FHA Primer

FHA loan programs reflect the Federal Government's commitment to expanding homeownership and home buying opportunities through reduced down payment requirements, mortgage insurance charges, and relaxed underwriting standards when compared to conventional mortgage loans. I am including the FHA Primer here.

FHA loans recognize many areas as a high housing cost area and has increased the maximum FHA loans amounts. The FHA loans limits are as follows:

FHA loans high cost areas:

One Family $62,790
Two Family $464,449
Three Family $561,411
Four Family $675,000

The FHA loan program is an outstanding choice for first time homebuyers because the program requires only 3% cash (which may be a gift) into the transaction and the FHA Loan guidelines are significantly more forgiving of past credit issues. We will look specifically at the last two years of your credit history. If there are some credit problems, we may be able to overcome them with sufficient explanations and supporting documents of why the issues occurred. Never rule yourself out of qualifying for FHA loan because of credit, prequalify and have me review your credit. I have more information on FHA credit requirements available

This FHA primer is focused on the using FHA programs to purchase a home. If your interest is in refinancing an existing FHA or VA loan please go to my mortgage refinance center. For extensive information on the FHA 203(k) program to remodel a home please see my renovation loans page.

There are some credit issues that we must allow for a certain time to pass before you can qualify for a FHA loan. They are follows:

Two years from the date of discharge for a bankruptcy
Three years from the date of foreclosure

FHA requires any outstanding collection accounts, judgments, charge off's be paid in full before closing. If you have had some credit difficulties in the past, FHA compensating factors can often get your loan approved.

ADVANTAGES OF FHA FINANCING

Lower required down payment
FHA loans are assumable* with a qualified borrower
Higher qualifying ratios of 29% for housing and 41% for total indebtedness on existing construction; 31% for housing and 43% for total indebtedness on new construction
More flexible underwriting standards
Gift funds for down payment and closing costs are allowed
Up-front Mortgage Insurance Premium can be financed
The lowest down payment (as low as 3%, never more than 5%) requirement of any non-subsidized financing program
Seller allowed to pay prepaid expenses
Seller can contribute up to 6% of purchase price toward closing cost and discount points
Charges on conventional loans such as tax service fees, underwriting fees, copy & courier fees are not allowed to be charged to the buyer with FHA loans
With FHA’s no cost streamlined refinancing you can lower your payment at NO COST to you. Usually, closings can occur within 2-3 weeks.
The FHA ARM has the best features on the market with a 1% annual interest rate cap and a 5% lifetime cap.

If you currently have an FHA loan and are considering refinancing to lower your monthly housing cost there is a simple low cost " FHA streamline" refinance process which you should consider. One of the important features of the FHA program is that the loan is assumable should you sell in the future. If interest rates rise, an assumable mortgage may be the difference between being able to sell your home or not.

Other FHA Loan Programs

FHA ARM

FHA offers an adjustable rate mortgage which allows many people to buy a home with very low payments and down payment requirements. Useful if you have a debt to income issue or want to buy more home.

Streamline Refinance

They have permitted streamline refinances on insured mortgages since the early 1980's. The basic requirements of a streamline refinance are:

The mortgage to be refinanced must already be insured.
The mortgage to be refinanced should be current.
The refinance is to result in a lowering of the payments.

For more information go to the FHA Streamline Refinance page. I also have a Free report "Buying your First Home" available by email.