|
FHA Home Loans
FHA, also known as the Federal Housing Administration, operates under
the control of the Department of Housing and Urban Development (HUD) and has the primary
responsibility for administering the government home loan insurance program. This
program allows buyers who might otherwise not qualify for a home loan to obtain one
because the risk is removed from the lender by FHA.
The most popular FHA home loan program nationwide is the 203(b) FHA
home loan that only requires a minimum of 3% from the borrower and permits 100% of their money needed to close to be a gift from a relative, non-profit
organization, or government agency.
Only
applicable for buyers who intend to purchase the home as a primary
residence.
Advantages |
Disadvantages |
| The main advantage to a FHA
home loan is
that the credit criteria for a borrower are not as strict as FNMA or FHLMC. Someone
who may have had a few credit problems should not have a problem obtaining FHA financing.
Also, FHA home loans are assumable, allowing a person to take over the mortgage without
the additional cost of obtaining a new loan. In addition, the seller must pay for
part of the "traditional" closing costs (called non-allowable costs) while a
borrower's allowable costs can partially be wrapped into the loan. 100% of the down
payment and closing costs can be gifted. |
The greatest disadvantage of FHA home loans is the upfront mortgage
insurance premium (MIP). On a 30 year FHA home loan that equals to
1.50% of the loan amount (0% for a 15 year with more than 10% down)) in
addition to the 0.5% annual renewal premium that a borrower will pay (until
the loan reaches 78% of the original value of the home). In addition,
the maximum FHA will allow a person to borrow is limited region to region. |
Loan Limits
|
Click here to find out limits in your area |
Underwriting
|
Standard FHA underwriting guidelines |
Mtg. Insurance
|
Also known as
MMI, there is a 0.5% annual renewal
premium paid monthly throughout the year |
Documentation
|
Standard documentation required from borrower |
Refinances
|
FHA offers regular and cash-out refinances.
In addition, they offer no credit qualify streamline refinances. |
|
