have been discharged for two years.
  • A 3.5 percent down payment. This may change to 5 percent in 2010, but it is still lower than traditional mortgage financing that requires 20 percent down.

FHA loans offer advantages for real estate investors and home buyers.

FHA 203K Loan – Getting an FHA Construction Loan

With the current doom and gloom that is all around, most especially plaguing the housing and mortgage market, getting a new loan or mortgage is a lot more difficult. One of the most difficult loans to obtain nowadays is a home improvement and construction loan. But borrowers need not worry because the currently popular FHA loan has a FHA construction loan that you could get for your home improvement requirements.

88220489They call this FHA construction loan as the 203(k) streamline program. This loan can be used to buy a fully furnished or refurbished house or make certain major repairs and upgrades to their home. But it is not limited to that because it can even be used to refinance a current mortgage.

One good thing about this loan is that it is not re-qualified because it has only one underwritten time which is upfront. There is also no minimum amount required for home improvement, repair or upgrade but they have set a maximum limit which averages for most states at around $35,000.

The 203(k) streamline program gives you two good options for interests: fixed and adjustable rates. You don’t need even to worry if it would be too high because it would also just be the same like obtaining any standard FHA home loan.

On purchase of a fully furnished or refurbished house, the evaluation is finalized as “subject to” which means that it would be after the repairs or improvements are done. As for refinancing mortgages, two appraisals are needed. The first one would show what would be the current value of the property and the second one would indicate the value after all the payments have been done (including the interest payments).

But not all properties are eligible for a FHA construction loan most especially on refinancing mortgages. HUD REO properties, condos and manufactured homes are allowed including one to four unit houses. One criterion for eligibility is that the house should be 100% complete.

As for eligibility of FHA 203K on home improvement or upgrade works, one important requirement is that it would be finished within three months after the loan had been approved. Private lenders often require the borrower to have the repair or upgrade to be done by a licensed contractor.

Although they may not licensed but the borrower should be able to prove the expertise of the contractor on the work that needs to be done by submitting a resume that contains at least two references who would certify the credibility of the contractor.

It could also be the borrower itself who can do the work but just like with the contractor, the borrower needs to prove his expertise and experience on getting the job done. But before that, they need to submit the cost estimates including labor and the materials needed. This is important just in case the borrower failed to finish the work satisfactorily and a need to hire a contractor is imminent.

Getting a FHA construction loan would really be a big help to you in these days of turmoil.

The Benefits of Getting an FHA Mortgage

The Federal Housing Administration, also known as FHA, does not lend money directly to home buyers to purchase a home. Instead, approved lenders issue loans that are then insured by FHA. While there are many mortgage programs available, the benefits of getting an FHA loan are numerous.

880066481. FHA loans accept a low down payment of 3.5% so that low to middle income consumers can attain homeownership.

2. The minimum credit score to obtain an FHA mortgage through automated underwriting is 620, well below the required score for conventional loans. Any score below 620 requires manual underwriting to determine any compensating factors that will warrant an approval.

3. The minimum debt-to-income ratio through automated underwriting for an FHA loan is 43%, well below the DTI requirement for a conventional loan. For DTI above 43%, manual underwriting and compensating factors are required.

4. FHA offers the FHA 203(k) mortgage insurance program for homes that require maintenance and repair. Both the home and the rehabilitation expenses are rolled into the loan.

5. Home buyers can use non-occupying co-borrowers in order to qualify for an FHA mortgage.

6. FHA mortgages are assumable which allows a home buyer to purchase a home from an existing FHA mortgage holder. The home buyer can assume the FHA mortgage which may carry a very low FHA interest rate.

7. FHA offers a sweat equity mortgage where the home buyer agrees to perform work on the home. The labor and costs of materials is counted towards the required down payment of the loan.

8. FHA has mortgage programs available for condominiums, co-operatives and manufactured housing.

9. FHA loans are available as fixed rate mortgages or adjustable rate mortgages.

10. The FHA streamline refinance program allows existing FHA mortgage holders to move to a better mortgage without the need of documentation, a credit history or an appraisal. The homeowners record of mortgage payments is considered in lieu of traditional credit scores.

11. Up to 6% sellers concessions can be used towards the FHA closing costs.

12. Gifts and housing grants or loans from FHA approved sources are allowed to be used towards the down payment.

FHA loans do charge an upfront mortgage insurance premium and an annual mortgage insurance premium. However, when considering the pros and cons, there are many more benefits of getting an FHA mortgage available to consumers who may not otherwise be able to purchase a home.

