Have you been hearing all the bad news about the economic downturn? Have you been led to believe that getting a mortgage loan is nearly impossible and that banks have stopped loaning money? While there has been a shift in the types of loans being made, it simply isn’t true that you can’t get financed for home ownership. FHA loans have become a standard in the changing economy, and with interest rates at the all time low – below five percent – now is the time to buy.
If you are renting or wanting cash out of your home right now, the interest rates are very appealing. Five percent is a tremendous opportunity to get more house than you would be able to buy at a higher rate. When deciding how to get a loan, it is good to go in understanding the types of loans before talking to your loan specialist.
The internet has made it easier than ever to apply for an FHA loan as lenders have gone online. Just what is an FHA government insured loan? The FHA is an abbreviation for the Federal Housing Authority, and these loans are insured against default to the lender by the government. FHA loans are a good loan to apply for in several situations.
Whether you are a first time homebuyer, or don’t have a lot of money to put down, the FHA loan may be a good choice for you. FHA loans are also good for people who don’t have perfect credit scores and want to keep payments as low as possible. FHA loans are also advantageous if you want to get a lower interest rate. Why? The federal government insures the loan, so lenders can be assured they will get paid. The FHA loan is generally easier to qualify for, and credit problems (even bankruptcy) are easier to get past with an FHA loan as opposed to other loans.
With that assurance, the interest rate is often a little lower since the risk of non-payment is reduced. Since the FHA has been established since 1934, and in that time has developed ways to help homeowners keep their homes during hard times. The objective of the FHA is to help homeowners avoid foreclosure. Once you own your home, if you have trouble making payments often you can negotiate repayment terms in the case of temporary unemployment of disability.
WHAT TYPES OF LOANS ARE AVAILABLE Fixed rate loans are the most common. In this instance, the interest rate will not fluctuate during the life of your loan (15 or 30 years), meaning that your payment will not change. This is a good option, because you can depend on your mortgage amount and it won’t get higher if interest rates increase. Adjustable rates are available.
Since some homeowners may be a little short on income at the front end, they will choose an adjustable rate mortgage. With this option, the interest rate starts out lower and changes with the Constant Maturity Treasury Index. This may seem like an appealing option at the front end, since you might be able to get more house. Just be aware that the interest rate can change up to six percentage points during the loan, which will make a significant difference in your payment.
Rehabilitation loans are available if you find a property that you fall in love with, but it needs a lot of work. The 203K Rehabilitation loan program will provide a mortgage loan that includes the cost of repairs. The final value of the property once it is repaired is the determiner of the loan amount.
WHAT ARE THE REQUIREMENTS FOR AN FHA LOAN?
Credit Score: FHA loans do not use the FICO score. While you do not have to have perfect credit, FHA will look at the past two years of credit history and allow for minor issues.
Debt to Income Ratio: Debts include any loan payments, including auto, student person, and charge cards. The total amount of your debts should not exceed 38% of your income to qualify for a loan. Utility bills are not factored into this amount. Your mortgage payment should not exceed 29% of your income.
Down Payment: The standard down payment for an FHA loan is 3%; for exceptions and assistance programs, talk to your loan professional.. Not only do we offer FHA loan services, but other FHA loan programs such as HUD, the Officer and Teacher Next Door programs, and CHDAP and Nehemiah financing are available throughout site. There are an abundance of other programs that will assist you in finding the right programs for you, whether you want to buy, refinance, or get investment properties. We can assist you with all your financing needs. We look forward to serving you.