FHA Loans

FHA loans have been very useful in getting people into new homes. The program was established in 1934 and is a part of HUD. These loans help to insure the loan and your lenders are able to offer more affordable deals. FHA loans also help to lower down payments, closing costs and they are usually easy to qualify for.

203(b) Mortgage Insurance provides mortgage insurance for a person so that they may purchase or refinance their main home. The mortgage loan is funded by a lender and then the mortgage is insured by HUD. The borrower will be required to meet FHA credit qualifications. The borrower may be eligible for up to 97% financing and they are able to finance their upfront mortgage insurance premium.

An FHA loan can make the home buying process easier and less expensive for the borrower. They typically have minimal down payment and closing cost requirements. The down payment is less than three percent of the sales price and there are one hundred percent financing options available. The FHA regulates closing costs and the seller is able to credit up to six percent of the sales prices towards the buyer's costs.

Individuals do not have to meet a credit score requirement. The FHA will allow a home purchase for two years after bankruptcy and three years after a foreclosure. There are also easier debt to ration and job requirement guidelines. The loans feature a higher debt ration than other home loan programs. Self-employed individuals are also able to qualify and less than two years on a job is also required. These advantages make it easier for first time homebuyers to purchase a home. They also make it easier on those individuals that are looking to upgrade their home. Anyone is able to use a FHA loan as along as you do not have more than on at a time.

These loans are also better options for first time homebuyers or individuals with poor credit scores. The FHA offers loans that are designed to compete with subprime loan lenders. They are designed to offer specific benefits for first-time buyers with poor credit scores. The FHA is also bale to offer lenders funds to help prevent homeowners from going into foreclosure. They are offering incentives to these lender to ensure that if a homeowner falls behind on their mortgage payment, the lender has a reason to help the homeowner get caught up and avoid forbearance agreements and loan modifications.

There are two new types of loans to aid new homeowners. One loan offers a low down payment plus up to $15,000 to help with home renovations after close. The idea is that the lender will give the homebuyer $5,000 to $15,000 to help bring the house up to standards. The funds are added to the total amount of the loan and will have to be paid back, but it is an option if the home needs immediate repairs.

The other loan is a hybrid 5-year adjustable rate mortgage. This loan is different in that it offers a three percent down payment, a $312,895 maximum mortgage amount and interest rate rises are limited to two percent a year with a maximum of 6 points over the life of the loan. The program offers three, seven and ten year hybrid loans as well. The initial period of interest is a lot lower than a standard thirty year fixed rate mortgage, although the fixed rate mortgage is a better choice if you intend to stay in the home longer than five years.