Veterans – Should You Choose a VA Loan Or an FHA Loan?

The federal government rewards veterans of the US military in several ways. Many programs, from education reimbursement to disability compensation, employment services and life insurance are available to active and former members of the armed forces. Another benefit of military service is home loan assistance in the form of the VA Loan.

87791439Of the 23 million+ living veterans, less than 10% have used the this benefit provided to them.
If you are a veteran, member of the active military or even the surviving or current spouse of a veteran, you may be in need of more information about the two most popular government-backed loans available to you today. These loans are the VA Loan & the FHA loan. Buying a home or refinancing is a big decision, so it’s best to be fully informed.

VA Loans vs FHA Loans

* VA Loans are almost identical to most conventional loans, only they offer many extra benefits such as: no down payment requirements, lower qualifying credit scores and loan fees can be packaged into the mortgage.

* FHA Loans are a popular option among many non-veterans. Easy refinancing, more lenient qualifying credit criteria and low down payment requirements attract many people who may not otherwise qualify for a conventional mortgage.

* VA Loans have eligibility requirements that must be met before a veteran or active military member can be approved for the loan. A certificate of eligibility will be issued to qualified persons and will include an entitlement amount (the portion of the mortgage that the VA will guarantee for each service person). The VA can issue the eligibility certificates or your mortgage lender can obtain a certificate for you.

* Almost anybody can get an FHA loan. There are no income limits, however there are limits on how much you can borrow. VA Loans have limits as well, but they are available up to $729,000 in most areas.

* Loans for veterans don’t require you to pay private mortgage insurance (PMI). FHA loans require you to pay the government equivalent of PMI, called MIP (mortgage insurance premium). Getting a VA loan allows you to avoid this extra expense.

If you’re a qualifying member of the military, a VA loan is a great way to take advantage of today’s low mortgage rates. Many people aren’t sure if they want to deal with the perceived hassle of a loan for a veteran. If you are a veteran with no available VA entitlement, FHA loans can make a lot of sense. Whichever option you choose, make sure you work with a trusted mortgage lender in order to lock in a competitive rate.

How to Get Approved for an FHA Loan Despite Bad Credit

Mortgage loans help the individuals to satisfy their immediate demands. Mortgage is the security for the loan amount that is provided to the money lender for getting the loan. Most mortgage companies do not risk the mortgage amount by providing loans to the people with bad credit scores. There are some bad credit mortgage companies that provide mortgage loans to bad credit holders but the interest rates charged are often higher. Getting the mortgage loan from such companies and repaying the mortgage amount on time along with the interest rates, you can raise your credit score.

Federal Housing Administration (FHA):

87697248The Federal Housing Administration is the government agency from United States that provides insurance on the mortgage loans approved by the FHA mortgage lenders in United States. It provides insurance on the home for single family and multifamily that include homes and hospitals. It is the biggest company in the world providing insurance on the mortgage loans. The main objective of FHA is to stabilize the mortgage market, improve the housing standards and providing adequate home financing system by insuring mortgage loans.

The loans provided by FHA are quite flexible and you can get them even if you have bad credit history. For getting the mortgage loan from FHA, it is important that your credit score should be 3 percent down. But if you have poor credit, it is good choice to put it down to lessen the risk for the mortgage lender. Credit is only the part of your application but the down payment and the job history are quite essential.

Getting FHA Loan after Having Bad Credit:

Bad credit history can affect your chances of getting mortgage loan from the loan providers. However, it is possible to get the loan from the lenders despite of having bad credit history by paying more down payment amount. FHA loans look at the job history of the applicant and do not consider the credit history of the applicant.

You can also get the FHA loan if you have undergone bankruptcy, late payments, foreclosure, or liens. When you have filed a bankruptcy, you will have to wait for two years after your discharge date for applying to the FHA loans. By holding good payment history after filing bankruptcy, you can easily qualify for the FHA loan.

Foreclosure

In case you have foreclosed your home loan, you will have to wait for 2-3 years after the foreclosure date to apply for FHA loan. Lender may ask you the letter for foreclosing your home loan.

Late Payments

By showing the overall positive credit history, you can be approved FHA loans if you had made no late payments in the past.

Liens

For getting the FHA loan, it is important to show the credit improvement to the lender. If you have any Federal lien, that is security interest over the property to secure your loan, you may not qualify for the FHA loan.

The bad credit mortgage companies are helping the individuals with bad credit scores to get the mortgage loans and improve their credit score. By showing continuous improvement in the credit, you can get easily qualified for the FHA loans.