What does FHA stand for anyway?
The Federal Housing Administration is an agency of the federal government. The FHA insures private loans issued for new and existing housing, and for approved programs for home repairs. The FHA was created by Congress in 1934, and in 1965 became part of the Department of Housing and Urban Development’s Office of Housing. The FHA’s mission in the present day includes offering help borrowers get the amounts they qualify for, and to assist lenders by reducing the risk of issuing loans. To start FHA guidelines are typically more relaxed than conventional. If you have had a bankruptcy that was discharged at least 2 years ago or an alternative credit issue such as but not limited to credit cards, auto loans, cable TV and so on it may be easier to obtain financing with FHA than other avenues such as conventional mortgage. FHA interest rates are extremely competitive with conventional rates.
FHA vs. Conventional
Fannie Mae loans are conventional loans made at the risk of the lender without benefit of any government guarantee or government insurance. A conventional loan with an LTV (loan to value ratio) of greater than 80% requires primary mortgage insurance, which can be paid monthly. The borrower typically must have 5% of his/her own funds for the down payment and typically 2 months reserves on deposit. Closing costs must be paid by the borrower.
Requirements of a conventional loan applicant include excellent credit, job stability with sufficient income, a sizable down payment, and low debt to income ratios.
Common FHA loan types
FHA 203 B (Basic)
This is the most popular FHA program. This FHA program requires 3% down payment for purchases and allows rate reduction refinances up to 97% of loan to value.
FHA 203 H (Disaster Victims)
As the name suggests this FHA loan program is meant to help those affected by a national disaster. This FHA program does not require a down payment and allows 100% financing.
FHA 203 K (Re-Hab loan)
This FHA loan would allow you to borrow money above the purchase price to make improvements.
FHA Reverse Mortgage
A reverse mortgage is a type of loan that would allow a homeowner to convert a portion of the equity into cash.
Where can I get an FHA loan?
We can help you through the FHA process by contacting us today. The FHA mortgage process can be explained in more details and we can even show you the bottom line numbers on a property you may be looking at to purchase with FHA or help find a property that will fit FHA loan guidelines.
When you looking to buy real estate contact The Derrick Monroe Group at (612) 282-SOLD.
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